There is a significant opportunity to create positive impacts as boards and leadership teams switch their focus on sustainability, with chief financial officers playing a key role in supporting this ambition.
These positive impacts include competitive advantage, differentiation, and increased stakeholder value – by applying the right lens.
According to a Deloitte report, with the introduction of mandatory sustainability disclosures, the visibility of sustainability performance is increasing, and CFOs can contribute to this not only through meeting reporting disclosure requirements but also realising additional organisational benefits.
Across Asia Pacific, governments and regulators are adopting global sustainability reporting standards. For impacted organisations, these set a new standard for sustainability reporting and transparency across f inancial and non-financial assessments. Many organisations are lifting their sustainability ambitions and investment.
Currently, 45% of organisations in Deloitte’s global sustainability report identify sustainability as a key driver of their overall strategy, and 85% report increasing investments. Yet only 35% view sustainability reporting as a driver of strategic goals, with 53% seeing it primarily as a compliance exercise.
Deloitte says building a robust sustainability reporting capability is no small feat, but CFOs can improve sustainability data and insight and use this as the bridge for leaders to unlock value from their compliance efforts. As with many previous transformations, such as digitising paper-based systems or cloud adoption, what may at first appear primarily as compliance and cost-driven can go on to create substantial value
Looking for value
An important question for the CFO is at what stage of the compliance project should they start to plan for value creation. Deloitte says the practical approaches for each organisation will differ according to their business and maturity.
However, at each stage of the compliance project a connection should be made to the value that can be delivered.
Shareholder value
• Building an effective reporting model: The requirements for sustainability reporting are complex and will continue to grow. Building the core reporting capabilities can reduce long-term complexity and cost. Reaching the finish line on time and meeting the right standards not only mitigates the risk of regulatory sanctions but also enhances your organisation’s reputation, attracting stakeholders and reinforcing trust.
• Long-term value creation: Value creation opportunities will vary from organisation to organisation. These could range from identifying emerging consumer trends to addressing potential stranded or exposed product-lines and assets. Thirty-five per cent of organisations are already seeing increased revenue from sustainability initiatives, and another 35% reporting business innovation.
• Cost efficiency: Increasing the focus on sustainability impacts, asset utilisation and supply-chain offers opportunities to drive efficiency. Many organisations are already beginning to reap rewards from energy efficiency, waste management efforts and increased collaboration in supply chains, and 36% expect to realise cost-savings from sustainability efforts over the next five years.
• Better access to investment and funding: Investor scrutiny of sustainability risks and performance is becoming an important focus for capital and debt markets. ESG-screened investments grew to $30.3 trillion in 2022, approximately 25% of global assets under managementv. Approaches like ESG screening and the Principles for Responsible Investment have the potential to become stronger with increasing disclosure.
Employee value
• Employee engagement: There is strong workforce engagement around sustainability, with employees in organisations with a ‘people and planet’ focus twice as likely to be engaged. Sustainability reporting can engage more employees and make tangible efforts more visible.
• Capability and growth: Investment in capability development to meet sustainability challenges is an important part of the reporting roadmap. This can arm employees with the skills they need for future challenges, position the organisation as a leader, and serve as a magnet for talent.
Customer and public value
• Enhancing brand value and reputation: Supporting sustainability claims with verifiable data and performance is increasingly important as disclosures become visible across organisations. Those that go further can reap benefits from public and customer perception, with 36% of organisations aiming to impact customer satisfaction with sustainability initiatives.
• Positive social and environmental impact: As more organisations adopt a holistic approach to financial and non-financial impacts, the value of positive social and environmental impact is being recognised. More initiatives are targeting wellbeing and resilience of communities for their own value, as well as the opportunities for down-stream financial and reputational benefits.
Environmental value
• Stronger business resilience: Clarifying sustainability impacts and emerging risks will help build business resilience over time. A clear example for many organisations is to ensure that climate scenario planning is linked to business continuity and resilience as well as strategy development. Thirty-six per cent of organisations are reporting increased business resilience because of sustainability efforts today.
• Improved risk management: Sustainability reporting offers an opportunity to enhance existing risk management practices with a focus on a wider range of risks and impacts across the organisation’s footprint. Scenario planning and stress-testing will play an important role in addressing uncertainties and adaptation plans.
• Reducing footprint impact: By increasing the focus on resource use, emissions and waste, organisations can take more action through enhanced monitoring and measurement. The key is to increase the visibility of data inside the organisation and across supply chains and integrate these insights into the decisionmaking and operating functions of the organisation.
