Lesson 5:

Sustainability Business Case

Lesson 5 Outline
What we'll cover today:

The Generic Business Case

Global Level Business Case

Company Level Business Case

Project-Level Business Case

Group Exercise
Lesson 5 Objectives
At the end of today's lesson you will be able to:

Differentiate the three main justifications behind any business decision

Identify some of the global economic opportunities and risk related to sustainability
Recognize how the global megaforces of change impact businesses
Identify some of the business opportunities and risks of sustainability
Appreciate the role of purpose in business
Articulate a convincing to business case for sustainability
Generic Business Case
What is a Business Case?

To begin, here is a textbook definition of

a business case:

“A document written for executive

decision makers, assessing the
present and future business value
and risks related to a current ...
investment opportunity.” (Keen &
Digrius, 2003, p. xii).

Keen, J. M., & Digrius, B. (2003). Making technology investments profitable: ROI road map to better business
cases. Hoboken, NJ: John Wiley and Sons, Inc
Big Three Justifications - Traditionally

Capture
Opportunities

Do the Right Thing!

Mitigate Risks
Traditional Sustainability is NOT Connected to Core Business

Capture
Opportunities Sustainab

Do the Right Thing!

Mitigate Risks
Traditional Sustainability Plays on the "Opposing Team"

Capture
Opportunities
Decision Makers Sustainability
Do the Right
Champions Thing!
(CEO, CFO…)

Mitigate Risks
21st Century Sustainability Business Case

Capture New
Opportunities
Enhanced
Reputation
&
Fulfill Our Purpose
Innovation

Mitigate New Risks

Lesson Journey – The Business Case at Multiple Levels

Environment

Society

1. Global Level Economy

2. Company Level Business

Project 3. Project Level

Global-Level Business Case
Lesson Journey – The Business Case at Multiple Levels

Environment

Society

1. Global Level Economy

Business

Project
 21st Century Sustainability Business Case – Global Level

Grow Global GDP

Fulfill Our Purpose

Mitigate
New Global Risks
Sustainability as a Business Opportunity

Sustainability Business Opportunities Video

New Opportunities - $12 Trillion

Economic Bonus:
380M jobs

“Better Business, Better World,” Business and Sustainable Development Commission, Jan 2017.
The Risk Landscape – WEF Global Risks Report 2024
New Risks – WEF Global Risks Report 2020

50%
uninsured
Sustainability Megaforces of Change

Environment

Society of Change
Global Megaforces
Climate Resource Wealth Ecosystem Food
Changes Technology Feedback
Change Scarcity Inequality Decline Security
in from Our
People’s Past
Actions
Pandemics!
values Energy & Personal Population Urbanizatio Water Deforestatio
Fuel Action Growth n Scarcity n

Economy
Adapted from “Expect the
Unexpected” © KPMG 2012
Company-Level Business Case
Lesson Journey – The Business Case at Multiple Levels

Environment

Society

Economy
2. Company Level Business

Project
 Global Megaforces of Change
Climate Resource Wealth Ecosystem Food
Changes Technology Feedback
Change Scarcity Inequality Decline Security
in from Our
People’s Past
values Energy & Personal Population Urbanizatio Water Deforestatio Actions COVID-19!
Fuel Action Growth n Scarcity n

Impacts on Enterprises

Changes
Price Physical Customer/ Resource
New Law in
Increases and Employee Constrains
& Stakehold
& Weather Preference on
Regulation er
Volatility Changes Changes Production
Behaviour

Will you seize the Will you avoid the

emerging emerging

Opportunities Risks
• Reputation and brand
•Market •Regulatory
• Innovation and learning
•Litigation •Reputation Adapted from “Expect the
• New products, services & markets Unexpected” © KPMG 2012
•Social •Physical
• Cost reduction
• Access to capital of all kinds
 21st Century Sustainability Business Case – Company Level
Increase Profit

• Revenue Growth
• Operational & Employee
Enhanced Expense Savings
Fulfill Our Purpose Reputation
& Innovation
Avoid Profit Decrease
• Revenue Decrease
•• Revenue Growth
Operational & Employee
• Operational
Expense & HR
Increases
Expense Savings
Best Practices Business Case
Opportunities P&L Statement Risks
Revenue growth Risks to
Company reputation; Innovative products; +9% Revenue Revenue
Innovative services & financing

Energy costs -75%

Waste costs -20%
Risks to
Materials & water costs -10% Expenses
Expenses
Employee productivity & innovation +2%
Employee attrition costs -25%

