Having a ESG Vision
Why do businesses invest in ESG capital expenditure?
Name two businesses in the same industry that do well for their bottom lines. Now, think about their images and reputations. Consider what your friends and families would say about them. Which company do you think will last longer, have more growth, and generate higher productivity? I am willing to bet that most people would pick the company that is managed for the long term and in line with ESG trend – the one that has a ESG vision.
But how do businesses integrate sustainability into their businesses and adopt their own ESG visions?
Identify the ESG goals that work for you
When global financial markets were collapsing—we found that the ones the public perceived as behaving more responsibly had less-negative stock returns than their competitors.https://hbr.org/2020/09/social-impact-efforts-that-create-real-value
Think of your value and your business mission. What are your business goals? Now think about the reasons for you to achieve those goals. Are you under regulatory pressure to take actions? Do you want to do good and make the world a better place? Or you want to improve your company’s reputation? Boost employee productivity? Lay out a ESG vision before you build a ESG program.
Investing in longer-term environmental issues
You can simply reduce the heating temperatures in your business by one degree in winter and that can make a difference. But if you want to create a long-term impact, the best way is to invest in longer-term equipment and assets that will help you sustain the positive impacts.
Energy Saving with LED installations
While ESG investments might seem like costly donations without real benefits, they can lead to cost savings and increased turnover due to more sales. Ikea, the global furniture chain, sets aggressive goals for its climate change mitigation and sustainability mandates. The company’s IKEA People & Planet Positive strategy focuses on limiting its CO2 emission and is hitting its ESG goals. The company invested 21-million-euro investment of LED lighting products in 2012 and they yielded a cost savings of around 40 million euros to 2020. And the company’s sales has been growing for the last 20 years (except 2020 pandemic) from 10B EUR to 42B EUR in 2021.
IKEA has launched an effort to completely rethink product design. The aim is to create products that can be reused, refurbished, remanufactured, or recycled, thereby extending their lifespan.https://hbr.org/2020/09/social-impact-efforts-that-create-real-value
Net-Zero will need more Charging Stations
Another way to develop your ESG vision is to fill the supply shortage for clean tech. The electronic vehicle (EV) is one of the fastest growing industry, with a growing need of more EVs to help countries reach the Net-Zero goal by 2050. However, the lack of charging stations is one of the major risks that limits the growth of the EV industry.
In Canada, there are currently 16,573 public EV charging ports in service and 50,000 ports committed but not installed as of June 2022 (CVMA report). Including the committed charging ports, the 67,000 charging ports equate to a charger to EV ratio of 7%. The report further estimates that if Canada were to achieve the Net-Zero goal by 2050, the country would need 39million EVs, which means 3.9 million charging stations are required, under the assumption that one charging station can support 10 EVs on the road.
“For Canada to keep pace with California, an additional 650,000 public chargers (defined by California as public and shared private chargers) need to be built in the next 8 years,”https://www.cvma.ca/wp-content/uploads/2022/05/Closing-the-electric-vehicle-charging-infrastructure-gap-May-11-2022-final.pdf
How can businesses invest in ESG
Businesses don’t have to invest in ESG alone. Look for partners, subsidies and rebates. For example, businesses can install charging stations at their operating locations. Not only businesses can directly contribute to the Net-Zero goal, but they can also drive more traffic (literally) to their business locations.
We have discussed how ESG increase M&A valuation in another article. In this article, we have discussed ways for businesses to develop a ESG vision. If you need help creating a capital expenditure budget or financial forecast, we are here to help. As your sustainable consulting partner, we also help our clients get access to different financing options as well. Feel free to contact us for a free consultation.