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Not Reporting Potential Value of Environmental Risk Leads to Missed Financial Opps

In this story:

While more and more companies today are focusing on environmental programs, processes and products, many of them are not capturing – or reporting on – the financial value they’re gaining from strong environmental performance, according to research from Accenture, CDP and Hermes Investment Management. And that is a huge missed opportunity, Accenture says.

Address and Report on Environmental Risk for Financial Value

Consumer goods businesses are heavily exposed to physical, climate and operational risks through reliance on agricultural and commodity inputs; they also face challenges to brand value if they remain inactive on environmental issues. Telecommunications businesses have exposure to carbon risks through their energy consumption intensity, but they also offer products and services which play a major role in enabling carbon footprint reductions for customers and others.

Yet more than 40% of the top 100 telecom and consumer goods companies reporting to CDP have not quantified, or publicly reported, the potential value at stake from addressing these risks and overcoming them with strong environmental performance, according to the research.

This is a huge missed opportunity for companies, according to the report. Justin Keeble, managing director of Accenture Strategy, says that reporting on financial value through environmental performance allows businesses to:

  • Build investor trust
  • Provide meaningful transparency
  • Help ensure long-term profitability

How Sustainability Risk = Value Creation, Plus Next Steps

Climate and environmental risks have known impacts of at least $700 billion – but those risks are still poorly understood and dangerously under-quantified, the report found. Investors are increasingly urging both the telecom and consumer goods sectors to understand and confront environmental risk, but if companies are not disclosing the financial performance and benefits of their programs, they’re still missing out on the opportunities created by informed investors.

“The investment community pays increasingly close attention to how a company captures and reports environmental performance and opportunities,” says Bruce Duguid, director at Hermes
Investment Management.

Once a company has a strong environmental management program and has begun to see results, the report suggests that next steps should include:

  • apply capabilities for measuring sustainable value creation to influence longer-term decision-making;
  • embrace new sustainability management opportunities;
  • continue to confront risks;
  • and demonstrate real action to investors.

Study Details

The study is based on Accenture Strategy analysis of the responses to CDP Climate, Water, and Forests questionnaires in 2014, 2015 and 2016. The initial analysis drew on Accenture Strategy and valuation frameworks to examine what Income Statement and Balance Sheet impacts the companies reporting to CDP had experienced, and that they could experience in the future, as a result of their environmental performance. In addition to evaluation of discrete quantitative responses, Accenture Strategy also assessed several thousand qualitative responses to CDP questionnaires to collate a fuller picture of the financial outputs and outcomes of CDP members’ environmental performance.

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