Sustainability Capital +51% -16%

PROFIT
Reserve to +81% to -36%
sustainabilityadvantage.com/business-case-simulators/sustainability-advantage-worksheets/
Sustainability Business Case - Veriform
$2M from 100+ energy-saving projects (2006-2018)
50% electricity & natural gas savings
35% maintenance savings: $35K/yr
15% employee turnover savings
3-6 months average pay-back period (100+ projects)
77% CO2 reduction
3X sales per kWh
25% staff increase
146% building size increase
“Ontario businessman who saved millions by going green reveals his secret,” National Observer, April 2018
Project-Level Business Case
Lesson Journey – The Business Case at Multiple Levels

Environment

Society

Economy
Business

Project 3. Project Level

CFO "Business Case" Form
20th Century CAPEX Request Form
Project Details and Requesters

Project Description / Why needed

Expense and Revenue Impacts

Risks

Capital Required (CAPEX) and Sources

Financial Analysis / ROI

Payback Period, IRR, NPV …
Authorizations
21st Century CAPEX Request Form
20th Century CAPEX Request 21st Century CAPEX Request Form
Form
Project Details and Requesters
Project Details and Requesters

Project Description / Purpose

Project Description / Why fulfillment
needed
+ Helps fulfill purpose / vision /
values
Expense and Revenue Impacts Aligns with long-term strategic
plans

Risks
+ Improves environmental and social
impacts
+ Expense and Revenue Impacts
Capital Required (CAPEX) and + All direct and indirect benefits
Sources
Impact on Assets
+ Enhanced asset values and market
Financial Analysis / ROI value
Payback Period, IRR, + Risks
NPV …
Monetized risks of not doing the
Authorizations project
Quantification ($) Capital Required (CAPEX) and Sources
of additional
CFOs’ advice to New sources of capital
information
CFOs Financial Analysis / ROI
 21st Century Sustainability Business Case – Project Level
• Revenue Growth
• Operational Expense Savings
• Employee Expense Savings
How the Project: • Asset Value Increase
• Fulfills Our Purpose • Market Value Increase
• Aligns with long-term strategies
• Improves Environment & Social 1. Risks if Project NOT done
Impacts • Risk of Revenue Erosion
• Expense Increases
• Asset Value Decreases
• Market Value Decreases
2. Risks if Project FAILS
(Contingency risks)
 The Human Factor
The art of the business case
process
is more important than the
accuracy of the numbers in the
spreadsheet.
Co-Creation = Co-Ownership
Engage data owners
Engage implementers
Engage decision-makers
Avoid turf wars and bruised egos
Group Exercise
 Photo by Miti on Unsplash

Group Exercise – Penny's Bakery

Group Exercise – Penny's Bakery

Case Study:

Penny’s Bakery is looking to pilot an energy reduction project in a downtown

location.

They hope to install LED lights to reduce energy use and improve the
working environment for employees.

Can you help Penny (the founder) figure out the business case?
 Group Exercise: Penny's Bakery
Baseline Data

Current revenue: $600,000 Questions:

Current profit: $50,000
Energy Expenses: $120,000 1. What is the project's Payback
Average annual employee salary: $40,000 Period?
Number of employees: 10
Current value of company equipment: $5,000 2. What is the expected annual profit
increase because of this project?
Estimated Project Costs (Hint: Funding required)

$50,000 in equipment upgrading (lighting) and materials costs

Estimated gains

• Revenue growth from new customers of 1%.

• LED lights will reduce the bakery's total annual energy consumption by 20%
• The improved working conditions because of the building's LED lighting will result in a 1% increase in productivity,
which will probably affect half of the employees.
• The equipment upgrades will increase their value by 25%.
Group Exercise: Penny's Bakery

Answers:

1. What is the project's Payback Period? 2.6 years

2. What is the expected annual profit increase because of this project?

53%
Lesson 5 Summary
In this lesson we explored:

The three main justifications behind any business decision

The new global opportunities and risks related to sustainability

The megaforces of change framework

The company opportunities and risks related to sustainability

The importance of purpose for a company

The Business Case at the Project level

Assessment Due Date Value of Final Mark

Quiz 1 (Lessons 1, 2, 3) Week 4 10%

Individual Assignment Week 7 (Oct 18) 20%

Groups Finalized by Prof Week 7 No Mark

Quiz 2 (Lessons 4, 5, 6, 7) Week 8 10%

Applied Video Assignment Week 9 10%