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Green Finance: How Sustainable Business Practices Can Improve Your Bottom Line

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Microsoft is dedicated to becoming carbon negative by 2030. General Mills achieved their goal to sustainably source 10 priority ingredients by 2020. Prudential Financial considers environmental, social and governance factors in every investment they make.

Green business may have once felt niche, populated by smaller players that weren't afraid to lose out on revenue if it meant making a smaller impact on the environment. Today, though, the biggest businesses around the world are prioritising the Earth--and proving that you can do exactly that while still achieving and surpassing your financial goals. In fact, with more customers taking a stand--and using their pocketbooks to show where their priorities lie--a commitment to the environment and sustainable business practices has become a selling point for many organisations.

That's good news for finance teams. While your business's bottom line is always top of mind, the new focus on all things environmental means more businesses are supporting an environmental agenda and putting their money where their mouths are. And, as an integral part of the business planning process, finance teams are well-positioned to lead the way, building sustainability efforts into their decision making and weighing the risk and reward of every element of their organisation's sustainability efforts.

Let's look at three ways your finance teams can make sustainability part of your business plan--and how you can build on them to ensure your business is contributing to a better world as a whole.

1. Make Green Investments

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By choosing to invest in funds and businesses that prioritise the environment, you're not only supporting companies that are helping the world rather than hurting it, you're also demonstrating your own business ideals. 

If green investing is a priority for you, you may opt to buy green bonds, exchange-traded funds (ETFs), index funds or mutual funds. Or you might choose to invest in businesses working on renewable energies or creating sustainable alternatives to everyday products. Either way, these kinds of investments can help you ensure your portfolio stays in line with your business values, while also adding to your earnings at the same time.

2. Measure Your Environmental Performance

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Businesses measure performance every day using key performance indicators (KPIs). So why should your performance around sustainability and your environmental impact be any different? The good news: You're already collecting some critical data that can help you measure the impact of your sustainability and environmental initiatives.

Utility bills, fuel, travel receipts and mileage for company vehicles can all help provide the data you need to measure your business's environmental performance and sustainable business practices. Some of the KPIs you can use include:

  • Your carbon footprint
  • Consumption of energy
  • Supply chain miles 
  • Waste reduction
  • Recycling rates

3. Source Out Sustainable Suppliers

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What's another metric that can help you ascertain your ongoing environmental performance? The environmental sustainability of your suppliers. 

After all, while it may be great for you to make sustainability and the size of your environmental footprint guiding principles of your business, if your suppliers aren't taking their own actions, yours can only go so far. You become complicit by association.

Understanding how your suppliers prioritise sustainability and whether their beliefs align with your company values can go a long way in building out your green finance commitments. But don't be fooled by greenwashing attempts--instead, try to understand the concrete actions they've put in place to make environmental consciousness a priority.

Going Beyond: Prioritising Organisational ESG

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Creating a sustainable future  is all about building a better world--and in many organisations, that means prioritizing not just sustainable business practices, but a range of social issues as well. In fact, environmental, social and governance (ESG) criteria have become critical to many businesses today. They're also something many investors, employees and customers look at as well.

By focusing on ESG internally, you're demonstrating that you care about more than just your growth goals and revenue objectives. It also reveals that you're looking outwards to the world at large and inwards to how you're interacting with your employees and customers as well. 

This is how ESG breaks down:

  • Environmental refers to the impact your business makes on the earth. It includes the elements listed above, such as your sustainable investing efforts and any actions your business takes to reduce your harm to the environment. It can also include internal programs such as recycling efforts, volunteer initiatives and office retrofits to create a more sustainable workplace.
  • Social refers to how you work with customers and any corporate activism you participate in around human rights issues. It also factors in your relationships with employees and how you treat the people who work for you. Are you prioritising diversity, equity and inclusion (DEI) and putting programs in place to back that up? Are you paying employees fairly and offering opportunities to grow or perks to keep morale up? What are you doing to close the gender gap? All of these demonstrate your social impact on the world.

Governance is all about your leadership team. That is, how your organisation is managed, whether your management team and board of directors lead by example and the type of compensation they receive. Are they avoiding any conflicts of interest? Are they diverse and inclusive? Are they receiving huge bonuses while employees are experiencing wage freezes? All of these can demonstrate the type of priorities your leadership team brings to the table--and in turn, the priorities of your business as a whole.

By focusing on ESG internally and prioritising it throughout your decision-making process, you help set your business apart for investors, employees and customers--and ensure you're giving back to the world as a whole. More than that, though, you'll show that not only is the environment a cornerstone of your business values, but rather, it's just the start. Your organisation truly cares about making a positive impact.

Leading the Way

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To make a lasting impact on the environment and promote more sustainable business practices, everyone needs to get involved. And while ideally, your whole organisation will join the initiatives underway, finance can lead the charge to make green initiatives a center point of your business.

By championing green finance and making the environment and ESG part of your overall strategic goals, you're taking a big step to building a more impactful business and creating the change the world needs.

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