Sustainability

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Sustainability considers the long term environmental and other effects of an organisation's activities, seeking to ensure that they do not degrade the physical environment or other necessary conditions for well being.

Sustainability has a number of important dimensions in treasury and finance, including environmental sustainability, financial sustainability and social sustainability.


Environmental sustainability involves making decisions and taking actions which expressly take responsibility for the impact on the environment, and avoid depleting or degrading natural resources such as soil, water, forests, and biological diversity.


Financial sustainability is achieved when an organisation is able to earn reliable financial surpluses and generate cash in the medium and longer-term.

Financial sustainability includes the ability to pay back borrowings over time, with interest, while maintaining necessary levels of internal investment.


Social sustainability seeks to identify and manage the impact of business and other activities on people. For example, employees, customers, suppliers, others employed by customers and suppliers, and host communities.


Historically, it was often considered that there was a conflict between environmental sustainability and financial sustainability.

More recently, an increasingly mainstream view is that it is only environmentally sustainable businesses which are fully financially sustainable.

This view suggests that there need be no conflict between an organisation’s environmental and financial objectives, when a sufficiently long-term view is taken.


Sustainability is increasingly being used as a component in borrowings and credit evaluation.

Credit rating agencies are also taking sustainability principles into account.


ACT's sustainability awards
"These awards are presented to individuals or organisations in recognition of the contribution the treasury or client-facing team has made towards sustainability in their organisation or more widely.
Criteria may include (but are not limited to):
  • Environment: solutions that take into consideration and make a positive impact on the environment.
  • Social: solutions that address social challenges, either on a large (e.g. modern slavery) or small (e.g. volunteering in the local community) scale.
  • Governance: innovative solutions to manage the demands of greater scrutiny on a team or organisation.
  • Innovative finance solution: whether loan, bond, supply chain finance or something other, if you’ve raised debt using an innovative solution or to address an innovative need (e.g. to support the wider social agenda), we’d like to hear from you."
Diversity & Sustainability Awards, Association of Corporate Treasurers.


Credit ratings and ESG
"The European Commission’s Sustainable Finance High-Level Expert Group (HLEG) says that credit rating agencies should “systematically integrate” relevant environmental, social and governance (ESG) criteria into their credit-rating analyses, along with factors related to longer-term sustainability..."
The Treasurer, web exclusive, June 2019.


See also

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