CFO role in managing risk expands.

• Author: Ladd, Scott
• Position: CORPORATE SUSTAINABILITY

Chief financial officers have a growing need to be directly involved in the sustainability of their businesses, as investors and other stakeholders increasingly draw a strong connection between sustainable practices and company performance, a study of the issue reveals.

Ernst & Young, in its recent report How Sustainability Has Expanded the CFO's Role, notes that given the presence of risk and opportunity built around environmental, social and governance (ESG) issues, the CFO's role is evolving in three specific areas--investor relations, external reporting and assurance and operational control and financial risk management.

The report states that this year, social and environmental resolutions make up more than 40 percent of all shareholder proposals, up from 30 percent in 2010. Average voting support for these proposals has more than doubled since 2005, from 10 percent to the current 21 percent.

Steve Starbuck, Americas Leader of Climate Change and Sustainability for E&Y, says the study found that the line between accounting records and sustainability records "has begun to blur."

"Companies that conduct financial and sustainability practices in silos could miss out on business opportunities and proactive risk management," says Starbuck. "Increasingly, a company's sustainability story is being heard and read by the same stakeholders who read its annual report." These factors, he adds, create a need for financial executives to incorporate sustainability thinking into their regular activities.

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Five actions that can enhance corporate value through greater attention to sustainability, as outlined in the report, include:

1. Actively pursue sustainability and reporting programs. Increasingly, companies recognize that implementing procedures to measure...