The number of businesses going green (and the number of eco-conscious individuals) continues to increase as the fight against climate change accelerates. Some perhaps embrace this movement out of sheer morality, whereas others do not want to be left behind.
However, it can sometimes be difficult for finance workers to persuade their leaders to get on board with green initiatives, as authority figures in this realm tend to make decisions based on financial outcomes. There’s good news though. Going green is more financially rewarding than many may realise.
In this article, we discuss the importance of being eco-friendly in finance, and explain the difference between sustainability and efficiency. We also highlight the specific financial benefits of going green, and provide some top tips on how to make your finance team more sustainable.
Importance of going green in finance
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Improved reputation
In today’s culture, businesses that are seen to be eco-friendly are quite simply viewed more positively from a reputational standpoint, as their brand becomes intrinsically linked with sustainability. This means that prospective partners will be more likely to work with them (due to shared values) and will generally hold them in higher regard.
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Attract the best talent
Individuals just starting their journey in the finance world are more likely to join an organisation that displays environmental awareness. Gen Z are arguably the most eco-conscious generation to date, as they have been raised within this new culture. So, finance managers are in danger of missing out on the best talent from this age group if they can’t demonstrate the company’s sustainability. The same is true for retaining talent and maintaining a motivated workforce too.
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Increased survivability
The future business landscape (in terms of structures, processes, supply chains, etc) will be built around sustainability. This means that those proactively putting green initiatives in place are essentially future proofing their company. Finance teams taking this approach will remain on the cutting edge of technology too, because innovators are constantly pushing the envelope to hit increasingly ambitious climate targets. Those that leave it too late may end up going through unnecessary turbulence later down the line.
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Stay compliant
Not only will climate targets continue to intensify, but environmental legislation will also change in line with this. World governments have already set a range of targets related to cutting carbon emissions and getting to net zero. Companies that fall on the wrong side of this could end up facing large fines in the future. So, it’s better to strive towards net zero now rather than taking drastic measures later.
Difference between sustainability and efficiency
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Sustainability
Sustainability is heavily linked to self-sufficiency. To be self-sufficient, companies shouldn’t lean too heavily on one particular employee, customer, supplier, or product to achieve their goals. If one cog in the operation were to stop working, the wider business mechanism should be resilient enough to keep functioning as normal. Excessive and short-term financial targets are factors that can lead to unsustainability. Encouraging quick wins can lead to a neglect of long-term goals. When businesses implement scalable processes, they can grow in a sustainable way. In terms of the environment, sustainability is all about using energy sources that don’t run out and using materials that can be reused, as this is better for the planet.
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Efficiency
Efficiency is more about the way things are done rather than what is being done. Any process or method can be made more efficient by making subtle and smart changes. With regards to financial processes, many businesses may achieve the same outcomes via a range of different methods. The most efficient approach will be the one that utilises the smallest amount of energy and time. Finance teams can achieve this by streamlining their activities and removing unnecessary steps. Efficiency is typically defined as the highest amount of output from lowest amount of input. This is linked to eco-friendliness, as decreased input means a lower amount of waste is generated (in terms of physical materials and carbon emissions).
What are the financial benefits of being eco-friendly?
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Higher demand
A selling business lives and breathes on the demand it can generate. Just like partners and employees, customers today are very careful about where their money goes. They will be far more willing to engage with a positive brand. Therefore, being green is a substantial selling point, leading to higher demand and ultimately increased revenue.
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Less waste
As we’ve touched upon, improved sustainability and efficiency means that less waste is produced. Decreased waste goes hand in hand with lower costs, as there is a more optimal use of resources. Less is spent on raw materials, rental/storage costs, energy bills, maintenance/disposal costs, and more. If employees are wasting less time due to better processes, the company is getting a better return on investment for salary costs too.
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Access to government grants
The government incentivises organisations to be eco-friendly by offering financial assistance with the investment required to set up a green infrastructure. This softens the blow of getting on board with the green movement. There also financial rewards (such as tax breaks) for those that achieve certain environmental targets.
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Better investment opportunities
Sustainable businesses are a more attractive proposition to investors too, as they will inevitably have a preference for companies that demonstrate a forward-thinking nature, longevity, and future value. Existing shareholders will be more likely to stick around too, and lenders will be more open to businesses that have a demonstrable moral stance. Greater investment means a bigger budget and better opportunities to innovate/grow.
