The common perspective that the responsibilities of chief finance officers, or CFOs, should not extend beyond the traditional parameters of corporate finance and risk management is increasingly being challenged by shifts in the business landscape. Last year, a research study by professional services firm Deloitte found that progressive CFOs are starting to realise that sustainability is now within the finance domain. “Finance teams are in a unique position to not only translate and operationalise sustainability within their organisations, but also communicate outcomes to stakeholders,” said the report.
How should CFOs react to these growing expectations for them to become more involved in sustainability issues, while making sure that their business is strategically positioned to benefit from the transformation?
Defining moments
Brian Ho, Deloitte Asia Pacific and Southeast Asia climate and sustainability assurance leader, said that as much as companies’ operations are negatively affected by climate change, the job functions of a large number of CFOs are also impacted when extreme weather events happen more frequently.
At an online session organised by the Global Reporting Initiative (GRI), as part of its Asean Expert Series on sustainable business leadership, to discuss how CFOs can take the lead in driving corporate sustainability, Ho said that CFOs increasingly demand and support immediate actions to limit the impact of climate change. The comment also picks up on a similar theme in Deloitte’s 2022 CxO Sustainability Report, which surveyed over 2,000 executives across 21 countries, and found that CFOs are concerned about sustainability.
The findings from the report suggest that despite increased awareness, CFOs continue to struggle in translating their corporate commitment to sustainability into tangible actions. On a positive note, the gap means that CFOs can take the opportunity to lead the charge and create long-lasting changes. With the emergence of sustainable finance, sustainability-related legislation, advances in research and development and societal demands to address climate emergency, CFOs have many compelling reasons to ‘cross the Rubicon’ and look beyond revenue generation and cost reduction.
Financial stakeholders are increasingly likely to press for companies to do more to be transparent, by demonstrating how they are protecting their business against environmental, social and governance (ESG) risks. Without the ability to track and report sustainability performance and metrics, CFOs will be unable to meet demands from investors, management and other stakeholders, all of which underlines the growing relevance of robust sustainability reporting when setting financial KPIs and strategy.
Rewiring thinking for sustainability
There are also CFOs who continue to shatter the assumption that they are the stumbling blocks for sustainability. Kevin John Monteiro, CFO of the pan-Asian agri-food business Japfa, first became engaged with sustainability in 2017, through disclosure requirements set by the Singapore Stock Exchange.
At the same session, Monteiro shared that regulatory compliance, executed in line with corporate values, can become the push CFOs need to integrate sustainability in their business operations. “CFOs, with their close proximity to senior management, board members and investors, and their enterprise-wide corporate knowledge, can take the lead to become enablers for sustainability,” he said. This will help get buy-in from key stakeholders.
Yiong Yim Ming, CFO of the real estate multinational City Developments Limited (CDL), emphasised that sustainability is a progressive evolution over time, and that a company can gradually expand and escalate the changes, both internally and externally.
Looking back on almost three decades of CDL’s sustainability journey, she said: “The transformation of sustainability for it to evolve from ‘just a responsibility’ to being ‘part of the ethos’ takes time. For CDL, this was made possible when top management started setting the tone, with different departments then brought onboard to translate the senior leaders’ commitment into orchestrated actions.”
Jessica Fries, executive chair of Accounting for Sustainability (A4S), believes that CFOs and finance professionals possess both the skill and impetus to advance sustainability from mere compliance to integration.
“As the financial vanguard of the company, CFO’s access to comprehensive organisational information can drive a timely transition, and more importantly, help to prioritise a specific ESG focus that adds value to the organisation,” she said.
Commitment to sustainability reporting
Commitment to reporting is crucial to determine whether companies have integrated sustainability into their various functions, supported by the leadership of their CFO and other C-Suite executives. Standards for sustainability reporting can also be used by senior management to enable this change, as they set out the extent to which senior management has aligned corporate sustainability with long-term business strategies and policies, connect measurable ESG metrics with business function performance and increase the exposrue of management to ESG issues.
More than ever, CFOs can dispel the myth that finance departments are a handicap for sustainability. By setting an example from the top — translating the opportunities and benefits of sustainability into financial terms and utilising financial and non-financial data in ESG strategy— CFOs have a leading role to play in unlocking the sustainability potential of the company in a way that is aligned with long-term value creation.
Hendri Yulius Wijaya is Country Program Manager for the Global Reporting Initiative (GRI) in Indonesia. He leads GRI’s collaboration with Indonesian stakeholders to create an enabling policy environment for sustainable business practices, while assisting businesses in aligning their sustainability reporting with the international standards.
The original article has been edited for clarity.
