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Many Businesses Still Fail to Report Financial Value from Strong Environmental Performance

According to New Research from Accenture, CDP and Hermes Investment Management

Home / Press Centre / Many Businesses Still Fail to Report Financial Value from Strong Environmental Performance, According to New Research from Accenture, CDP and Hermes Investment Management

Bruce Duguid
13 September 2017
ArchivedEOS

Despite almost $500bn in reported opportunities from climate change

NEW YORK; Sept. 13, 2017 – Four in 10 telecommunications and consumer goods companies reporting to CDP fail to capture or report any financial value from strong environmental performance, according to new research released today by Accenture (NYSE: ACN), CDP and Hermes Investment Management. The largest emitters in the global economy, responsible for 50 percent of carbon emissions that was reported to CDP, account for a cumulative $447bn opportunity from climate change. Yet 42 percent of these companies have not yet quantified the potential value.

“We see this as a huge missed opportunity for companies. Reporting on financial value through environmental performance allows businesses to build investor trust, provide meaningful transparency and help ensure long-term profitability,” said Justin Keeble, Managing Director, Accenture Strategy. “Through this partnership with CDP and Hermes, we’re bringing Accenture Strategy’s industry-leading insights to help companies focus on sustainability as a means for value creation.”

Additional key findings from the analysis highlight that climate and environmental risks, with known impacts of at least $700bn, remain poorly understood and under-quantified, despite increasing investor urgency in both the telecommunications and consumer goods sectors. Moreover, although sustainable business leaders understand how strong environmental performance drives improved financial results, many businesses are still missing out.

“The bottom line is that environmental performance improvement makes sound business sense, “said Paul Simpson, CEO at CDP. “By recognizing the tangible business and financial benefits of disclosure and action, companies can drive sustainable economies and secure long-term growth.” 

 

The results of the research provided three key actions for businesses to undertake that will help them on this journey to progressive environmental performance and stronger financial outcomes:

  1. Define a suitable framework for understanding how sustainability action can create or protect value. Understand environmental performance and how it impacts your specific business context through lenses of revenues, costs, assets, liabilities and capital.
  2. Target sustainable business cases with clear commercial and environmental potential. Build a finance-driven business case, and use early successes to convince the entire organization of the commercial benefits related to of strong environmental action.
  3. Confront environmental risk, capture emergent revenue and cost opportunities, and contribute to a more resilient business. In the long term, capabilities for measuring and delivering value creation through sustainability can be applied to strategic decision-making regularly, and for disclosing the value captured or preserved to investors.

“There is no doubt in the positive correlation between sound and progressive environmental performance and how a company performs financially,” said Bruce Duguid, Director, at Hermes Investment Management. “What we’ve found through our own work, which was cemented by this latest analysis, is that the investment community pays increasingly close attention to how a company captures and reports environmental performance and opportunities.”

For more information on this research and its findings please visit: www.cdp.net/consumer-goods-value and www.cdp.net/telco-value .  

Methodology

This study is based on Accenture Strategy’s analysis of the responses to CDP's Climate, Water and Forests questionnaires in 2014, 2015 and 2016. The initial analysis drew on Accenture Strategy’s proven valuation frameworks to examine what Income Statement and Balance Sheet impacts the companies reporting to CDP had experienced, and that they could experience in the future, as a result of their environmental performance. In addition to evaluation of discrete quantitative responses, Accenture Strategy also assessed several thousand qualitative responses to CDP’s questionnaires to collate a fuller picture of the financial outputs and outcomes of CDP’s members’ environmental performance.

In the second phase of work, a range of stakeholders from across the Telecommunications and Consumer Goods sectors were consulted via interviews to explore the key barriers each sector is facing to using environment-focused financial data when making business decisions, and to explore potential solutions for how to address these barriers.

Accenture Strategy, CDP and Hermes focused on Consumer Goods and Telecommunications sectors to highlight differences in financial opportunities and risks across sectors. Consumer Goods businesses are heavily exposed to physical, climate and operational risks through reliance on agricultural and commodity inputs, and face challenges to brand value from inaction on environmental issues. Telecommunications businesses have exposure to carbon risks through their energy consumption intensity, yet offer products and services which play a major role in enabling carbon footprint reductions for customers and others.

 

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Bruce Duguid Bruce Duguid is a director at Hermes EOS and leads engagements with environmentally-exposed companies across the mining, oil and gas and utilities sectors, as well as corporate governance engagements in the UK. He is the lead author of the Institutional Investors Group on Climate Change’s 'Investor Expectations of Mining Companies – Drilling Deeper into Carbon Asset Risk’. Prior to joining Hermes EOS he was head of sustainability at the UK Green Investment Bank, where he spent four years working on the project to establish the bank and then building its sustainability function. Before working in sustainability, Bruce worked in corporate strategy as a management consultant at the Boston Consulting Group and as head of strategy at Visa Europe. He is also a qualified lawyer in England and Wales and holds a degree in Natural Sciences from Cambridge University.
Read all articles by Bruce Duguid

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