7 minute read 2 Sep 2021
The Clyde Arc Bridge at night across the River Clyde West of Glasgow city centre in the Finnieston area. The bridge is also known locally as the Squinty Bridge because of the angle at which it crosses the river

How sustainability went from a cost to an opportunity

By Kath Barrow

UK&I Assurance Managing Partner, Ernst & Young LLP

Assurance leader and a member of the UK&I Executive. FTSE100 audit partner. A fan of theatre, travel, and the South West countryside.

7 minute read 2 Sep 2021

Doing the right thing for both the planet and business have become inseparable.

In brief
  • Declining costs in green energy and new technological advances are creating new possibilities.
  • Early sustainability adopters will benefit the most.
  • Aligning businesses to sustainability is an opportunity to be seized.

Whilst 2020 will always be the year the global pandemic took hold, 2021 may yet be remembered as the tipping point in corporate and global action on sustainability.  

If that’s the case, those looking back will inevitably focus on the major headlines, from President Biden returning the US to the Paris Agreement and Prime Minister Johnson’s plans for a green industrial revolution to major organisations announcing their net zero pledges before 2021 United Nations Climate Change Conference (COP26) in Glasgow. 

But for many businesses that tipping point has another meaning: the year that doing the right thing for the planet and for business became inseparable. This change is being driven by a simple fact. Advances in low-carbon technologies mean that many green options, from energy use to waste reduction, have gone from being a cost to the business to being break-even or value additive. 

There are a number of sources of ‘green value’ — from enhanced reputation, greater resilience to attractiveness to investors and consumers and for the first time perhaps, the case can now be made on cost savings alone. 

Falling green energy prices  

Energy is a significant cost for most companies, making the business case for using renewables, which traditionally cost more, or required significant capital investment up front, challenging. 

That not only changed, it did so faster than anyone thought possible. US technologist Ramez Naam has spent a decade writing about and modelling solar energy prices. Despite being seen as an outlier, whose forecasts were far more optimistic than official sources like the International Energy Agency (IEA), he proved to be hugely underestimating the trend. In fact, the cost of solar energy in 2020 was less than half his 2011 forecast and less than a quarter of IEA’s 2010 forecast.1

This illustrates how, once technologies have been developed, they can be rapidly refined and reduced in cost. A parallel is electric vehicles which, once highly expensive and limited in range, are now becoming both more affordable and effective. Once this happens, momentum builds fast. The proportion of electric or hybrid UK car sales nearly doubled in the first three months of the year, compared to the same period in 2020.2  

So, falling costs in green energy and rapid advances in low-carbon technology are making business cases in 2021 that looked impossible just a few years ago. 

Wider trends that support sustainability  

That basic cost driver is supported by major, related trends. In 1970, economist Milton Friedman declared that “the social responsibility of business is to increase its profit”3 but by 2019 a more progressive message had emerged from the 2019 US Business Roundtable (which brings together America’s most powerful CEOs) stating that “the purpose of a corporation is to create value for all our stakeholders, whose long-term interests are inseparable”.4

Those stakeholders are now pushing organisations to care more about sustainability: pressure from young people — who increasingly hold companies accountable for their impact; from regulators — who seek to expand reporting on sustainability performance, and from institutional investors and the banks — who are incorporating Environmental, Social and Governance (ESG) factors into their valuation and investment models. 

The investor focus on environmental and other non-financial factors is sharpening. The 2020 EY Climate Change and Sustainability Services (CCaSS) Institutional Investor Survey (pdf)  found that, of the 98% of investors surveyed who assess ESG, 72% carry out a structured review of ESG performance, compared with just 32% in the previous survey conducted two years earlier. 

The trajectory is not only clear but appears to be unstoppable. Many predicted that the economic pressures caused by the COVID-19 pandemic would slow down the sustainability agenda, but the opposite appears to be true. Early adopters whose efforts were initially underappreciated by investors — from Unilever’s long-term sustainability commitment5 to Tesla’s fearless focus on electrification6 — are now reaping the benefits. As this trend strengthens, even what were seen as niche areas of sustainability are now attracting interest. Who would have thought that the fastest growing category for a globally famous burger chain would be vegan?

