Trade-offs in improving sustainability

The last step in the analysis of sustainability measures involves achieving a balance between improvements and any negative consequences they may have.

In some cases, the measures implemented to improve a company’s sustainability may bring about undesirable collateral effects. To achieve an optimal solution, it is therefore necessary to strike a balance between the conceivable options and any negative consequences they generate.

Example of multiple options with variable consequences

The calculation table below has been reproduced from the previous chapter. This is an example of a fictitious company seeking to determine the optimal sustainability measures to be implemented depending on financial considerations. Three scenarios are considered here.

  Scenario 1
Base scenario
Scenario 2 
Replacing refrigeration equipment to reduce dependence on back-up generators
Scenario 3
Improving insulation and ventilation and increasing glazed surface areas to reduce overall consumption
Jahresenergieverbrauch gesamt (MJ) 400,000 350,000 300,000
Energy consumption indicator (O2) =
Total energy consumed/standardization factor
8MJ/product 7MJ/product
(-12.5% compared to Scenario 1)
6MJ/product
(-25% compared to Scenario 1)
Annual energy cost USD 200,000 USD 180,000 USD 150,000
Annual difference in energy costs
compared to Scenario 1
  USD 20,000 USD 50,000
Cost of new equipment 0 USD 50,000 USD 200,000
Expected life of new
equipment
  5 years 10 years
Annual depreciation   USD 10,000 USD 20,000
Total annual cost USD 200,000 USD 190,000 USD 170,000
Repayment period   2,5 years 4 years
Net profit 0 USD 50,000 USD 300,000
Return on investment   100% 150%

Advantages and disadvantages of Scenarios 2 and 3

Each scenario has advantages and disadvantages which need to be taken into account:

  • By adopting Scenario 2, the company has the option of saving money and reducing energy consumption. The monetary savings are modest, and the investment repayment term is short.
  • In Scenario 2, the company may also consider that the reduction in dependence on back-up generators makes the company more vulnerable to energy suppliers, jeopardizing its operating costs and the reliability of supplies.
  • In Scenario 3, the initial investment is larger and the repayment term longer, but the potential savings and benefits are clearly higher.

The best option will be determined depending on the company’s specific requirements.

Consulting the company’s partners

Consulting the company’s partners that might be affected by the sustainability measures implemented—suppliers, employees, local communities, regulators, customers, investors, etc.—helps guide the company’s selection of an option. Involving partners may also result in the identification of new options not considered previously and the provision of helpful additional information.


Sign up to our newsletter to stay informed (on the top right).


Information

Last modification 28.08.2018

Top of page

https://www.kmu.admin.ch/content/kmu/en/home/concrete-know-how/sme-management/corporate-social-responsibility/improving-environmental-performance/sustainability-measurements/achieving-results.html