Finance Leaders Decrease Costs with Sustainability

Increasing Sustainability Decreases Costs

Sustainability not only helps the environment, but also improves overall business practices, aids in company growth, and increases the value of your business. Finance leaders who promote increased sustainability are realizing economic gains and significant cost savings. More than half (53%) of organizations said that their sustainability reporting is now integrated into the group annual report (3). Clearly, there are increasing pressures for finance leaders to report on and advocate for sustainable practices that boost the bottom line.

Renewable Energy is Decreasing Power Costs

According to the 2019 World Energy Outlook by the International Energy Agency (IEA), “a sharp pick-up in efficiency improvements is the single most important element that brings the world towards the Sustainable Development Scenario” (1). It is not difficult for finance leaders to make a case for reducing energy usage, since one of the leading costs for any manufacturing firm is the amount of funds it takes to power equipment and production processes. one way to decrease these costs that also has positive environmental impacts is to shift to renewable energy sources. Based on the levelized cost of energy, the cost of solar panels per watt produced in 1977 was $77; in 2020 it is $0.14 (1). Tax credits for implementing solar, wind, geothermal heating, and other renewable energy sources can result to up tax credits amounting to 30% of the investment (2). Furthermore, usage costs for these types of energy methods are often far cheaper in the long run. Using technology, finance leaders can identify ways to decrease energy costs and increase sustainability, including reducing power usage during peak hours, buying and trading renewable energy, and shifting operations to match the availability of more sustainable energy options such as solar and battery powered systems.

Lower Logistics Costs

Upwards of 70% of the products in the United States are transported by truck (4). Shipping of materials and inventory can be expensive, especially when multiple, long-distance routes are required. Finance leaders can use technology to optimize shipping routes. Maximizing usage of shipping containers is another example where finance leaders can cut costs significantly. By making sure you are utilizing space efficiently and planning logistics route to transport the greatest number of goods with the least shipments and mileage, you can reduce your fossil fuel emissions and save time and money. Furthermore, using a smaller network of localized suppliers decreases transportation costs and consistent, bulk purchases are typically discounted and much cheaper than buying from a large network of suppliers sporadically.

Reduce Waste Management Costs

On average, for each ton of garbage it costs $30 to recycle, $50 to send to landfill, and $75 to incinerate, meaning the solid waste industry generates $60billion annually (5)! This does not even take into the account the initial cost of the materials wasted. Finance leaders can use technology to assess where materials are being wasted and why, and decrease waste to increase sustainability and minimize waste management costs. Furthermore, recycling and repurposing of byproducts can result in further decreasing costs, additional revenue streams, and potential to reduce materials purchased from other vendors.

Conclusion

Every line of business must do their part to enhance sustainability in modern day companies, and finance leaders are no exception. Furthermore, increasing sustainability has a twofold benefit, since sustainable practices significantly reduce costs associated with logistics, material sourcing, energy, and waste management.

Read the whitepaper on how to increase sustainability in manufacturing.

Read the whitepaper on how to increase sustainability in food and beverage companies.

Sources:

1. 1. https://www.weforum.org/agenda/2020/08/sustainable-manufacturing-economic-and-ethical/
   2. https://blog.thomasnet.com/green-manufacturing-sustainability-benefits
   3. https://www.capgemini.com/us-en/wp-content/uploads/sites/4/2020/07/Final-Web-Report-Sustainability-In-CPRD-2.pdf
   4. https://foodsafetytech.com/column/sustainability-strategies-for-the-food-industry/
   5. https://softengine.com/resources/whitepaper/manufacturing-waste/