Chasing zero in the finance world? Yes, you heard it right. It does make sense to chase a zero in finance world when it comes to sustainability. And there is a need to create a world of zero emissions, zero waste and zero inequality and report it adequately.
Considering my finance background, I will discuss the importance of sustainability from a CFO perspective, especially why it is important for CFOs and how they are in the best position to drive sustainability within their organisations.
Indeed, appropriate digital technology is required to report and monitor environmental, social and corporate governance (ESG) factors as we can’t control what we can’t measure, and we can’t measure what we can’t monitor!
CFOs are in a better position to drive sustainability because they have a bird’s eye view of how monetary resources flow within the organisation.
Why is sustainability reporting critical for a CFO?
In today's environment, CFO's tracking and reporting must include economic performance along with societal and environmental performance to drive business success. This has become more relevant in the wake of the COVID-19 pandemic, as public awareness of the world’s environmental, social, and governance challenges has grown—and with it the demand for businesses and policymakers to take action.
These demands make sustainability a CFO imperative. Global leaders have pointed out that a separate sustainability strategy may no longer be sufficient.
Instead, companies must ensure their entire business strategy is sustainable. CFOs will experience impact on their organisations’ cost of capital too.
In the near future, a company's financing rates will be directly linked to its ESG performance.
Financial institutions will not only consider basic indicators such as revenues, costs, and profits for granting a loan but ESG performance would also be inevitably considered as a key part of that appraisal process.
Indeed, there are costs associated with sustainability reporting but companies that embed sustainability into core business processes consistently outperform their competitors and will only continue to do so in the future.
How CFOs are best placed
CFOs are in a better position to drive sustainability within the organisation because they have a bird’s eye view of how monetary resources flow within the organisation.
That gives CFOs a clear understanding of the costs and resources required for their organisations’ different initiatives, including the sustainability initiative. CFOs are not only key stakeholders in this area but they can also take the lead, thanks to their organisational network and in-depth overview of data, processes and reports.
In addition, CFOs have the professional toolkit to align ESG issues with the company’s profitability goals.
Role of digital technologies
Digital technologies will accelerate the CFO’s journey by delivering the visibility and velocity required to inform and drive better business decisions through embedded, validated, real-time data.
Visibility into relevant metrics across every line of business will equip CFOs with the insights required to comply with new regulations, safeguard their licenses to operate, meet increasing stakeholder expectations, cut costs, and recognise opportunities for innovation and business transformation.
Moving forward, a digital transformation architecture and a roadmap that enables sustainability efforts will become fundamental to every company’s business strategy.
My role at SAP is to guide CFOs on their digital transformation journeys and one of the key components nowadays is ESG reporting — part of that is to guide them on selecting a digital technology that enables end-to-end visibility and real-time data with insights to identify levers and options for driving corrective and enhanced action that take financial, social, and environmental valuation into account.
That digital technology also needs to offer a greater degree of granularity in reporting and a higher level of transparency around ESG performance.
Let’s chase zero in finance and create a world of zero emissions, zero waste and zero inequality and report it adequately.
ESG is a financial matter—something that needs to be accurately tracked and measured and its results quantified. These are areas where the CFO thrives and must take ownership. Remember, we can’t control what we can’t measure. And we can’t measure what we can’t monitor.