I heard from a sustainability professional last week that accounting/finance departments still apply old-school thinking to sustainability projects in terms of how they treat risk and return. In applying what are sometimes double standards, accounting/finance act as an obstacle to sustainability. And for my sector, this has been particularly frustrating in the last 5+ years as it has really stepped up its financial literacy and become skilled in putting solid business cases behind its proposals. It is with this friction in mind that I present this week a few case studies where accounting/finance is not an obstacle and in fact a great help. As the article title suggests, Apple, Holcim and Statoil are featured.
Apple issues its first green bond
Apple made news last week with the issuance of a green bond. As reported in BusinessGreen, the amount of $1.5bn to be dedicated to funding projects that cut carbon emissions, clean its supply chain, conserve resources and develop greener materials. Its move was inspired by the enormous investment trends for Environmental, Social and Governance risks (ESG), including carbon (which has been covered in “Lessons from Norway, AXA, Rio Tinto and China on the urgency of divestment from coal” and “Published: Australia is catching up on climate investment risk”). In other words, it is about making Apple attractive an investment proposition.
Holcim’s Social and Environmental Profit and Loss Statement
I learned last May via Eco Business that Holcim, a major global cement company, is incorporating environmental accounting into its business. This forms part of Holcim’s broader objective to better include the social and environmental aspects of cement into its costs of production. To kick-start this process, it nominated a pilot site in India and elicited the consulting services of KPMG and its True Value Methodology.
Put simply, this methodology is about first identifying the material positive and negative externalities, and then assigning a financial value to them using “expert input and best available global, regional and site specific data sources”. Finally, KPMG put these into an “earnings bridge” a term described on page 5 of its methodology brochure.
In addition to achieving its goal of internalising externalities, the project helped green-light water efficiency projects that will phase out groundwater use.
Statoil venture capital fund for renewable energy
Major Norwegian resources company Statoil made news last week with the announcement of “one of the world’s largest corporate venture funds dedicated to renewable energy”. The venture capital fund is to invest $200 million over four to seven years in ambitious and progressive businesses in renewable energies. This fund forms part of Statoil’s New Energy Solutions division, its business unit for all things low carbon, clean and modern.
These are three distinct and unique examples of how accounting/finance can get actively involved and support sustainability. With Apple it was able to raise significant funds for projects while growing in attractiveness to a new and increasingly mainstream generation of socially and environmentally risk averse investors. With Holcim, accounting/finance helped develop a more accurate cost for its cement production to improve its own reporting in addition to sustainability. And with Statoil, accounting/finance was able to get actively involved as an investor for renewable energy projects, establishing a fund and imparting its wisdom and experience on investment choices.
There are many more things that accounting/finance can do with sustainability than the simple “yes/no” on projects. Show your counterpart these case studies and brainstorm strategically together on the possibilities, to help make work more interesting and meaningful for all involved.