Bring your business case up to speed with the sustainability agenda of today

A Declaration of Rebellion was made outside the UK Parliament on 31st October 2018. Two months prior; and unconnected; a schoolgirl started to spend her school days outside the Swedish Parliament. Her placard read, ‘Skolstrejk foer klimatet.’

The Declaration was made by Extinction Rebellion. The schoolgirl was Greta Thunberg. 2018 was a year when climate change became a high-profile public topic. Various groups and individuals pressed governments for action.

One year later, in 2019, the 2008 Climate Change Act was amended to commit the UK to ‘net zero’ greenhouse gas emissions by 2050, which requires a 90%+ reduction in absolute carbon emissions by 2050. This was also influenced by the UK Government’s commitment to achieve the UN Sustainable Development Goals by 2030, one of which is to protect the planet.

Supporting these commitments, the Government then revised the must-have information within business cases, and introduced the need to comply with the Social Value Model, with one of its key themes being the fight against climate change.

The Social Value Model, net zero and the impact on business cases

The Social Value Model sets out the Government’s social value priorities for procurement, with one of its five main objectives being ‘to fight climate change through effective stewardship of the environment.’

Business cases will now be evaluated against whether they provide ‘effective measures to deliver additional environmental benefits…including working towards net zero greenhouse gas emissions’. This has been mandatory for all central government departments, executive agencies, and non-departmental public bodies since January 2021 and so departments must include relevant content on sustainability in the five-case model.

Departments are now faced with the challenge of providing evidence that they have considered the strategic value of a proposed project against the Social Value Model as well as the wider ambition to achieve net zero.

There are several ways to do this throughout each of the five cases, with different factors and considerations that should be accounted for at each stage.

How does the new net zero strategy impact the strategic case?

The key purpose of this case is to provide strategic fit and support a compelling case for change.

Traditionally, objectives in the strategic case would be developed to support departmental spending objectives, but they must now also support the ‘net zero’ mandate, irrespective of whether the core policy or project is environmental.

Capgemini Invent has worked with government departments, and we are finding increased interest in formulating objectives which reference department-specific environmental objectives, policies and action plans.

Examples of strategic environmental references

• Support of the ‘Net zero’ mandate is possible in all projects, including departments such as HMRC or DWP whose portfolios are traditionally less centred on the environment. With such a strong emphasis now being put on the government’s net zero strategy, it is key that delivery against this is referenced in business cases.
• BEIS list tackling climate change as a priority strategic outcome; demonstrated through the Ten Point Plan for a Green Industrial Revolution, the Energy White Paper, and the Industrial Decarbonisation Strategy.
• DEFRA is instrumental in leading on the 25 year Environment Plan. In addition to net zero, other vital environmental measures need to be addressed, including themes of sustainably using land, connecting people with the environment to positively impact health and wellbeing, as well as ensuring diverse environments with reduced pollution.

How do we measure sustainability impacts in the economic case?

The key purpose of the economic section is to identify whether the preferred option is the best value for the Public, both from a monetary and environmental point of view.

The Treasury Green Book (Government guidance for appraisals and evaluation) states the need to assess and quantify environmental considerations. As of January 2021, new projects now need to consider:

• Impacts on carbon emissions and contribution to net zero targets
• Assessment and quantifying impacts on the natural environment

However, there are significant challenges with quantifying benefits and costs. This is linked to the uncertainty of impact; lack of knowledge over the tipping points beyond which environmental damage is beyond repair, long term horizons, links with other policy decisions, international considerations and lastly; the need for flexibility. Decisions taken today should not ‘lock-in’ potential future climate risk or lead to difficult, costly actions to reverse the decision in the future.

From our experience in writing the economic case for Public Sector bodies, we have encountered some common issues for ‘net zero’ benefits analysis including:

Choosing the right baseline. It can be incredibly difficult to measure an organisation’s baseline carbon footprint. To complicate this, assumptions made today about continuing along a current policy path may not hold true in the future.

• To overcome this – Spend time deciding how to measure before collecting data for measuring baseline. Don’t rely on applying the same assumptions every year, climate change and environmental impacts are constantly shifting.

Placing a value on changes in energy use. Energy and fuel use may change in the future, making it difficult to predict impact against net zero targets.

• To overcome this – Government guidance recommends using the long run variable cost of energy supply for net changes in energy use. This cost should be fuel, sector and time-specific. It factors in use of resources in production, transportation, supply and use of energy, rather than taking the market dynamic energy price which is prone to distortion.

Calculating the impact of emission changes. To effectively compare options, the impact of a project on the environment should be quantified.

• To overcome this – Government guidance sets out a three-step process to estimate emissions changes. First, the change in energy or fuel use is calculated. Second, this is converted into a corresponding change in Co2 emissions. Lastly, change in Co2 Emissions is multiplied by the relevant carbon price to give the cost of GHG. Departments should ensure they use the latest research and guidance on this, as well as consider other non-environmental factors when comparing options.

Want to find out more?

Weaving ‘net zero’ considerations into business cases is no longer a ‘nice-to-have’ and must be included in all five cases.

Capgemini Invent are currently developing Business Cases across the Public Sector and can support in developing all five sections of your business case, incorporating key sustainability elements.

For further information, contact james.pierce-dalton@capgemini.com

Laura D’Souza

Laura is a senior consultant at Capgemini Invent. Her previous experience includes working with clients across health, local government, central government and arm’s length bodies to formulate strategy, improve management practices and implement new operations.