Special Topics in Environmental Management

Businesses Aren’t Capturing Environmental Value

CDP (formerly the Carbon Disclosure Project) and several partner organizations have issued a study showing that 4 out of 10 companies reporting to the CDP fail to capture or report any financial value from strong environmental performance.

Working with Accenture Strategy, a professional services company, and Hermes Investment Management, the CDP assessed data it received over 3 years (2014–2016) and coupled the findings with information gathered from interviews conducted with senior consumer goods and telecommunications executives.

“The largest emitters in the global economy—responsible for 50 percent of carbon emissions reported to the CDP—account for a cumulative $447 billion opportunity from climate change,” says the CDP. “Yet 42 percent of these companies have not yet quantified the potential value.”

The CDP runs a global disclosure system that enables companies, cities, states, and regions to measure and manage their environmental impacts.

“We see this as a huge missed opportunity for companies,” said Justin Keeble, managing director of Accenture Strategy. “Reporting on financial value through environmental performance allows businesses to build investor trust, provide meaningful transparency, and help ensure long-term profitability.”

More Than $700 Billion in Risk

In addition to companies not capturing financial value from their environmental achievements, the CDP and its partners found that:

  • Climate and environmental risks, even with known impacts of more than $700 billion, remain poorly understood and under-quantified despite increasing investor urgency. The CDP and partners believe that the $700 billion is just the tip of the environmental risk iceberg.
  • Sustainable business leaders drive positive financial impact through superior environmental performance, but many firms are missing out. Value opportunities include revenue increase, risk decrease, and brand value increase. The CDP and its study partners cite several reviews of thousands of academic studies that found that progressive environmental performance results in superior corporate environmental performance.

Build a Finance-Driven Case

Based on the results of the research, the CDP and its partners recommend that business undertake three key actions:

  • Define a suitable framework for understanding how sustainability action can create or protect value. For example, businesses should better understand environmental performance and how it impacts specific business contexts through the lenses of revenues, costs, assets, liabilities, and capital.
  • Target sustainable business cases with clear commercial and environmental potential. For example, build a finance-driven business case and use early successes to convince the entire organization of the commercial benefits related to strong environmental action.
  • 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.

More information is available here.