Sustainability to Play Key Role in Financial, Operational Performances

Sustainability will play an increasing role in organizations' financial and operational performance, according to Gartner, Inc. By 2015, improving sustainability related performance will become a top five priority for 60 percent of major Western European and North American CEOs.

 

Gartner analysts say sustainability is no longer primarily about risk mitigation, focused on compliance, reputation, philanthropy, the "triple bottom line" and being seen as doing good things.

 

In practical terms, for most enterprises today, the value in sustainability is actually derived from operational efficiency and business enablement.

 

Sustainability’s enhanced corporate value will be enabled by a maturing set of information systems and decision support tools that facilitate the engagement of the CFO and the finance team.

 

“Sustainability is no longer a ‘soft’ and tangential aspect to organization performance,” says Simon Mingay, research vice president at Gartner. “A sustainable approach to business activities is generating tangible business benefits for organizations today, through a combination of operational efficiencies and market growth opportunities.”

 

Improved financial and operational performance is achieved by optimizing the use of increasingly expensive natural resources, minimizing the value lost through waste and emissions, and exploiting the increasing fiscal incentives and tax breaks — particularly those for energy efficiency. Business enablement is achieved by exploiting the emerging market opportunities of a low-carbon economy.

 

As perspectives continue to evolve, it is also about meeting the expectations of investors, customers, employees and other key stakeholders, by making better-informed decisions that explicitly balance commercial, environmental and social performance standards and criteria.

 

 

Gartner analysts say information-enabled processes and technologies will be a key enabler in achieving all these elements, providing a lens into organizational performance that is highly fragmented.

 

"For many consumer-facing and resource-intensive industry sectors, we anticipate a steady shift in the strategic intent of sustainability from operational efficiency to more of a core capability directly impacting products and services," says Mingay.

 

"Although many CFOs have historically been skeptical of the financial or business enablement value of sustainability, volatile and escalating resource costs — most notably, energy costs — along with changing customer, consumer and investor expectations in many developed economies, are changing the value equation."

 

While IT can continue to improve its own energy efficiency, the much bigger opportunity is applying IT to analyze, optimize, manage and otherwise improve the sustainability performance of the business itself. The applications of IT are many, and they are highly contextual according to the industry sector.

 

Recurring themes continue to include the easy and obvious, such as the use of remote-collaboration tools for travel substitution, and increased building utilization and efficiency, workplace management and remote working.

 

However, increasingly IT is being employed in more sophisticated and complex situations, including manufacturing process re-engineering, real-time automation and control in production environments, real-time route optimization for vehicles, natural resource management and optimization, management of the supply chain, and business analytics, all of which deliver efficiencies and reduce costs.

 

"One factor that has limited the traction of sustainability programs by the CFO and finance team, in particular, has been the lack of frameworks, systems and tools, which expose sustainability-related performance data and practices, provide decision support, and connect sustainability performance to financial performance," Mingay says.

 

"Such tools enable the CFO and the finance team to bring to bear their analytical skills on the issue of sustainability, and assist in making better-informed and more-balanced decisions that include the evaluation of sustainability and risk in the decision-making process."

 

 

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