New
Recent studies about SME , important events and advice from entrepreneurs: this column collect all the articles of current events published on the SME Portal.
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.
Information
Last modification 10.10.2022
