It’s squarely in the CFO's mandate to support their business in maintaining a competitive position while moving towards a more compliant, sustainable business model.
Improving sustainability performance and metrics can be aligned to business financial performance improvements. Whether top-line growth from delivering more sustainable products to a customer base, where that customer base factors sustainability into purchase decisions, or cost reduction from lower waste, energy costs, packaging, or improved resource efficiencies. CFOs can bring a critical lens to sustainability initiatives and seek to quantify the returns delivered to the business and its stakeholders.
Throughout this journey, sustainability data will inevitably be treated like traditional financial performance, as most regulatory frameworks are trying to achieve a level playing field for capital allocation across the triple bottom line. By gradually investing in data, technology and reporting, and by upskilling their organisation, business leaders can demonstrate that better sustainability performance is a value differentiator.
However, the current value equation for sustainability investments isn't apparent because policies around sustainability metrics still need to be rolled out. And despite some early signs, there's little clarity on how markets will respond to this triple bottom line, which will keep any investment to the compliant minimum.
But it's not an all-or-nothing dilemma. Some policies, like those for carbon emissions, are relatively more mature and are easier to overlay on traditional business performance views, while topics like biodiversity, and the associated metrics, are more challenging.
So, one of the main principles in funding this journey is prioritisation. Many organisations may find it easier to justify the cascading of group annual targets to business unit KPIs for topics with clear policies and measurable data, such as carbon footprint, diversity and water consumption.
With stable policies and reliable data, it is not such a giant leap to embed them into regular business performance cycles alongside traditional indicators such as volumes, revenue, gross margin and operating expenses.
Key considerations for CFOs and their teams:
- Do we have enough visibility of sustainability spend and outcomes across the value chain?
- How do I know I'm making a decision that is simultaneously driving profit and sustainability?
- How can I support the business to optimise the triple bottom line?
- Are my business counterparts accountable and enabled to make new types of decisions?