Turning climate strategy into action: How telecom leaders can build the business case for carbon reduction measures
This GSMA handbook provides telecommunications practitioners with frameworks to develop robust business cases for carbon reduction initiatives. It covers feasibility screening, financial appraisal through cash flow analysis, and scenario building to account for climate risks. The report also details methods for incorporating non-financial strategic benefits into investment decisions.
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OVERVIEW
Introduction
This handbook is designed for practitioners within telecommunications companies who seek funding for carbon reduction measures. It serves as a supplement to the GSMA’s Climate Transition Planning Guidance, focusing on how to operationalise climate strategies into fundable initiatives. The guide aims to help teams use financial tools to communicate the implications of proposed measures, particularly where value is derived from avoiding climate-related risks or capturing future opportunities. Because decarbonisation initiatives often compete with other projects for funding, building a robust business case is essential to demonstrate both financial and strategic value.
Feasibility – prioritisation and screening of carbon reduction measures
Before conducting detailed financial appraisals, companies should screen a wide range of potential measures to ensure efficient resource allocation. The report recommends two primary methods: technical and financial screening, and Marginal Abatement Cost Curve (MACC) analysis. Technical screening evaluates technology maturity and integration complexity, advising that preference be given to commercially available technologies that integrate easily into existing infrastructure. Measures using emerging technologies should be implemented as pilot projects first.
Financial screening considers the investment type, such as capital expenditure (CAPEX) versus operational expenditure (OPEX), and the funding source. MACC analysis ranks measures by comparing their relative emissions reduction potential against their cost-effectiveness. In this analysis, bars below the x-axis represent net savings, while those above reflect net costs. High-priority measures are those with high carbon reduction potential and net savings. Conversely, measures with a net cost but high abatement potential should be treated as long-term strategic priorities.
Fundamentals – financial appraisal of carbon reduction measures
The core of a business case is a cash flow analysis, which maps expected inflows and outflows over the project lifecycle. This process involves comparing a Business-As-Usual (BAU) case, representing the status quo, with a Solution case, representing the proposed carbon reduction measure. The report illustrates this through a worked example of a hybrid diesel-solar PV and battery system for an off-grid base station. Key steps include determining input assumptions, mapping cash flows over the project timeline, and calculating annual net and cumulative cash flows.
Decision-makers evaluate these cash flows using four standard financial metrics: Net Present Value (NPV), Internal Rate of Return (IRR), Return on Investment (ROI), and Payback period. In the hybrid diesel-solar example, the project is projected to generate a 19% return per year over its 20-year lifetime. The NPV is calculated at $18,350, with an ROI of 325% and a payback period of approximately four years and nine months. These metrics provide insights into the project’s profitability, risk, and value creation in today’s monetary terms.
Scenario building – integrating climate risks, opportunities and dependencies
To strengthen borderline business cases, the report suggests scenario analysis focused on Transition Risks and Opportunities (TROs). These arise from shifts in energy markets, technology, policy, and consumer preferences. The framework includes three scenarios: a base case (the most likely outcome), an optimistic case (where TROs materialise faster, creating financial upside), and a pessimistic case (where dependencies fail to materialise, creating a financial downside).
In the optimistic case for the diesel-solar example, the introduction of a carbon price and faster battery technology innovation increases the IRR to 24% and almost doubles the NPV to $35,588. The pessimistic case, assuming lower technology performance and slower cost reductions, see the IRR drop to 17% and the NPV fall to $14,311. This range of possible returns demonstrates project resilience and helps practitioners identify necessary risk mitigation strategies, such as performance guarantees.
Extending value – incorporating non-financial benefits
Decarbonisation projects often create significant value beyond direct cost savings. Key non-financial benefits include supporting corporate strategy, enhancing brand reputation, and improving competitiveness. For instance, a study cited in the report found that 81% of consumers expect companies to improve the environment. Other benefits include increased resilience to supply chain disruptions and alignment with future regulatory requirements, such as the European Corporate Sustainability Due Diligence Directive (CSDDD).
The report advises practitioners to identify specific value drivers and, where possible, use benchmarks or proxy data to quantify these benefits. Examples of quantification include using a supply chain risk index or measuring the impact on ESG ratings. In the physical PPA worked example, the project is noted to protect revenues as customers increasingly mandate renewable energy targets in 30% of tenders. Ultimately, incorporating these strategic considerations into a clear narrative reinforces the business case for investment approval.