It goes without saying Chief Financial Officers (CFOs) pay a great deal of attention to the financial performance of their companies and, in particular, anything that could impact the bottom line.
Sustainability is increasingly on the mind of CFOs because it highlights reputational and operational risks that should not be overlooked.
There are ways for CFOs to navigate the complex landscape of sustainability reporting and select systems that can streamline the production of sustainability reports and reduce the associated costs.
Sustainability issues range from the necessity of banks located in the United States to have enough capital to pass federal stress tests, to the imperative of dealing with oil spills like in Galveston Bay, to the critical steps taken by General Motors to address issues relating to vehicle safety.
CFOs play an important role in key investment decisions because they often have responsibility for evaluating new opportunities--such as sustainability-focused product offerings--and for identifying and analyzing potential risks. That said, not all CFOs are embracing the transition under way. CFO Magazine reported that only 13 percent of CFOs are "very involved" in sustainability with another 52 percent "somewhat involved."
Forward-thinking CFOs need to reassess how they allocate shareholder capital and act strategically to keep their business models focused on managing these new issues. Deutsche Bank research found a marked correlation between strong environmental and social performance and a lower cost of capital. This correlation is clearly of interest to the CFO of any company trying to grow the business.
Since 2010, CFOs in the United States must personally sign off on the controls and procedures in places that report material climate change-related risks. Under these regulatory requirements, all CFOs need to ensure the companies' processes are of high quality: climate change-related data must be quality assured and provenance verified as both reliable and pertinent.
As the importance of such reporting grows, the know-how, resources and rigor that finance teams have in place for gathering and analyzing data will naturally lead them to take an increasing interest in how sustainability-related issues are managed.
That said, it is not about CFOs taking on the responsibilities of other colleagues. Rather, CFOs are likely to take on a central role in managing the evolving way business performance is measured, evaluated, communicated and perceived by stakeholders.
Overview of the Sustainability Reporting Chain
Sustainability is a new approach to assess the vitality of companies. It is becoming increasingly relevant on a global scale for its in-depth evaluation of investment and development opportunities. Sustain ability is of paramount importance because investors, faced with the uncertain evolution of the global financial crisis, are looking at evaluation differently. They are evaluating not only the short-term financial performance of companies, but also their real viability--in other words their ability to grow in the context of new challenges and manage new risks generated by a rapidly changing world.
The sustainability approach permits analysis of a company's capacity to develop innovative technologies, secure access to raw materials essential to business, and manage economic recession trends in addition to the impact on sustainable consumption.
Leading-edge companies recognize that it is in their vested interest to acknowledge stakeholder queries and thus see sustainability and its underlying rationale very differently from their predecessors. In fact, they recognize two complementary aspects to sustainability that are not mutually exclusive: risk management and business growth opportunities.
What is the Sustainability Reporting Chain?
The sustainability reporting chain is the group...