CFOs and Sustainability

The struggle for sustainability

The longstanding debate over the archetypical CFO’s responsibility to sustainability continues. While pundits and politicians continue to posit the modern CFO as an instrumental figure in the all-important shift to corporate environmental responsibility, resistance to the reinvention of the role remains.

Why some CFOs still don’t get it 

The disconnect between CFOs and the devotion of internal financing to sustainability initiatives is attributable to a number of factors, all intertwined in a cause-and-effect ecosystem:  

• Tracking – Evidence demonstrates that but a paucity of the companies who subsidize sustainability properly track the returns on these investments. This is largely due to the current state of reporting and accounting structures. Most fail to accommodate adequate measurements for sustainability. As a result, separate sets of metrics are required for the financial and the environmental, deterring non-practitioners.
• Data – Industry is in dire need of a data-based platform designed to properly produce and analyze sustainability performance. But these tools are still in their infancy. A significant percentage of CFOs, therefore, are foregoing the practice, waiting for the development of the ultimate digital solution. 
• Standards – Players like The World Economic Forum, The Securities and Exchange Commission, and The International Sustainability Standards Board are facing pushback over their attempts to put forth standardized reporting rules. The thinking among disgruntled CFOs seems to be, if you can’t measure it, how can you report it?     

The environmentally minded CFO

In spite of these challenges, it behooves every organization to engage and encourage a progressive, environmentally minded CFO, one who, in spite of the aforementioned obstacles, remains constructively focused on the value of sustainability within their business culture. 

Five main themes of the CFO Leadership Network 

The environmentally minded CFO may well adhere to the five main sustainability themes outlined by the CFO Leadership Network, a worldwide organization whose roots can be traced back to a U.K.-born initiative in 2004 (How to Become a Sustainability Wizard – CFO):

• Building a financial culture that embraces sustainability, including the incentivization of action among the board and executive management
• Embedding ambitious sustainability targets into strategic planning, budgeting, and forecasting, and backing them up with capital investment
• Accessing sustainable debt finance and enhancing investor engagement
• Adopting common standards and consistent terminology
• Applying natural, social, and human capital accounting to accelerate integration into decision making 

Prescriptive sustainability practices for today’s CFOs

Building on the Leadership Network directive, prescriptive sustainability practices for today’s CFOs should include…

• Auditing current sustainability strategies—The identification of an organization’s existing corporate sustainability practices, including those that are “under the radar.” This style of formal classification could include water and waste management systems, recycling programs, hazardous waste disposal, and supply chain and sourcing considerations
• Cross-departmental collaboration – The facility to work with representatives of each division to collect and share respective environmental best practices. The goal is to develop and promote cost-saving operational efficiencies that can be applied across the organization
• Financial assessment – Comparative studies of current practices to proposed measures, in order to determine the financial advantages of pivoting. These studies help to establish which practices offer the most value, often resulting in a shift of operational priorities
• Health and safety costs – The measure of the financial savings in health and safety costs as a direct result of the implementation of the prospective practices, including paid sick days and workers’ compensation claims
• Subscription to GRI standards – Reliance on the Global Reporting Initiative Standards as remedy to the measurement dilemma. The GRIS’ are the world’s most widely used measurements for sustainability reporting. They’re predicated on the measurable ESG (Environmental, social and corporate governance) metrics of every function of business performance, and the evaluation of management’s commitment to the promotion of sustainability at all organizational levels   

The UN Global Compact CFO Taskforce 

In addition, the sustainability-minded CFO may well borrow a page from The UN Global Compact CFO Taskforce. In 2019, 60 CFOs gathered to create this influential fraternity, representing a combined $1.7 trillion in market capitalization. This consortium continues to successfully achieve UN sustainability goals. Its resources include a platform through which CFOs can share and develop new ideas, as well as a comprehensive management and governance framework, the CFO Principles on Integrated SDG Investments and Finance 

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