How Can CFOs Drive Sustainability?

FEATURE How Can CFOs Drive Sustainability?

Organisations must align their organisational and environmental goals, paving the way for a new profession

By Doreen Remmen

CFO, Institute of Management Accountants (IMA)

Risk is something that every business must deal with, and, as the past 12 months have proven, risk is often due to circumstances beyond our control. December 2019 witnessed one of the biggest Australian bushfires, followed by Indonesian floods in January 2020, a volcanic eruption in the Philippines, 30 locust swarms in East Africa, the Middle East and Asia, and epic wildfires in the western United States. And, of course, there is the novel coronavirus pandemic which still grips the world. The resilience of a company in the face of such events depends largely on the sustainability that has been built into its business processes, community relationships, and tangible and intangible assets. as 80% of the valuation of a company depends on the worth of its intangible assets. A growing focus on integrated reporting (commonly understood as the merger of financial and nonfinancial reporting) is having a profound impact on the accountancy profession. Historically, accountants have struggled to account for and systematically integrate nonfinancial value into financial reports. That is now changing, as an increasing number of companies have begun to include the monitoring of environmental, social and

corporate governance performance (the key sustainability metrics) in their strategic reviews.

Conservation efforts around the world are now being increasingly supported by businesses big and small as they align their organisational goals with environmental goals. Companies are gradually shifting priorities to meet these demands in a way that drives value. Risk management and cost reduction are key drivers of a company’s sustainability agenda. According to an EY survey, “One key reason for growing CFO involvement is the growing scrutiny of company sustainability issues by equity analysts.” One may think that non-financial reporting is primarily the objective of marketing teams and the CEO, and something removed from the domain of the finance team. However, members of the finance function, led by the CFO, have a critical role to play in order to make the task of sustainability business-relevant, aligning this mandate with the organisation’s long-term goals. Sustainability reporting is an intricate, multi-layered challenge that requires a tactical approach that finance professionals with analytical skills are best suited to lead. Other teams may lack formal processes and adequate infrastructure, including resources and standardised tools, policies, data collection and analysis software, that are readily available to the finance teams. In line with the evolution of the profession towards better inclusion of sustainability in accounting practices, a new role is appearing: the sustainability accountant reporting to the CFO. The role encompasses reporting on a broad range of themes, such as managing carbon footprint and assessing social impact. The leaders in the field are participating in the creation of non-financial reporting and sustainability accounting standards.

Thanks to their accounting background, to bridge the rigor and language sustainability. The role supports better inclusion of social and environmental concerns in the day-to-day practices of the organisation. To be successful, the sustainability accountant must also be able to communicate the added value of their position to the organisation, both

The creation of this new position is of major benefit to the profession. The immensity of the task makes it unlikely

An increasing number of “ that traditional CFOs will directly manage the social and environmental Doreen Remmen companies have performance of their organisations. begun to include Sustainability accountants are a necessary intermediary for addressing the monitoring landscape. This is a necessary evolution of environmental, to encompass sustainability and become social and chief value officers. More than ever, corporate companies need the finance team to provide intelligent, timely, and governance authoritative insights that better inform their decisions. The CFO sets the tone performance (the within the department and can drive the key sustainability culture in a way that permits finance function professionals to serve as metrics) in their strategic reviews. “ change agents within the organisation. The CFO can drive the right culture by articulating and embodying the organisation’s purpose and values. 31