Chapter 4 - Sustainability in Business

What is Porter's value chain?

Activities that add value to a product, split into primary (production, sales) and support (HR, procurement) activities.

What influences a sustainability strategy?

Regulation, investor pressure, consumer demand, technology, and finite resources.

What are the main barriers to sustainability?

High costs, poor leadership, conflicting stakeholder priorities, hard to verify suppliers, unclear regulations, and expensive reporting.

What are impacts vs dependencies?

Impacts = how the business affects the world. Dependencies = how the world affects the business.

What are transition risks vs physical risks?

Transition = risks from moving to a low-carbon economy (e.g. new laws). Physical = risks from climate change, either sudden (floods) or gradual (rising sea levels).

What is sustainability-linked finance vs use of proceeds finance?

Sustainability-linked = any purpose, but loan terms depend on hitting sustainability targets. Use of proceeds = must be spent on a specific green or social project.

What are step-up and step-down mechanisms?

Miss sustainability targets = interest rate goes up. Exceed them = interest rate goes down.

What is an LCA?

A tool that measures a product's environmental impact at every stage, from raw materials to disposal.

What are the three components of ESG?

Environmental (emissions, biodiversity), Social (labour, human rights), Governance (board structure, transparency). No universal ratings standard exists, making comparisons difficult.

What are GHG Scope 1, 2 and 3 emissions?

1. Scope 1 = direct emissions

2. Scope 2 = from purchased energy

3. Scope 3 = everything else across the value chain.

What is greenwashing and what are the consequences?

Misleading claims about sustainability. Leads to reputational damage, fines, legal action, and loss of trust.

What is greenhushing vs greenwishing?

1. Greenhushing = hiding real sustainability efforts to avoid scrutiny.

2. Greenwishing = talking about sustainability without actually doing anything.

What are the steps in a sustainability plan?

Materiality analysis → set goals → plan actions → set KPIs → engage stakeholders → monitor and report.

How do sustainability risks and opportunities affect enterprise and social value?

They affect future cash flows and reputation (enterprise value) and stakeholder trust and relationships (social value).

What are the three types of use of proceeds bonds?

Green (environmental projects)

Blue (ocean projects)

Social (housing, education etc).

What are the four stages of an LCA?

Define goal and scope → inventory analysis → impact assessment → interpret and recommend.