How to Secure Funding for Sustainability Software (with Budget Proposal Template)

It’s become increasingly clear that integrating financial and sustainability data creates value beyond compliance.

Despite the shifting regulatory landscape and recent political upheavals, a new survey of executives and institutional investors reveals that ~85% of companies intend to move forward with their existing climate disclosure plans, with 97% agreeing that an assured integrated sustainability and financial reporting programme will give businesses a competitive advantage in the next two years.

However, for Operations, Finance, and Sustainability teams at the coalface of energy and carbon data monitoring/reporting, and/or data compliance with frameworks for ESG (Environmental, Social, and Governance) reporting, securing stakeholder buy-in and budget approval for a fit-for-purpose sustainability management system might still be a challenge.

How to make a strong business case to senior management for investing in sustainability software

Navigating the procurement process and creating a budget proposal for specialised software like this requires a strategic approach that emphasises both financial and non-financial benefits for your entire organisation.

In this article, we’ll explain the power of the cost-benefit approach when seeking stakeholder buy-in and funding sign-off. We’ll also show why asking upfront for ‘in-principle’ budget approval can save you a lot of time and disappointment down the line. We share a handy budget proposal template specifically designed to help you secure preliminary budget allocation for sustainability management software, which is particularly useful in the case of ‘unknown pricing’, i.e. where the majority of vendors don't publish (even estimated) costs online.

But first…

Do you know who holds the purse strings in your organisation?

Although IT is central to business results, an IT budget rarely includes all of an organisation's technology spending.

IT-related items that tend to fall outside the normal scope and allocation of an IT budget include applications to be deployed for and used by specific business units, e.g. a sustainability management system, which would primarily be used by Sustainability/ESG, Operations, and Finance teams, each of whom has influence on and interest in the organisation’s ESG/Sustainability objectives and targets.

In these situations, i.e. the procurement of specialised software which requires significant collaboration and exchange of data and knowledge between cross-functional teams, the purchase might be treated as capital expenditure (Capex). Capital expenses are frequently used to fund improvements to existing resources, although they’re more often seen as an investment in a company's growth potential. Budget approvals for Capex assets will usually have to come from senior management, with final sign-off on funding from the Chief Financial Officer (CFO), or an equivalent.

Money talks

The key to getting budget approval for any business need is to prove it will bring a positive return-on-investment (ROI).

This cost-benefit approach is usually your best shot at getting buy-in and funding sign-off for sustainability software, because most senior decision-makers are more likely to action investment when the stakes are expressed in financial terms. So be sure to align your budget proposal for sustainability management software with wider business objectives, and articulate the cost benefits of the software in a way that resonates with these stakeholders.

Why seeking ‘in-principle’ budget approval is always a good idea

Before you rush headlong into researching solutions, evaluating options, and vetting software providers, upfront alignment on cost expectations is crucial.

Securing ‘in-principle’ budget approval to explore sustainability management tools ensures feasibility. Without it, you risk finding the ideal vendor only to discover they’re wildly beyond your budget – or worse, there’s no funding available – which is a gargantuan waste of time and resources for everyone involved. 

How to secure preliminary budget allocation

In the ESG/Sustainability software space, you may have noticed that many vendors don’t publish their pricing online, which can make requesting a budget with estimated costs for your new sustainability management system rather difficult.

To address the ‘unknown pricing’ challenge, we’ve crafted a compelling budget proposal template to help you secure preliminary budget allocation with a defined approval threshold, incorporating justification for budget flexibility and final pricing adjustments after vendor evaluation. Feel free to adapt and tailor the content for your own budget proposal.

Budget Proposal Template for Sustainability Software

Executive Summary

This business case outlines the need for investment in a sustainability/energy management system to improve our energy management, carbon tracking, and the environmental component of our Environmental, Social, and Governance (ESG) reporting capabilities.

The proposed software solution will enable us to reduce energy consumption and achieve cost savings, reduce our overall carbon and greenhouse gas (GHG) emissions, simplify compliance reporting, mitigate risks (including future investment decisions on decarbonising), and improve stakeholder trust.

By implementing this software, we will move from manual, error-prone processes to an automated, data-driven approach that supports our corporate sustainability goals and contributes to the company’s long-term financial success.

Current Challenges

Our company faces several challenges related to energy and sustainability data management, including:

• Diverse Data Sources: Difficulty in managing data from multiple sources and formats
• Data Integrity: Difficulty in ensuring data accuracy and completeness, especially with reliance on spreadsheets and manual processes
• Reporting Complexity: Time-consuming manual processes that hinder ESG initiatives
• Lack of Transparency: Limited visibility into performance against ESG goals and difficulty in tracking progress
• Time-consuming Manual Processes: Inefficient manual processes to review, collate, and report data to various stakeholders
• Data Silos: Spreadsheets create data silos, hindering collaboration and insights
• Difficulty in calculating Scope 3 emissions (supply chain and other indirect emissions): Requires comprehensive data analysis and co-operation with suppliers and partners
• Compliance Pressures: Increased regulatory demands such as the Corporate Sustainability Reporting Directive (CSRD) require more robust reporting
• Financial Risks: Potential financial losses due to poor investment decisions based on inaccurate data

These challenges not only impede our ability to meet regulatory requirements and sustainability targets but also result in operational inefficiencies and financial losses.

