The Better Decisions, Real Value (BDRV) toolkit helped Sainsbury’s Energy and Environment team to develop a clear business case for making its stores more energy efficient and to identify financial benefits which had been overlooked. They found that the business’s decision-making process for large investments did not factor in some of the main incentives for energy-saving.

Background

Sainsbury’s needed to decide how much to invest in making its stores more energy efficient. Initiatives like this are a key part of its sustainability strategy, but still need to be approved by the investment board.

The Energy and Environment team, part of Sainsbury’s property division, wanted to be able to articulate the business case for the investment as clearly as possible to ensure the project would go ahead. One challenge they faced was that estimates suggested there would be a long payback period before the energy efficiency improvements yielded a financial return. They also wanted to capture less tangible benefits as well as direct financial savings, for example, the clear reputational benefits of the initiative.

What did we do?

The project team began by assessing the ‘pathways’ by which the energy efficiency improvements could add most value to the business, using the BDRV pathways tool, available at: http://www.forumforthefuture.org/project/better-decisions-real-value/ove....

The team identified a need to look more deeply into how the investment board made its decisions. They found that a simplified calculation used to assess Net Present Value (a measure of how much the financial benefits from a project outweigh the costs) did not take into account some of the most important direct financial incentives for energy-saving. For example, cost savings for Sainsbury's from the Carbon Reduction Commitment were omitted..

How did Sainsbury’s benefit from the project?

Sainsbury’s identified an important blind-spot: its investment appraisal ignored some significant financial benefits of energy efficiency. The team also developed a better understanding of the processes and tools used for financial decision-making, and built a closer relationship with their finance colleagues.

The Energy and Environment team is now better equipped to identify and communicate the wider business benefits of good energy decisions. They also have greater confidence in articulating a clear business case for other strategic sustainability decisions.

How did this project inform the development of our BDRV toolkit?

Using the pathways tool on a real business issue helped us to clarify and expand on the different ways that sustainability initiatives can provide business value. The latest toolkit version incorporates our experience from this and other projects, as well as feedback from a range of experts in business sustainability.

By working with finance teams, we learnt how some financial tools are ill-equipped to deal with the complexity of sustainability and the softer numbers that often come out of attempts to quantify the financial benefits of initiatives in this area. This helped us develop the Ready Reckoner tool, which offers guidance on overcoming these obstacles and providing numbers that are ‘good enough’.