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New revenue streams
The pursuit of sustainability involves innovative ideas and new ways of working, which can lead to unexpected positive outcomes. Complex problems often require complex solutions, so by unlocking these puzzles a new revenue stream could be opened. A business may realise that their existing materials can be used create different products, or perhaps their services could be offered in a different way. They could even end up forging unexpected partnerships as they drive into new markets.
How to make your finance team more sustainable
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Implement hybrid working
There was a shift towards remote working during the pandemic out of sheer necessity. But it has become clear that it is a good idea to allow employees to keep working from home (at least some of the time). Not only do workers experience greater productivity and wellbeing, but it’s better for the environment too. When at home, there’s no need to commute, meaning less cars on the road. Companies may even think about downsizing their office space too, which means workplaces expend less energy. Finance managers can facilitate hybrid working by implementing Cloud-based technology for financial tasks.
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Incentivise green transport
They can also encourage employees to travel via green methods on the days when they must commute to the office. This could be achieved by offering vouchers/discounts for public transport. It could also involve having a cycle to work scheme and sufficient bike storage facilities. Or perhaps giving rewards to those that decide to utilise active travel. Going forward it might make sense to install charging points for electric vehicles too, if enough people adopt this mode of transport.
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Measure your carbon footprint
You can only improve your environmental impact if you know what it is in the first place. It’s now possible for companies to measure their carbon footprint, with digital systems designed for this specific purpose. These tools have dedicated fields to input all activity a business might engage in. By inputting detailed and accurate numbers, they can discover their carbon footprint for each specific activity (as well as the total impact). With this information at hand, they can then take measures to reduce or offset these emissions, particularly for the areas that are excessive. This method is a good way for companies to prove their worthiness of a net zero accreditation, which is a further way to boost their brand.
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Use renewable energy
One of the quickest ways to become greener is to power your business with renewable energy. This could be achieved by using an energy provider that sources entirely from solar and wind. Or it could involve generating your own energy, perhaps by placing solar panels on every office building. There are many other measures that can be taken too, such as insulating offices better or using energy-efficient light bulbs.
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Have an ESG policy
ESG stands for Environmental, Social, and Governance. As the name suggests, ESG is the way a company positions itself in relation to nature, the local community, social causes, their people, and the way they are governed. Many stakeholders in the corporate world now hold ESG metrics in the same regard as financial performance (in terms of being a yardstick for success). Recycling is an example of an ESG initiative that benefits the environment. Finance managers could provide designated time throughout the year for volunteering too, so that employees are able to give back to the community.
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Buy locally
Logistics can make up a large percentage of any company’s carbon footprint. Sourcing materials from local suppliers is more eco-friendly, as it means smaller distances must be covered. It is also beneficial for the strength of the supply chain too, as a localised operation is less likely to be affected by tumultuous political/environmental events. If you don’t want to limit yourself geographically, many services can now be offered virtually, which extends your reach without the need to travel.
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Automate processes
The use of digital systems immediately makes finance teams greener as it means they can go completely paperless if they choose to do so. Dedicated accounting software also enables them to automate many of their repetitive tasks, providing an instant boost to efficiency, by increasing the speed of processes and thus reducing the amount of wasted time/energy.
Using technology to become a greener business
At Advanced, we provide a Cloud-based accounting solution called Advanced Financials. It has designated functionality for the likes of accounts payable/receivable, sales invoicing, credit management, bank reconciliation, purchase management, expense management, asset management, and much more. With the entire finance function moved into the digital realm, there’s no need for paper documents. And as it is a Cloud solution, finance managers can offer remote working to employees.
Advanced Financials is a scalable system, so businesses can grow sustainably, and at their own pace. This software streamlines accounting processes, ensuring employees have more time to drive strategy, innovation, and ESG initiatives. With built-in dashboards and reports it’s easy to view overall financial performance, so managers can find even more ways to cut unnecessary costs.
Are you looking to gain the financial benefits of going green? If so, be sure to take a closer look at our Cloud-based accounting software, which improves your eco-friendliness through digitisation, increased efficiency, and remote access.
