Prominent role for CFO in supporting sustainability

Important role for CFO in sustainability reporting

New standards and guidelines, tightened requirements and regulations. These are all things that a company must keep in mind when compiling its sustainability reporting. Financial reporting is no longer the only gauge that provides insights into an organisation's strategy and future sustainability.

Managing and interpreting sustainability data is increasingly becoming the responsibility of the Finance function. Because investors want more insight into sustainability risk assessments and auditors expect ownership from the Finance function when it comes to that sustainability data.

Extended role for CFOs in implementing sustainability in organisations

CFO’s can take their role in sustainability a step further. By applying sustainability information not only in external reports, but also by using it in the internal organisation. Think of the Finance function incorporating sustainability into forecasting and costing processes. The roles that the  CFO can take in order to execute sustainability reporting and create sustainability value for the organisation are as follows:

• The transformational catalyst
  As a transformation catalyst, the CFOs can help align a company’s strategy, organisation, and culture behind a common sustainability agenda.
• The strategic visionary
  As a strategic visionary, the CFO can help the company's Finance function discover strategic insights. In addition, a financial professional can help achieve intended goals, assist with managing risks and seizing opportunities.
• The grounded communicator
  As a grounded communicator, the CFO can help explain the relationships between sustainability and financial data. Starting with compliance and moving toward integrated sustainability.
• The collaborative integrator
  Putting together a compelling sustainability report is more complex than people think. It requires collaboration and insights from across the company, with people from different business functions working as one team toward common goals. As a finance professional, CFOs have collaboration skills needed to lead this change.

Preparing the Finance function for sustainability

In addition to changes in processes, data and systems, finance functions must also consider changes in organisational design, governance structure and how to equip finance professionals with new skills.

• Organisational structure
  The organisational structure of the Finance function will also need to be adapted for sustainability activities. As most Finance functions begin sustainability reporting, one of the first questions they must answer is how the new activities on sustainability reporting are integrated into the financial structure. In practice, we see several solutions:
  1. Integrate the activities into the existing finance reporting teams (read: set up a sustainability reporting sub-team).
  2. Create a separate team. Some organisations have even defined a new role: for example, that of Sustainability CFO

• Governance structure
  The governance structure should reflect the growing financial organisation. This includes the role of committees and whether entirely new committees are needed. Or whether sustainability responsibilities can be incorporated into the remit of existing committees.

New skills for finance professionals

Most finance professionals do not have much experience in sustainability. So to truly understand the new sustainability activities, they will need to gain knowledge on each of the ESG topics. Knowledge that is going to add value to sustainability activities and to ensure the right quality of financial sustainability results.

In a nutshell, the following are the steps needed to bring the organization and Finance professionals on the sustainability journey:

• develop a vision
• set up governance structure
• create capacity
• initiate change management
• start in-service training