Overall, global companies have been spending less than in the pre-covid times, due to the current geopolitical climate. But, a new trend can revive spending and change the mindset for CAPEX strategies : ESG. In June, EU agreed on a new social and environmental reporting rules for big companies: companies have to be more transparent on their decarbonization plans and performances. Businesses need to be more specific about their transition plans to reach climate neutrality by 2050 by presenting concrete actions, investment plans, time-bound KPIs in terms of sustainability. They also have to be fully transparent regarding their processes and their impact on the planet. In today’s world, social and environmental issues have way more impact than before on investment strategies. The new trend among big corporations is to make sustainable capital investments.
Businesses concerned by environmental issues try to integrate sustainability in their supply chain practices. According to the EPA (US Environmental Protection Agency), carbon emissions have increased by more than 90% since 1970. It’s important to include sustainability in supply chain processes and develop a green supply chain management (GSCM): the objective is to minimize carbon emissions and waste while maximizing the profits on every key point of the supply chain (manufacturing, purchasing, warehousing, distribution, transportation).
Consumers wish to consume more sustainable products
A new shift towards greener products is seen among consumers, despite the skyrocketing inflation. According to a study by the European Commission, 9 in 10 consumers are concerned about environment protection. In reality, only 22% had bought green labeled products, 31% avoided over packaged products and 32% repaired a product instead of buying a new one. (EU Study About Sustainable Consumption). If we put this into perspective with new EU regulations regarding sustainability, we see that The Commission plans to strengthen the role of consumer in the green transition – that means that businesses need to slowly adapt to new consumers’ wishes of greener products.
Recently, the UN released a shocking report regarding the climate change: to achieve a liveable climate, businesses need to drastically reduce their emissions of greenhouse gases in order to achieve a so-called “net-zero” (gas emissions to as close to zero as possible”. Companies in the biggest polluters (being China, the US, the EU) have to set a target : for now, more than 1200 businesses have implemented strategies to reduce their emissions. On a more legal level, the European Climate Law forces countries to cut greenhouse gas by 55% by 2030, this brining opportunities for growth, markets, jobs and technological development.
What does all this mean for financials? Sustainability becomes a new investment criteria, and McKinsey speaks about sustainable investment as the new-normal. Business need to process the way of investment into greener project by creating standardized KPIs to assess the added-value of the project in terms of positive impact. Recently, we see an emergence of ESG criteria and regulatory framework in EU countries and on a European level (e.g., taxonomy eligibility). To achieve growth and sustainability, it is important to leverage technology when managing CAPEX.
When we created Vertical, our focus has always been to provide the right software to enable efficient horizontal and vertical collaboration, as well as data collection and reporting. To manage your Green Capex in the most efficient way, there’s no other tool that can make you master in your data analytics.
With Vertical’s portfolio approach, CFOs gain visibility on projects and their KPIs. It becomes possible to classify projects and review the investment performance to secure additional funding for greener projects.