In any organisation, so-called 'support' or 'corporate' functions periodically face the same question: what value do they create, compared to their cost? The E&S function does not escape this questioning. Worse, it is sometimes particularly exposed, because its cost is visible (salaries, consultants, studies, audits) whilst its value is diffuse and rarely quantified.

The argument based on regulatory compliance, often put forward by E&S teams themselves, is no longer sufficient. An experienced CFO will respond that minimal compliance, at the lowest cost, is sufficient. The debate then inevitably shifts towards team reductions and outsourcing to ad hoc consultants.

The argument that withstands this test rests on five concrete value creation levers. Each is measurable, at least partially, and each produces a documented return on investment. This article presents these five levers, the orders of magnitude of associated value creation, and how to integrate them into internal budget dialogue.

Lever 1: access to financing

The first lever is direct and measurable. A mature E&S function conditions access to specific financing or enables better terms on conventional financing.

For projects under international financing, the E&S performance of the borrower is a quasi-binary decision factor: without a credible mechanism, no DFI loan, no bank loan signatory to the Equator Principles, no access to sustainable bonds. These financings represent a growing share of available sources for large infrastructure projects.

Beyond access, E&S quality influences terms. An issuer who can document robust E&S performance generally obtains slightly more favourable margins, longer maturity periods, less restrictive covenants. The order of magnitude is modest on an individual transaction, but it accumulates across a portfolio.

Typical case. A construction company wishing to raise international financing for a major project is asked, from the first exchange with a lender, to demonstrate its E&S maturity. Lenders examine previous projects, teams in place, procedures, certifications. A company poorly equipped with E&S function sees its request deferred by several months for an upgrading period. These months of delay have a considerable opportunity cost.

Quantification involves analysing the financing portfolio: which transactions would not have occurred without the E&S function? Which terms would have been less favourable? The answer, even approximate, produces significant figures.

Lever 2: avoiding liabilities

The second lever is avoidance. An effective E&S function avoids non-compliances that cost dearly, directly and indirectly.

Avoided costs cover the six families described in classical analyses of E&S risks: direct compliance remediation costs, delay costs, disbursement suspensions, accounting provisions, reputational costs, legal costs. Each can, individually, exceed the annual budget of a well-dimensioned E&S directorate.

Avoidance is difficult to prove in absolute value (one cannot quantify precisely what did not happen), but the order of magnitude is assessable by analogy with comparable projects where non-compliances occurred. DFIs sometimes publish post-mortems on projects that went wrong; these documents are a useful source for calibrating orders of magnitude.

Typical case. An infrastructure project economised on its RAP upstream, considering that the component was well covered by national law. At the time of lender due diligence, the RAP proves insufficient. The project must redo the work, mobilise teams again, delay its financial calendar by six months. The overall cost of this correction far exceeds the savings initially hoped for on the E&S function. An E&S manager in place from the outset would have anticipated the need for a compliant RAP, at marginal cost.

Lever 3: operational efficiency

The third lever is less obvious but structurally important. A mature E&S function contributes to the operational efficiency of the project across several dimensions.

Prevention of occupational accidents reduces absenteeism, compensation, site stoppages, productivity losses. Statistics from major construction companies show a robust correlation between E&S maturity and health and safety performance.

Optimisation of water, energy and material consumption, directly driven by E&S approaches, produces measurable operational savings. A waste reduction approach on a construction site can generate savings of several per cent of the materials line item.

Quality of community relations reduces site stoppages linked to local disputes. A site blocked by a dissatisfied community costs several hundred thousand euros per week of stoppage. A single stoppage avoided in the life of the site can justify several years of well-dimensioned community E&S function.

Quantification mobilises classical operational KPI indicators (accident frequency and severity rates, consumption per unit produced, average grievance processing time, site stoppage rate). The correlation with E&S maturity is built over several years of observation.

Lever 4: employer attractiveness and talent retention

The fourth lever operates on human resources. Qualified profiles, particularly younger graduates, attach growing importance to the environmental and social reputation of their employer.

A company that positions itself on projects reputed to be ethically or environmentally difficult has recruitment difficulties for certain profiles. A company that demonstrates a serious E&S policy attracts and retains talent more easily.

The cost of a failed recruitment or an unanticipated departure is assessable: several months' salary, plus transition costs, plus the opportunity cost of the vacancy. Relative to the number of key profiles in an organisation, the stakes are significant.

Typical case. A construction company that regularly recruits graduate engineers observes, over several years, that its offers remunerated equivalently to its competitors receive significantly fewer applications. Analysis reveals that the company is perceived, rightly or wrongly, as less E&S engaged than its competitors. Implementation of a visible E&S policy, accompanied by coherent external communication, progressively restores attractiveness. The gain is measured in recruitment quality and retention rates.

Lever 5: valuation in disposal and external growth

The fifth lever, often neglected, concerns capital transactions. A company contemplating a disposal, stock exchange listing, merger-acquisition operation, sees its valuation strongly influenced by its ESG maturity.

Sophisticated acquirers systematically conduct ESG due diligence. Identified weaknesses produce either a valuation discount, or the requirement for negotiated provisions, or suspensive conditions that delay the transaction.

Financial analysts increasingly integrate these dimensions into their recommendations. ESG investment funds, which represent a growing share of the market, explicitly exclude certain companies from their investment scope.

The company that, over several years, has built a mature E&S function, with publishable indicators, robust governance, an aligned project portfolio, presents itself in a markedly more favourable position in these operations.

This value creation is difficult to quantify on an isolated transaction, but it is clearly visible in benchmarks of sectoral valuation multiples between ESG leading and lagging companies.

Building the argument for the CFO

A convincing argument vis-à-vis financial management combines three registers.

The quantitative register. Each lever is quantified, even approximately, with orders of magnitude documented by comparable cases. The result is presented as overall ROI over a horizon of several years.

The comparative register. The company's performance is positioned relative to its sector peers: where it is, where it could be, what effort the difference represents. This comparison usefully activates the competitive reflex.

The risk register. Costs avoided by a mature E&S mechanism are quantified in plausible scenarios. The ratio between cost of the function and avoided costs is presented, generally in a very favourable range.

This argumentation, conducted rigorously, produces constructive dialogue with financial management. It enables moving beyond debate on the cost of the function to discuss the value it creates and the means of maximising it.

What financial managements want to see in the E&S argument.

  • Figures, even approximate, rather than qualitative discourse.
  • Comparisons with sector peers.
  • Quantified risk scenarios.
  • Performance indicators monitored regularly.
  • Clear articulation between the E&S function and the company's strategic decisions.

Defending the value of an E&S function is not done by invoking regulatory compliance. It is done by demonstrating, with supporting figures, the five value creation levers that the function activates: access to financing, avoiding liabilities, operational efficiency, employer attractiveness, capital valuation.

This demonstration is not trivial to produce, but it is possible. Orders of magnitude exist, sectoral comparisons are multiplying, documented cases are accessible. The effort of producing a solid argument pays for itself immediately in internal budget dialogue and over several years in the lasting credibility of the function.

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