Shades of green: measuring sustainability  

Though the picture so far seems rosy, there are challenges, the first is measurement. Businesses are taking action to move towards net-zero and, understandably, their investors and stakeholders want detail and proof around that, so how do they provide it? The answer is currently far from clear, with numerous methods and metrics appearing in the marketplace. This risks confusion at a time when clarity is needed, if companies are to reach their environmental targets, especially when this will depend on winning the confidence of consumers and investors. 

It’s not just about satisfying stakeholders, either. Management teams will need data and KPIs that support their new objectives. The measurement problem is twofold: how do you set and measure against common standards that everyone understands and works towards? And how do you set your own systems to reflect new green realities?, If you’re going to be changing practices to reduce emissions, shaking up your supply chain to promote sustainable behaviours and refocussing your reporting to reflect these new priorities, it’s likely that you will need to organise your business around different data and metrics. 

At EY, we are active on both fronts. We have been leveraging our leading role in global sustainability initiatives — including the Embankment Project for Inclusive Capitalism (EPIC), Stewardship Reporting, the World Economic Forum (WEF) and Climate Action 1007 — to develop global standards and EY teams are helping clients embed sustainability throughout their organisations to deliver clearly defined outcomes.  

At EY, we have been using renewable energy in our UK offices since 2007 and, globally, we recently announced our commitment that EY will be carbon negative in 2021

Government for good, for good 

Whilst it is right to recognise the progress made by business in addressing climate change, it’s important to acknowledge the role of governments. For example, developing green energy and making electric cars a viable alternative for consumers, governments have been vital in creating the framework to support investment and accelerate the application of new technologies.  

A funding gap still exists, however, with EY putting the investment needed for future global renewable energy development at a staggering US$5.2 trillion (pdf), based on the International Energy Agency’s Current Policies Scenario. 

Even more support and certainty from government may be required in the future, as businesses look to commit greater and arguably even longer-term investment to secure the next stage of the energy transition. 

That’s because many of the harder to reach aspects of sustainability are yet to be addressed. New forms of technology, new regulations and new taxes may all be needed on the road to a zero-carbon economy.

From ambition to action  

Despite the size of the challenge, the UK is well placed to take a leading role. The Renewable Energy Country Attractiveness Index (RECAI) ranks the UK as fourth in terms of renewable energy investment and deployment opportunities.

While the UK Government’s Ten-Point Plan to mobilise a Green Industrial Revolution, accompanied by a multi-billion pound support package, is welcome, more needs to be done to connect the dots, within and between the public and private sectors.  

EY has set up the Climate Business Forum to help bridge the gap between ambition and action. It leverages our role as a trusted advisor and convenor to bring together businesses, future leaders and government and to help drive concerted action on climate change. Working with leaders of today and also leaders of tomorrow, who are 18 to 30-year-old students, entrepreneurs and professionals, who are passionate about climate change, we took an intergenerational approach to address what can be done to help the UK progress with their green ambition. The outputs identified focused on what business and government could do to tactfully to deliver against the UK’s decarbonisation ambition.

Seizing the opportunity

Just as we have seen momentum build rapidly in the adoption of renewable energy and electrification, it is also happening around sustainability. Last year, ‘net-zero’ was a stretch target, now ‘carbon negative’ is the aspiration. Investors are primed, governments are supportive, consumers are on board and the science on climate change is more accurate. In such a context, it could be argued that climate change presents a better understood set of challenges and opportunities than, say, the future of digital innovation or even mobility in a post-fossil fuel world.

We are already seeing huge ‘bets’ placed in those areas while many businesses wait for greater clarity before investing in decarbonisation. This creates a great opportunity for early adopters. By seizing it companies can create value for their stakeholders. For those who don’t take the opportunity, the speed and volume with which investment is shifting away from high-carbon activities, means that capital may be increasingly hard to come by.

Perhaps the final barrier and often recognised barrier is culture. The corporate social responsibility (CSR) departments that were good for PR and self-worth, but otherwise seen only as a cost to the company, may begin to play an important role  in boardroom. Sustainability can only add value if it is part of the business, not apart from it.


From decreasing green energy prices through to improving sustainability reporting, companies who embrace sustainability quickly will create value for all stakeholders.

About this article

By Kath Barrow

UK&I Assurance Managing Partner, Ernst & Young LLP

Assurance leader and a member of the UK&I Executive. FTSE100 audit partner. A fan of theatre, travel, and the South West countryside.