How CFOs Can Contribute Big Time to Sustainability

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So far, most CFOs have viewed sustainability as someone else’s job – a matter of compliance or philanthropy unrelated to the pressing concerns of business. However, a growing number of prominent CFOs are beginning to adopt a sharply different view and, in so doing, are sending a powerful message to their peers in corporate finance.

This major trend is captured succinctly in ‘Sustainability and the CFO: Challenges, Opportunities and Next Practices by Ram Nidumolu, CEO, InnovaStrat, P.J. Simmons, Chairman, Corporate Eco Forum, Terry F. Yosie, President & CEO, World Environment Center. The report is published by Corporate EcoForum and World Environment Center in April 2015.

The relationship between CFOs and sustainability is being played out in the context of a business system that is slowly evolving from a shareholder driven model based on shortterm expectations of financial performance to one that is beginning to incorporate broader considerations. CFOs who grasp the potential for sustainability to maximize business value for their organizations can play a vital complementary role in corporate strategy and execution.

They ask CFOs to take a closer look to find increasing opportunities to leverage sustainability thinking for value creation – especially when dealing with pressures to reduce short-term business costs and strengthen organization’s foundation for long-term growth.

The authors show how CFOs can leverage sustainability to improve enterprise performance in three areas: (1) risk management, (2) capital productivity, and (3) innovation and growth. “Sustainability enables better risk management by giving firms far greater visibility into potential exposures that could cause on-balance sheet risks down the road, including: price volatility around energy and commodity prices; impact from more stringent regulations; supply chain disruptions or lack of access to key product development inputs; damage to reputation, brand, stock value, or license to operate; and future exposures and losses related to stranded assets.”

They also say how “Sustainability unlocks opportunities for greater capital productivity through reducing compliance, operating and product development costs; optimizing supply chains; boosting employee productivity; driving business processes improvement; reducing cost of capital; and opening new financing options.”

They are sure that sustainability enables stronger business innovation and growth by creating new customer relationships; inspiring new products and business models that drive growth; anticipating future growth problems during mergers and acquisitions; and in some pioneering companies, by creating new markets for ecosystems services.

Overall, the sustainability-related challenges, opportunities and “next practices” discussed in this report are beginning to alter the economic, environmental and social landscape within which business is being conducted. The CFOs interviewed for this report are a useful barometer for how CFOs at other large companies are likely to modify their understanding of sustainability and their corporate finance practices as they strive to help their companies perform better in an increasingly uncertain and complex world.

CFOs with insight into sustainability megatrends will help their organizations chart a smarter course to compete effectively in a world where sustainability-related challenges become more dominant.

The report has case studies of diverse range of companies such as Walt Disney, Unilever, Ecolabs, UPS, Shell and Vodaphone. The authors offer resources that offer practical tools and methods to integrate sustainability factors into financial analysis and decisions as well.

Read full report @ http://www.corporateecoforum.com/ wp-content/uploads/2015/04/CFO_and_Sustainability_Apr- 2015.pdf

In recent years, the CFO role has expanded significantly beyond that of a high-powered accountant to one of codecision maker in corporate governance and business strategy. This expanding purview has necessarily required a bigger lens on the variables and trends that could affect business as usual—with sustainability-related issues becoming increasingly paramount.

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