How do CSR and NetZero commitments improve borrowing conditions for companies?

In a world where environmental and social impact increasingly count against financial success, companies committed to CSR and the "NetZero" goal are positioning themselves as leaders of a sustainable future. These initiatives, far more than mere actions, are becoming key elements in the assessment of companies by investors and financial institutions. Companies that make a commitment can obtain better borrowing conditions and improve their financial performance. A win-win relationship with impact, which we'll decipher in greater depth in this article.

What exactly is a CSR commitment and NetZero?

In the current context, where Corporate Social Responsibility (CSR) and the NetZero strategy are becoming major issues, understanding these commitments is fundamental for organizations aiming to be engaged without forgetting their performance objectives.

Basic definitions of CSR and NetZero

CSR is about integrating social and environmental concerns into business operations and stakeholder relations. This includes various aspects such as:

• employee well-being,
• the environmental impact of the company's activities,
• and business ethics.

The NetZero approach, meanwhile, refers to the goal of achieving carbon neutrality by reducing greenhouse gas emissions to a level that can be fully offset by carbon sequestration initiatives.

Long-term commitment

Committing to CSR and to the NetZero goals requires a long-term vision and rigorous monitoring. This can include internal or external audits to measure progress and ensure transparency of the company's actions. It is crucial for companies to understand that these commitments are not one-off initiatives, but strategies integrated into the core of their business, requiring constant monitoring and adaptation.

The situation in France

In France, companies' commitment to CSR and NetZero strategy is gaining momentum, even if there are delays. For example, a survey carried out by Cegos in 2023 revealed that only 33% of employees feel that their organization's commitment to CSR is up to today's major global challenges, underlining the need for deeper and more authentic corporate involvement in these approaches.

However, Insee reports that 64% of companies with 50 or more employees have heard of CSR and 52% are actively involved, illustrating a significant awareness and involvement of French companies in the CSR approach. However, these commitments still need to be regularly monitored and evaluated by all stakeholders. On the one hand, to ensure that companies are more responsible, and on the other, so that they can have better borrowing conditions when faced with increasingly scrutinizing banks.

How companies' CSR and NetZero commitments facilitate their borrowing terms

CSR and NetZero commitments are taking on an increasingly significant role in the criteria used by lenders and investors to evaluate companies. This phenomenon is due to a growing awareness of environmental and social issues, which is translating into an increased demand for sustainability on the part of financial markets.

ESG criteria: a new standard for valuation

Environmental, Social, and Governance (ESG) criteria now form an integral part of company valuation. These criteria measure a company's sustainability and ethics in its business practices. A good ESG profile can facilitate access to financing by positively influencing the perception of risk by lenders and investors. Philippe Garin, CFO of the Korian Group, says that it is now easier to borrow with a good ESG profile, a trend that is likely to intensify in the future. For example, we're seeing more and more tools that go in this direction, such as green, sustainable or social bonds. Same thing for bank loans or credit lines indexed to CSR or ESG indicators.

The impact of CSR and NetZero on ESG criteria

Integrating CSR principles and NetZero commitments significantly improves a company's ESG criteria, creating long-term value and strengthening its competitiveness. These approaches not only improve a company's brand image and reputation, but also promote fidelity and recruitment of talent, while meeting stakeholder expectations regarding sustainability. This is the case with Salesforce and their model, which inspired the "Pledge 1%"initiative. This synergy between CSR and ESG criteria comes fairly naturally to most companies.

A concrete example of improved borrowing conditions:

Alstom is a striking example of a company that has benefited from better borrowing terms thanks to its sustainable commitments. Anneli Carlot, Alstom Group's Director of Treasury and Financing, has taken advantage of this emergence of financial products such as long- and short-term bank loans and sustainable "RCFs", which are suitable for companies committed to CSR and ESG objectives.

For this example, in 2023, Alstom successfully closed the syndication of a €2.25 billion revolving credit facility, with initial maturity of 12 months and including the possibility of two six-month extensions, at Alstom's discretion. This financial transaction was arranged with a consortium of 20 international banks.

More generally, a survey of around 30 companies by specialist consultancy Redbridge revealed that 61% of mid-sized companies have already raised sustainable financing or are considering doing so. We can therefore see that there is a growing trend towards integrating sustainability objectives into financial strategies.

Tips for interested companies

Towards a successful CSR and NetZero approach

For companies wishing to anchor or perfect their commitments to Corporate Social Responsibility and NetZero objectives, a few practical tips are in order. The first step? A rigorous assessment of the environmental and social impacts of your activities. This involves a comprehensive audit, from the supply chain to energy consumption, right through to labor practices.

The key? Transparency and relevant KPIs

It's crucial to adopt transparent communication about your CSR and NetZero initiatives. Why is this essential? Because investors, financial partners and consumers now value this transparency. Key Performance Indicators (KPIs) play a major role in this approach. KPIs must be clear and measure sustainability objectives. For example, the reduction of CO2 emissions, the percentage of waste recycled, or diversity within the company.

What other levers can be used to improve financial performance?

As you can see, CSR or NetZero commitments have become a real argument with banks, giving you more room to maneuver when negotiating rates, for example.

However, before turning to external financing solutions, it's essential to focus on the internal optimization of financial flows. This optimization can be done in-house or via specialist companies such as Avizo, who have, in fact, published a complete guide to cash flow optimization.

One does not preclude the other and, faced with the social or environmental regulations that will be established over the next few years, companies will gradually be led to have more and more CSR or NetZero commitments.