Who Holds the Balance of Power for Driving Sustainability In Your Organization?

driving-change-in-2014It’s a bird … It’s a plane … No, it’s a CFO — the new sustainability superhero!

CFOs are emerging as the new superheroes of the sustainability world. Their unique perspectives, skills, tools and roles empower them to advance corporate sustainability in the rapidly changing marketplace. Deloitte’s global research [PDF] reveals that finance’s sustainability role is on the rise: In 2012, 26 percent of CFOs from large companies indicated they had sustainability authority, up from 17 percent a year earlier. Nearly two-thirds of these finance chiefs expect their involvement to increase by 2014.

CFOs as corporate value-drivers

What is driving this shift from the perception of sustainability as soft stuff to sustainability as a value driver? CFOs realize that a sustainability lens can improve enterprise risk management, including physical asset, compliance, supply chain and reputation risk. Already, they have seen improved profitability from early investments in resource efficiency. They anticipate revenue generation opportunities from new business lines, new markets and new product features. Increasingly, they respond to investors, lenders, insurers, raters and customers who seek sustainability performance data. These finance leads foresee pending government regulations and embrace innovation as a means to go beyond value protection to value creation. Sustainability gives CFOs the chance to bridge their steward and strategy roles to future-proof their companies and enhance shareholder value. Findings from Deloitte’s CFO surveyFor CFOs to realize the business benefits, however, they need to embed sustainability considerations throughout their mandates. Fully embedded, sustainability will become a factor in corporate and financial strategy, financial and operating performance management, and risk and opportunity management. Finance teams will include sustainability factors in budgeting, business casing and investment decisions. Mergers and acquisitions, divestitures and capital expenditures will be analyzed from a sustainability perspective. Tax planners will include sustainability in identifying tax liabilities, and incentives and procurement managers will anticipate sustainability constraints and opportunities in supply chains. Finance will be responsible for the management, reporting and assuring of sustainability information, which will become incorporated into corporate decision-making, incentive compensation and investor relations.

Strategies to advance the mandate

Here are some top strategies to help finance leaders initiate or advance their sustainability role and mandate:

• Update your risk models to consider emerging medium to long-term sustainability risks to your business and its value chain.
• Determine your firm’s material sustainability priorities and create a sustainability lens for high-threshold decisions.
• Adjust anticipated pay-back periods and hurdle rates to green-light sustainability investments.
• Set up a corporate venture capital fund to scout and finance sustainability innovations.
• Identify competitive opportunities in your corporate strategy that take advantage of key environmental and social issues.
• Show your shareholders how your sustainability plans can unlock shareholder value.
• Develop business unit and IT systems and processes to enable consistent, reliable and assurable sustainability information management.

Finance chiefs also should ensure that their teams have the appropriate sustainability knowledge and expertise to anticipate and leverage the emerging sustainability business agenda.

To foster success, these finance superheroes need a sustainability mentor. Sustainability professionals can partner with finance peers to help them understand and communicate sustainability risks and build the sustainability decision tools to position the company for long-term shareholder and sustainability value creation.

And by the way, it’s easy to spot the successful CFO — just look for the cape.

For more information on strategies and tools, watch The Sustainable CFO Webinar, hosted by the Conference Board of Canada on Feb. 25. It will review the trends, drivers and roles that underpin the emergence of the finance sustainability superhero, and will offer insights from a seasoned finance executive and an institutional investor with more than $100 billion in assets.

This article was first published on Greenbiz
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Coro Strandberg is a sustainability strategist, coach and thought leader.  She works with Canadian business, governments, and non-profits to advance sustainbility into the marketplace.  She specializes in sustainable governance, human resource management, purchasing, investment and finance.   Coro can be reached athttp://corostrandberg.com

  • Wesley

    Coro, This is something I’ve heard for a few years but whenever I’ve seem conferences try to get a CFO panel together they fall flat on their face. It is almost what we are promoting is what we desire, rather than what is actually happening – particularly when considering Publicly traded Canadian companies. Thoughts?

    • Coro Strandberg

      I was in a discussion today with someone on the difference between hope and optimism. I think a lot of sustainability converts are somewhere along this continuum, Wes!

      My optimism in this case comes from a Deloitte report that surveyed CFOs on their role in sustainability and one quarter report their involvement has increased (2012 numbers) and over 50% expect it to increase in coming years. I think the facts are that CFOs are becoming more involved in these issues. I am hosting a Conference Board of Canada topic on the trend to CFOs becoming more involved in sustainability – with an experienced CFO and an institutional investor. It promises to be an interesting discussion. I believe registration is robust.

      Webinar details here: http://corostrandberg.com/about/speaking-engagements

      Look for the link to the $100 discount.

      Deloitte study here:

      http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/CFO_Center_FT/us_cfo_cfo-Insights_sustainability_091312.pdf

      • Grant

        Yes, hope and optimism should prevail. But, I also agree with Wes’ concern; more is said than done in most exec circles about sustainability, including the CFO office. While they should lead in helping frame the ‘portfolio’ approach to sustainability investments they are also quite adept at postponing progress. I call it the “ROI trick,” and it’s commonly used among CFOs. We hear of many sustainability leaders trying to determine an ROI on this project and that project, etc. knowing that it’s sometimes difficult to determine a specific ROI on one project when there may be several benefits that roll up from several projects/programs. But, the ‘ROI per project’ discussion keeps the broader strategic discussion at bay while the CFO attends to other matters. Happens in learning, talent and other employee engagement areas as well, not just sustainability. It’s not my intention to be pessimistic. My optimism and hope is to keep pushing harder and harder. If sustainability IS real, then it will require real engagement.
        Nice post, Thanks,
        Grant

        • Coro Strandberg

          Complicated. I am starting to see more evidence of carbon / water shadow pricing and that may turn out to be a more viable approach than traditional ROI calculations which leave out these considerations. It joins up with long-term risk thinking where companies start embedding ESG factors in short term decisions so as to avoid stranded assets or product obsolescence. Thoughts? And meanwhile, say more about how ROI is hindering learning, talent and employee engagement.