Proposed Solution

We propose the procurement of a comprehensive sustainability/energy management system that will:

• Automate Data Collection: Streamline the collection of data from various sources, reducing manual efforts and errors
• Ensure Data Integrity: Provide tools for data validation, cleaning, and storage to ensure accuracy and reliability
• Simplify Reporting: Automate the generation of reports for different stakeholders and formats, ensuring compliance with various frameworks, such as the CSRD
• Enhance Transparency: Offer real-time dashboards and analytics to track progress against ESG goals
• Streamline Data Management: Enable efficient tracking of multiple versions of data across the organisation
• Calculate Carbon & GHG Emissions: Provide tools to calculate and report on Scope 1 (direct emissions), Scope 2 (electricity/heat indirect emissions), and Scope 3 (supply chain and other indirect emissions)
• Improve Data Quality: Provide tools to identify gaps in the dataset, data anomalies, and ensure all meter points are running correctly

By centralising data and automating key processes, the software will enable our teams to focus on strategic sustainability initiatives and value creation.

Financial Benefits

Implementing the proposed software solution will yield significant financial benefits:

• Cost Reduction
  • Reduced energy consumption: The software will help reduce energy consumption by identifying inefficiencies and opportunities for improvement
  • Lower operating costs: Improved resource management and optimised processes will reduce operating costs
  • Avoidance of penalties: By complying with regulations and properly managing sustainability data, we can avoid penalties and fines
  • Reduced auditing costs: Properly recorded, curated, and reported data will result in fewer audits, less non-compliance issues, and a smoother auditing process
  • Reduced capital costs: Access to better loan interest rates and reduced insurance premiums due to strong ESG performance
• Revenue Enhancement
  • Increased market share: A strong ESG proposition will help attract new customers and expand our market presence
  • Competitive advantage: We will be able to stand out from competitors with poor or no ESG implementation
• Improved Efficiency & Productivity
  • Time savings: The software will significantly reduce time spent on manual data collection and analysis, freeing up valuable staff time for more strategic tasks
  • Optimised investments and assets: Allocating capital to more sustainable opportunities, such as renewable energy and waste reduction
• Other Financial Benefits
  • Improved investment decisions
  • Increased bid competitiveness
  • Greater access to grants and tax refunds
  • Improved HR retention and recruitment
  • Consultancy support savings
  • Reputation and sustainable brand value

Sustainability Benefits

The software will enhance our sustainability efforts by:

• Reducing Carbon & GHG Emissions: The software will help us identify, plan, and implement ways to reduce our overall carbon and GHG emissions
• Improving Resource Management: By tracking and analysing data on energy, water, and waste, we can optimise resource consumption
• Meeting Compliance: The software will ensure our data is compliant with international protocols and frameworks
• Driving Continuous Improvement: Data-driven insights will enable continuous improvement in operational efficiency and ESG performance
• Tracking Project Status: The system will show which projects should be prioritised and track the status of each project

Implementation Plan

The implementation of the sustainability management software will follow these steps:

1. Stakeholder Engagement: Engage key stakeholders from Finance, Operations, and ESG/Sustainability departments to gather input and secure buy-in
2. Request for Proposal (RFP)/Tender: Issue an RFP/Tender to evaluate different software solutions and identify the best fit for our needs, focusing on overall value rather than cost alone
3. Proof of Concept: Conduct a pilot programme (free or paid trial) to test the software and evaluate its effectiveness within our organisation
4. Implementation and Training: Implement the software across our organisation and provide training to all relevant staff
5. Continuous Monitoring and Improvement: Continuously monitor the performance of the software and make necessary adjustments to optimise its value

Budget

As this is not a fully off-the-shelf product, and pricing is not publicly available for many software providers in this space, we seek preliminary budget allocation with a defined approval threshold to proceed with vendor evaluations. A formal RFP/Tender/Quote process will provide specific costs, and a final budget will be submitted for approval before contracting.

Conclusion

Investing in a sustainability/energy management system is a strategic imperative for the company. Being able to leverage data-driven insights will help drive both financial and environmental performance aligned with our broader corporate sustainability goals. Given the myriad benefits and cost savings outlined above, this software solution is expected to provide a significant return-on-investment.

We thank you for your time and consideration of this proposal.

Further reading

Once you’ve secured preliminary budget allocation, it’s time to develop your RFP/Tender document.

Download our free RFP/Tender Guide with Customisable Template for expert advice on which questions to ask, and what to look for in a response.