Its lucrative and right to be green!

 

by Christopher Day

So said UK Prime Minister Boris Johnson in his September 2021 United Nations address: “When Kermit the frog sang 'It's not easy to be green' - do you remember? - I want you to know he was wrong. He was wrong. It's not just easy, it's lucrative and it's right to be green! He was highlighting that the traditional trade-off between profitability and sustainability is old hat. Social and environmental initiatives no longer come at the expense of shareholder wealth but are a pre-requisite for it. This presents businesses with an enormous opportunity.

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Our future lies in the emerging reality that sustainability is profitable. Even in the absence of carbon pricing, new wind and solar generation is more economical to operate than 80% of coal fired power stations in the United States. If one adds the impact of internalising the price of pollution and greenhouse gas emissions, as well as new carbon border adjustments such as those being drawn up by the European Union, inaction on reducing a business’ environmental footprint risks its ability to remain a going concern. In keeping with the Sustainable Development Goals, transitioning to renewable sources of energy has the added benefits of generating well remunerated employment, reducing inequality, improving air and water quality, minimising degradation of agricultural land, and driving a new wave of economic growth and industrial innovation underpinned by the green economy.

It is not only possible for businesses to be sustainable, it is essential if they are to achieve their primary objective of delivering sustainable risk adjusted free cash flows.