Want funding? Think sustainability

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Scott Gehsmann, transaction services partner at PricewaterhouseCoopers

Scott Gehsmann, a partner at PricewaterhouseCoopers, offers advice on sustainability when preparing for an IPO. Photo courtesy of PricewaterhouseCoopers.

— The business case for environmental sustainability is accelerating.

Aside from appealing to environmentally conscious customers, going green can prepare a company for investment capital or an initial public offering, according to new research from PricewaterhouseCoopers.

“When a company is raising capital for the first time, they’re really in the spotlight in terms of what they do and who they are,” said Scott Gehsmann, a partner in transaction services at PricewaterhouseCoopers in New York. The company can expect investors to question whether sustainability is an integral part of their business.

“We found the topic started to come up first in stakeholder meetings” and on so-called road shows, where business owners are pitching investors, Gehsmann said. At the same time, more professionally managed funds also are investing in socially responsible companies. As a result, PricewaterhouseCoopers has added advice on sustainability when preparing companies to go public.

About 85 percent of the 120 IPO registration statements that PricewaterhouseCoopers analyzed from 2010 and early 2011 included some disclosure about sustainability, according to its report, “Factoring sustainability into IPO planning.” In addition, more than two-thirds of the disclosures were non-regulatory in nature.

Sustainability disclosure increasing

While interest in sustainability has been growing for several years, disclosure in IPO registration documents and proxy statements increased substantially during the past two years, Gehsmann said. For example, more than 100 climate-change resolutions were filed in 2010 proxies, up 50 percent over the prior year, according to the report.

Sustainability to many companies now means embracing a triple bottom line by paying attention to their people, the planet and profitability, Gehsmann said. “Managing sustainability across all of these areas in a synchronized manner is what optimizes value for stakeholders,” he said.

Sustainability should be “wired” throughout the business, Gehsmann said. And businesses should be thinking about ways to develop environmentally beneficial products as well as reducing energy consumption, he said. By embracing sustainability as a core component of an overall business strategy, companies will be better prepared when they seek funding, he said.

It’s critical for businesses to be accurate in the way they describe their sustainable practices to stakeholders and they should avoid promising more than they can deliver.  If employees notice a disconnect between the messages a company sends out about sustainability and its actual practices, “It has the ability…to compromise their external message,” Gehsmann said. To avoid such missteps, designate a board member to be responsible for sustainability oversight.

Companies that don’t have a clear approach to sustainability throughout the enterprise “can actually trip over themselves” when they start communicating their message to the public or to investors, Gehsmann said.

— Ann Meyer

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