Sustainability in M&A: The new imperative for finance managers

In recent years, sustainability considerations have become critical in the mergers and acquisitions (M&A) landscape. According to a recent survey by Deloitte, over 70% of M&A leaders have abandoned potential acquisitions due to environmental, social, and governance (ESG) concerns. Furthermore, most indicated a willingness to pay more for targets with strong ESG attributes. This shift underscores the growing importance of sustainability in financial decision-making, particularly for finance managers. 

Chief Financial Officers (CFOs) and finance managers increasingly prioritise carbon-related financial reporting and disclosures. This change is driven by rising ESG concerns and the recognition that robust ESG practices are not just regulatory requirements but also strategic imperatives.

One notable tool aiding finance managers in this effort is the EDGE platform from EP&T Global. This platform has become essential for managing ESG and greenhouse gas (GHG) reporting. It offers comprehensive, data-driven insights that ensure accurate ESG reporting and compliance with GHG requirements. By leveraging advanced data analytics, finance managers can optimise energy efficiency, significantly reducing consumption and operational costs. This approach helps meets energy reporting requirements and helps companies achieve green certifications, enhancing their market reputation.

The EP&T EDGE platform enhances operational efficiency through its predictive maintenance capabilities. By addressing potential issues before they escalate into costly problems, finance managers can maintain high-performance properties, aligning with market demands and improving competitiveness. This proactive strategy ensures that companies are compliant with current regulations and are positioned as leaders in sustainability.

The Deloitte survey's findings, which surveyed 500 leaders from corporations and private equity firms, revealed that ESG factors are increasingly integrated into M&A processes, affecting decisions, valuations, and due diligence. Confidence in evaluating ESG profiles has risen, with 83% willing to pay a premium for strong ESG attributes. The impact of ESG on dealmaking has grown, with significant percentages reporting ESG-related decisions to abandon or adjust transactions.

Investors and stakeholders increasingly scrutinise corporate sustainability practices, making robust ESG disclosures necessary. Finance managers must ensure their organisations' carbon disclosures are transparent and align with market expectations to maintain investor confidence and corporate reputation.

CFOs and finance managers are also tasked with integrating ESG factors into broader risk management frameworks. This involves assessing the financial risks and opportunities associated with climate change and ensuring these are reflected in financial planning and analysis. By doing so, finance managers can provide a comprehensive view of their company's financial health and resilience in the face of environmental challenges.

Regional Considerations: The UK and Australia

The UK Perspective

• In the UK, businesses face stringent regulatory requirements for reporting greenhouse gas (GHG) emissions as part of their annual financial reports. All large companies must report their energy use and GHG emissions under the Streamlined Energy and Carbon Reporting (SECR) framework. Non-compliance can result in fines and other penalties, emphasising the importance of adherence to these regulations to avoid financial repercussions and legal issues.

• Companies are increasingly turning to advanced platforms like EP&T EDGE to support compliance. This tool is essential for finance directors responsible for ESG and GHG reporting, providing comprehensive, data-driven insights that ensure accurate and timely disclosures. It facilitates compliance with GHG requirements, optimises energy efficiency, and reduces operational costs through advanced data analytics and predictive maintenance capabilities. This not only helps companies meet regulatory requirements but also enhances their market reputation by achieving green certifications and demonstrating a commitment to sustainability.

The Australian Perspective

• In Australia, businesses that meet certain thresholds have been required to report their GHG emissions under the National Greenhouse and Energy Reporting (NGER) scheme since 2007. Additional legislation for mandatory climate related financial disclosure is currently before parliament that will require many other businesses to prepare sustainability reports from 2025 that are aligned with international standards, including the Task Force on Climate-related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB) 

• These stringent measures highlight the importance of compliance tools like the EP&T EDGE platform for finance directors handling ESG and GHG reporting. By offering comprehensive data insights, the platform ensures accurate and timely ESG disclosures, compliance with GHG requirements, and optimised energy efficiency. This aids in avoiding fines and supports sustainable business practices.

Integrating advanced tools like the EDGE platform with financial and sustainability reporting transforms how CFOs and finance managers handle carbon-related financial reporting and disclosures. The combination of accurate data, advanced data analytics, and predictive maintenance ensures that companies can meet stringent ESG criteria, optimise their operations, and achieve long-term financial sustainability.

The trend towards abandoning acquisitions over ESG concerns further highlights the critical nature of these factors in contemporary financial decision-making. As finance managers navigate this evolving landscape, prioritising sustainability in M&A and leveraging advanced reporting tools will be essential. This approach ensures regulatory compliance and enhances corporate reputation and competitiveness, positioning companies as leaders in the sustainability space.

If you've found any of the above valuable and want to learn more about how EP&T and the EDGE platform, Request a Demo contact us at info@eptglobal.com.