As we celebrate Earth Day this month, it's important to remember how to keep our planet sustainable and healthy every day. As finance and operations professionals, you may be wondering how you can bring your colleagues, teams and entire organization together to keep sustainability top of mind for everyone—inside and outside of the office. The good news is that within your professional roles you’re situated to help drive action in your organization when it comes to sustainability. According to this article, finance teams are uniquely positioned to evaluate new sources of value, and in effect integrate these new sources into the organizations sustainability plan. Sustainability is something that’s important to investors, customers and employees and it can also become the key to your organization's strategic plan. Learn more about why CFOs should be firmly focused on sustainability by reading our blog.
In this blog, we’ll share three tips to make sure your CFO is on board with sustainability, but before we dig in, let’s look at a few of the reasons why some CFOs might not be on board just yet.
Why Aren’t Some CFOs On Board With Sustainability?
Many organizations are focusing on improving their environmental impacts and building what’s considered a sustainable brand. According to this Forbes article a sustainable brand is one that has successfully integrated environmental, economic and social issues into its business operations. A few examples of building a sustainable brand at your organization could include developing sustainability reports and publishing them, as well as creating new roles like a Chief Sustainability Officer. But even with the movement to become more sustainable and an environmentally friendly organization most CFOs still aren’t on board.
According to this Harvard Business Review some CFOs still feel that sustainability is an unnecessary and costly expense for their organization rather than a source of value. Reasons being that CFOs generally need to see the long term financial benefits of sustainability integration within their organizations and sometimes that can be hard to illustrate. Most organizations aren’t really taking the time to accurately track their returns on sustainability investment— and there lies the problem.
The article goes on to highlight that CFOs often find themselves puzzled by the language and metrics used by their environmentally focused colleagues. CFOs talk finance and their lingo is focused on ROI while their sustainability focused colleagues might use language like waste reduction and energy efficiency. In fact, separate reporting processes for finance and sustainability may cause a lot of confusion and a lack of communication. Financial reporting generally views things like ROI, revenue, net income, and CapEx while sustainability reporting may view process changes, material and product replacements and cost. Since most organizations aren’t tracking returns on sustainability investment, there is also a lack of planning and dependable accounting structure to clearly report sustainability initiatives.
All the more reason why ad hoc financial reporting tools make all the difference in organizing reports to track returns on these kinds of investments. With ad hoc reporting you can bring finance led planning to every corner of your organization.
Since most business decisions are influenced by every aspect of your organization, with collaboration between departments and insights from all of your data— Vena’s financial reporting software allows you to store real-time data from your finance, sales, and marketing and other systems in a central database so that you can make ad hoc decisions quickly. Ad hoc reporting can help you plan your sustainability initiatives with a clearly defined ROI for your organization.
Get Your CFO On Board With Sustainability
1. Outline Your Current Sustainability Strategies
It’s important to outline your current sustainability strategies for your organization. Not only will this help you see areas of opportunity, it will also help you make a case to your CFO on where things are in terms of sustainability and where they ultimately could be. Your outline should take the form of a materiality matrix, an in-depth analysis to identify issues most pertinent to your organization and its stakeholders.
According to this article, a materiality matrix helps an organization evaluate two focused needs. It measures the value of needs between the impact on the business and the importance to stakeholders. For finance and operations professionals in a commercial bank space for example, a materiality need may be to have regulated and safe data and security protocols put in place. This could be higher on the materiality matrix as a priority for organizations in commercial banking than for organizations focused on distribution as an example. Materiality matrices can also be used for sustainability practices if you want to reduce plastic waste and manage energy efficiency for your organization. You first need to evaluate the sustainable solution and how it will impact the organization’s growth, costs or trust. Secondly you need to outline how important the solution is for stakeholders. Generally speaking, these matrices will build a visual representation of opportunities to prioritize according to their importance to the organization's goals.
These matrices also help make your case to your CFO on why ESGs are important to your organization and how your team can report on ESG data.
Moral of the story here is that outlining your materiality matrix to show opportunity—and making the point to your CFO that it can benefit your organization from an investment perspective—is very important.
2. Suggest New Sustainability Strategies for Implementation
Once you have the opportunity to review your current strategies and find some of the areas for opportunity through your materiality matrix, it’s time to put together a list of new sustainability strategies that can be implemented at your organization. As you suggest new strategies for your CFO, you can also take the time to highlight their monetary and non-monetary benefits. Consolidating all of this data into a single source of truth can really help you organize your point across to your CFO. You can learn more about how to leverage FP&A software to consolidate your data by reading our blog. Vena’s extended planning solution can also allow you to get at-a-glance visuals of key company metrics, operational and financial at any time to improve key decisions around sustainability initiatives. Non-monetary benefits for example can look at more sustainable practices like better energy, waste and water management. You should plan out and even make suggestions on products or solutions that can be implemented with each of these sustainable changes. Part of your suggestions should also show the cost of each implementation, which leads us to our last tip.
3. Outline The Monetary Long-Term Benefits for Your CFO
This Harvard Business Review article highlights the importance of calculating the monetary benefits of sustainability implementation. It also goes into detail on how you can quantify benefits for new sustainable strategies with examples. According to this research, you need to total the financial value created by each of the new sustainable strategies. From there, you can identify which sustainability strategies generate the most value for your organization. The idea is to plan out new sustainability strategies that make the most sense for your organization and that are feasible to do from an operational and financial perspective.
Long-term sustainability investments are shown to have a great ROI. In fact one example referenced in the article highlights an auto company’s goals to reduce VOC emissions and implement a new sustainable solution that allowed them to reuse a solvent. The result of reusing this solvent revealed a savings of $8 million. And when the organization compared the unit cost of the reusable solvents to the traditional new solvents, they realized that this translated to a total annual savings of $90 million. Showing these long-term benefits for your CFO will speak volumes. Not only will it show the ROI, it will also allow you to make your case and point that sustainability strategies can only benefit your organization now and in the long term.
Sustainability and Your Business
Getting your CFO on board with sustainability will help everyone think differently about the ways sustainable strategies can be implemented throughout your organization, making social and environmental issues a regular part of your business.