Creating operational efficiencies

Efficiency gains are even more valuable when they unlock wider commercial benefits. The latest Inflexion Sustainability Exchange explored how relatively simple environmental changes can reduce costs, improve operations and create value across the business.

“Operational efficiencies are often the first way in which commercial value can be realised through sustainability. A reduction in operating costs is a direct benefit, but the benefits don’t stop there, it can also mean stronger commercial decision-making and improved resilience,” explains Bethan Casey, Assistant Director in Inflexion’s Value Acceleration team. She hosted a panel at the recent Sustainability Exchange.

Bethan: What drove you to look at sustainability?

Mariska Schennink, Senior Manager, Sustainable Services at Baker Tilly: When I joined Baker Tilly around 18 months ago to build and implement the firm's sustainability strategy, achieving net zero was one of our first priorities. Clients in the public sector were increasingly asking us about it, so there was a clear link to winning and retaining work.

Once we looked more closely at our carbon footprint, we also found operational opportunities. Fleet electrification was by far the biggest: moving fully to electric vehicles could reduce our scope 1 and 2 emissions by 86%, while the broader business case suggested potential avoided costs and cost savings of around €15 million by 2032.

That shifted the focus from an environmental target to a tangible business case.

Nicole O’Brien, CPO of Village Vets: It was similar for us at Village Vets. We knew we wanted to do more around our footprint, but once we started looking properly at the numbers we identified practical opportunities quite quickly.

Our crematorium activity accounts for the majority of our emissions, so that has been an obvious area of focus. We have looked at solar, changing fuel types and different machinery. In the crematorium alone, solar could generate savings of around €270,000 over the lifetime of the installation, as well as reducing carbon.

There are incentives that can really bring down the outright cost of some initiatives. For example an installation we pursued (in Ireland) moved from pure sustainability play to investment decision, with an SEAI grant reducing expenditure by a third.

Jo Daley, CEO of Flotilla Group: In my experience, sustainability is rarely the starting point. Businesses usually begin with an efficiency problem or an opportunity to operate differently and reduce costs.

At Flotilla, we work with a number of private equity-backed businesses, including Inflexion-backed Cutwel. By looking at its operations and supply chain, Cutwel identified more than £330,000 of savings while reducing emissions by around 1,500 tonnes.

One change was moving from daily to monthly supplier ordering. That required better visibility and planning, but also reduced the time the team spent processing orders. The carbon benefit was almost a by-product of improving the operation.

Bethan: What have you learned about turning these ideas into practical initiatives?

Mariska: I had 10 minutes to present the strategy to our board, so I started with the commercial value: what clients were asking for and what our peers were doing. Then I moved onto the financial case and the cost of doing nothing. Two weeks later I came back with a more detailed plan showing both the investment required and the potential returns.

That taught me that I needed a business case behind everything. Sustainability might be the catalyst, but the argument becomes much stronger when you can show how it supports the future resilience and competitiveness of the business.

Nicole: Planning is key. With solar, for example, we had to understand not just installation costs but whether battery storage made sense, because the economics of selling power back to the grid are not particularly attractive. We commissioned a feasibility study so we had the data to make that decision properly.

Sometimes substantial changes turn out to be simpler than they first appear. A new piece of machinery may use less energy, but it might also drive efficiencies by, for example, increasing capacity.

For me as CPO, that is a clear return on investment. It also fits naturally with our values as a veterinary business: care for animals, our people and the wider environment are closely linked.

Jo: The knock-on effects are often where some of the most interesting value sits. If you change how you procure something, for example, you may reduce transport emissions but also improve inventory management, cut administration and free up employee time.

That is why measurement matters. If you can quantify the cost and operational impact before and after a change, you have much stronger evidence that the initiative is creating value.

Bethan: Beyond direct cost savings, where else can this create value?

Jo: The broader opportunity is to focus on the issues that are genuinely material to your business, your customers and your supply chain.

There is also increasing evidence that these factors matter in transactions. Over 76% of dealmakers have walked away from deals because of ESG concerns; 83% expect to pay a premium of at least 3% for strong ESG performance, and 67% apply a discount of at least 3% for poor performance.)  We see this in sector benchmarking. Companies that perform above average on relevant ESG measures can also show stronger commercial performance, and the strength of that relationship varies by sector. 

This is about correlation, as a business that approaches these issues well may also be demonstrating resourcefulness, discipline, and an ability to respond to change.

That is also why data is so important. If you cannot show where you started and what changed, much of the value can be lost when you look to sell.

Bethan: What is the most practical first step for a business that has not yet started?

Nicole: Get the data. An idea is much easier to support when there are numbers behind it.

Mariska: I would add peer analysis. Understand what comparable businesses are doing, then have a clear view of where you want to get to. That makes it easier to bring management and employees with you.

Jo: And pick something that is fundamentally material to your business. You do not have to solve everything at once. Start where there is a clear operational or commercial opportunity, measure the impact and build from there. Don’t let perfect be the enemy of good.