A CFO's Role in Driving Sustainability

Sustainability is no longer just about doing good - it has become an imperative for organizational success. With climate change accelerating, companies that fail to embed sustainability into their operations face major regulatory, reputational, and market risks.

As the stewards of organizational strategy and allocators of capital, CFOs have a crucial role to play in driving sustainability. As a start, these are some of the key questions that CFOs are asked during earnings calls nowadays:

• How are climate-related regulations impacting the economy?
• To what extent do ESG implications factor into decisions on greenfield investments or M&A?
• What is the company's strategy and timeline for achieving carbon neutrality?
• Will investing in sustainability have a positive impact on company valuation and stock price?
• What questions are investors, analysts, and banks asking about the company's climate and ESG strategies?

To answer those and more, it’s vital to have a clear understanding of the CFO’s role. So, what is the CFO's role in driving sustainability? Based off COP 21, here’s a 3-part overview of the key actions you can consider:

First, analyze your company’s environmental footprint across operations, supply chain and products. You must identify emission hotspots and reduction opportunities to inform target-setting. For example, you can conduct a greenhouse gas inventory so as to track and report it internally.

Second, incorporate sustainability into capital planning and investment decisions. You have to evaluate investments not just for profitability, but also for positive environmental impact. Prioritize projects that align with ESG goals. For instance, developing a mechanism to assess the sustainability impact of major capital expenditures and making sustainability a factor in decision-making. To do this, you can utilize the myriad of frameworks and standards there are to report on ESG.

Third, understand that companies which are ESG compliant are outperforming other companies which are not focused on ESG by up to 5%. Therefore, it will be in your interest to proactively engage stakeholders like investors, banks and regulators on your sustainability strategy and performance through ESG disclosures. This builds trust and transparency. In the long run, championing sustainability also attracts talent and partners. 

With that in mind, let’s dive deeper into more specific roles you can play to drive sustainability.