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CSR: A Strategic Imperative for Long-Term Value

Why CFOs are expanding their roles to include CSR

Published 09-19-17

Submitted by Sol Systems

Amazon Fulfillment Center Solar Rooftop

The material impact that CSR initiatives have on corporate performance has resulted in a sea change. CSR has evolved from simple corporate giving and employee volunteer programs into comprehensive environmental, social, and governance (ESG) programs that integrate sustainability into business strategy

Study after study shows that the financial benefits of CSR are significant. For example, an extensive study1 among consumer goods supply chains found companies that implemented “triple advantage” practices – where companies achieve profitability while integrating initiatives that improve ESG outcomes – realized between:

That might explain why 65% of CFOs have become involved in sustainability initiatives according to an Ernst & Young and GreenBiz survey among corporations with revenues over $1 billion. Cost reductions (74%) and managing risks (61%) were stated as two leading drivers in the company’s sustainability agenda.

Another key factor driving CFOs into the sustainability world is the fact that institutional investors from banks and insurance companies to private equity funds are now considering the sustainability rankings of the companies in which they invest. A recent McKinsey article pointed to a Deutsche Bank study that tells us why. Deutsche Bank evaluated 56 academic studies and found:

1. Companies with high ESG ratings have lower cost of debt and equity; and
2. 89% of the studies examined show companies with high ESG ratings outperform the market in the medium (three to five years) and long (five to ten years) term.

Given this remarkable upside potential and opportunity to expand the aperture of risk management, CFOs are becoming key stakeholders that shape sustainability strategy and goals across the organization. This is particularly true when a large capital expenditure or operating expense like energy procurement is involved.

How Clean Energy Helps CFOs Sleep at Night:
Material Impact on Financial Performance and Company Reputation 

Among all sustainability initiatives within an organization, energy is arguably the most impactful on corporate performance and long-term brand equity, as well as achieving sustainability goals. A move to a clean energy source such as solar, whether onsite at your facility or offsite at a nearby remote location, provides CFOs with four vital areas to create greater short and long-term value:

I. Financial Benefits

Organizations can save on energy costs on day one with zero capital outlay through a power purchase agreement (PPA). Or, if an organization determines asset ownership offers more value, owning a solar system can offer 8-12% returns, and a 100% payback on investment in 6-8 years. Financial benefits to explore include:

  • Reduction of operating expenses with lower cost electricity

  • Stable electricity pricing for predictable budgeting

  • Tax credits

  • Accelerated depreciation

  • Lower cost of debt and capital from institutional investors that favor organizations with strong CSR ratings

  • Renewable Energy Credits (RECs) — depending on state

 II. Risk Mitigation

In addition to protecting and enhancing corporate reputation, and thus brand equity, another critical risk that can be reduced is the price volatility for electricity.  Price swings in electricity markets can cause costs to vary by millions of dollars making it difficult for companies to accurately budget and plan for electricity expenses.

Solar energy PPAs provide predictability and stability making it possible to budget with certainty. A solar PPA offers stable price contracts of 20, or even 25, years.

III. Environmental

Solar energy directly reduces carbon emissions and makes a significant contribution to corporate sustainability goals.  High CSR ratings is now an attribute considered by many debt and equity firms when analyzing investments.  

IV. Brand Equity

There is no shortage of surveys regarding the link between brand value and sustainability either. Customer acquisition and retention are strongly tied to an organization’s CSR initiatives and outcomes. For example, the Nielsen Global Survey on Corporate Social Responsibility polled 30,000 consumers in 60 countries* Fifty-five percent of global online consumers responded that they are willing to pay more for goods and services from companies that are committed to positive social and environmental impact: Asia-Pacific (64%), Latin America (63%) and Middle East/Africa (63%). The numbers for North America and Europe are 42 and 40%, respectively.

In the end, there are a number of internal stakeholders involved in the analysis and decision to procure solar energy, whether onsite or through an offsite PPA. To ensure the greatest success and value, the CFO should be engaged in the process as early and often as possible.

1SOURCE: Beyond Supply Chain conducted by the World Economic Forum & Accenture

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Sol Systems

Sol Systems

Sol Systems is a leading national solar energy firm with an established reputation for integrity and reliability across its development, infrastructure and environmental commodity businesses. Sol is operating and building over 1GW of solar projects valued at more than $1 billion for Fortune 100 companies, municipalities, counties, utilities, universities and schools. The company was founded in 2008, is based in Washington, D.C., and is led by its founder. Sol Systems works with institutional clients, corporate partners, and foundations to create a more sustainable future we can all believe in.

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