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3 Reasons Why CFOs Should Be Firmly Focused on Sustainability

April 23, 2020 Sukriti Nagpal  
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Worldwide, businesses are recognizing the power of green.

With the social and economic impacts of climate change impossible to ignore, more and more companies are starting to introduce sustainable business practices. And they’re realizing they aren’t just great for the environment—they’re just as good for business too

According to a report from the Business & Sustainable Development Commission, investing in green business practices will open up $12 trillion worth of cost savings and market opportunities across the global economy by 2030. To remain competitive, the report adds, “businesses need to pursue social and environmental sustainability as avidly as they pursue market share and shareholder value.”

And who better to champion those investments than the CFO? Top-performing CFOs are constantly measuring the drivers of growth and revenue for their organizations, and sustainable practices have a big role to play when it comes to long-term profitability.

Still not sure? Consider these three reasons why your CFO should embrace sustainability and lead your company into becoming more green:

1. It’s Important To Your Investors, Customers and Staff

Aside from the more obvious cost savings associated with sustainable business practices—reduced energy and water bills, for example—CFOs are being driven toward green initiatives because that’s what the markets, and their customers, are demanding. And those outside demands are matched by the concerns of internal influencers like investors and employees, who have their own reasons for hoping to see more sustainable practices in action. 

  • Investors: We know that CFOs are accountable to their company’s shareholders, who have certain expectations about corporate governance and long-term financial performance. And according to the 2017 EY Investor Survey, 89% of investors believe that generating returns over time requires a sharper focus on environmental and social factors. This places further pressure on CFOs to weave sustainability into their investor relations narrative. Companies that miss the mark will have a harder time navigating capital markets successfully compared to their eco-friendly counterparts.
  • Customers: 2017 study showed that 63% of Americans hoped to see businesses take the lead in driving social and environmental change. And now more than ever, consumers are putting their money where their values are, which means that companies that don’t live up to those values will see their market share decline. One study suggests that consumers are even willing to pay a premium for products that are environmentally friendly, which makes a clear business case for CFOs to make sustainability a top priority.
  • Employees: Sustainability and corporate social responsibility can help attract top talent and keep employees more engaged. People want to work for companies that exemplify their core values, and sustainability is a value that’s given a lot of attention today. One survey showed that more than 70% of respondents would be more likely to work for a company with a strong environmental agenda, and almost half would even take a smaller salary to do so. Research also suggests that companies prioritizing sustainability experience reduced turnover, which can have a significant impact on the bottom line over time.

2. It Can Be Key to Your Company’s Strategic Plan

CFOs today are strategic partners and trusted financial advisors across every function of the business. And as drivers of corporate strategy, CFOs have unique insight into the “big picture,” as well as the performance of individual business units—which means they’re well positioned to identify areas in which sustainability can drive value and align positively with strategic goals. 

But in order for sustainability initiatives to stick, they need to be firmly entrenched in the company’s strategic plan and receive the necessary financial support. For a real-world example, consider this case study from retail giant Walmart. The company wanted to use digital technology to double its fleet efficiency between 2005 and 2015 through improved routing, loading and driver training programs. By 2014, they’d improved fuel efficiency by 87%, which resulted in 15,000 tonnes of avoided CO2 emissions and nearly $11 million in savings.

In order to ensure the viability of such a significant strategic project, the CFO would have had to identify the potential value, perform a cost-benefit analysis and approve the necessary investments to make that goal a reality. After all, CFOs are still the overseers of company expenditures—and while some sustainability initiatives require less upfront investment than others, most will have costs associated with them. After considering financial factors like net present value (NPV), breakeven and ROI—as well as strategic, non-financial factors like customer experience, community impact and engagement—it’s ultimately up to CFOs to decide which of those sustainability projects are worth pursuing for their organizations.

3. It Requires the Kind of Real-Time Data CFOs Already Track

According to a 2014 report from Deloitte, finance leaders cite slow payback and unquantifiable benefits as the top two factors holding back their investments in sustainability. In order for companies to take advantage of the many benefits associated with sustainable business practices, the value of these initiatives needs to be clearly and effectively communicated. That’s where reliable, forward-looking data comes into play.

And while all corporate executives today leverage data to guide their decision making, especially when it comes to long-term strategic initiatives like improving sustainability, gauging the impact of green initiatives requires the most up-to-date data available—both financial and non-financial. That’s a job best-suited for the CFO.

With the right tools at their disposal, CFOs can arm themselves with the ability to quickly consolidate company-wide data and perform forward-thinking analysis with forecasts, models and dashboards, ultimately identifying opportunities for strategic investments in sustainability. They can also track the impact of sustainability projects in real time, and use that information to guide their decisions moving forward.

How to Champion Sustainable Business Practices in Finance

The journey toward sustainable business practices does not happen overnight, and some companies are a lot further ahead than others. For CFOs and finance leaders looking to champion sustainability at their organizations, here are a few key tips to consider:

  • Create a clear reporting framework for sustainability factors like water and energy use, employee transportation habits, paper purchases, supply chain policies, etc., and develop financial models that can help you make sense of these metrics and what they mean.
  • Identify short- and long-term sustainability goals and put a plan in place to achieve them. Examples of this could be eliminating single-use plastics in the workplace, or investing in efficiency programs to ultimately reduce long-term energy costs.
  • Make sure that internal stakeholders are on board with your policies and that they’re made aware of how their activities are impacting your sustainability efforts. Hold them accountable to a defined set of sustainability objectives through open, honest communication.
  • Communicate your sustainability achievements to your customers and prospects. This will further enhance your brand’s reputation in the marketplace.
  • Don’t get complacent, because chances are there’s always more you could be doing to reduce your company’s environmental impact.

At the end of the day, there’s still a lot of work to be done before the global economic model can be considered truly sustainable. But with the right green policies, procedures and business drivers in place—ultimately steered by the strategic office of finance—modern businesses can make a lasting impact on the world while continuing to move their business goals forward.

Discover how you can leverage agile planning to drive your company’s sustainability initiatives for today and tomorrow.

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