AkzoNobel and Alcoa link sustainability to capital projects

Empowering the CSO helps prevent budget requests that have not integrated sustainability considerations and ensures that the company's sustainability specialists are engaged in project development early on. This practice also helps align the company's business strategy with sustainability goals. It will be interesting to watch how this practice impacts AkzoNobel's ability to build facilities that not only hold up to today's standards, but hold up to long-term performance and sustainability pressures, like increased resource scarcity.

A similar process occurs at Alcoa, a leading aluminum producer, where the CSO is one of a team of executives participating in the decision-making process for capital requests. This approach helps ensure that sustainability factors are considered at all stages of project development.

Asking about sustainability during financial planning

As a result of AkzoNobel's actions, its sustainability team now plays a role in the very early planning stages of large capital projects. It can ask important questions:

• Is this the right business for more investment, and how manageable are the associated social and environmental risks, such as water scarcity or impacts on biodiversity?
• Where can AkzoNobel site a proposed facility in order to use sustainable transport options for product distribution and minimize the company's carbon and water footprint, while balancing location-related costs?
• Where should AkzoNobel site a new facility so it has access to more long-term renewable energy sources?

• What are the cleanest sources of power generation that can be used at the company's facilities? How can the options be evaluated in the most transparent manner?

By assessing sustainability considerations early, the positive social and environmental benefits can be much greater than waiting until the final stages when only marginal changes are possible. By using this type of process, companies like AkzoNobel can learn from past decisions, including understanding the negative business impacts of not incorporating sustainability components like energy price volatility and future water scarcity into decision-making.

As we're already seeing with ongoing drought, sea level rise and more volatile weather patterns, environmental risks can have huge impacts on business operations. More and more investors are starting to ask questions on how to prevent corporate investments today from becoming worthless or "stranded" due to environmental factors, such as the impacts of climate change. Corporate practices like those at AkzoNobel can help to ensure that capital spending is more aligned with sustainability pressures over the long-term -- a policy that benefits both profits and planet.

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