Putting the CFO at the heart of building a sustainable business

Article written by Mike Barry, Strategic Advisor, speaker and commentator on Sustainable Business

With grim, scientific certainty the climate crisis is wreaking ever more damage to lives and livelihoods. The Middle East, Southern Europe, Japan and the Southern USA have been locked into months of punishing heat. Hawaii has suffered the catastrophic destruction of the town of Lahaina. In Canada 10000s of people have had to be evacuated from towns as huge wildfires bore down on them and the Panama Canal, through which 3% of world trade passes, has had to restrict boat passages due to drought.

Yet despite the human and economic evidence in front of our eyes some sections of society and the media have been resistant to the need to transition the global economy to Net Zero. Short term geopolitical turbulence and economic headwinds have contributed to this as has the desire to protect societal and business status quo.

The certainty that many corporates took from COP26 in Glasgow in 2021, which encouraged them to commit to become Net Zero over the next two decades feels like its evaporating. As a result, some companies seem to have paused, unsure as to whether the significant changes that need to be enacted across their value chains to become Net Zero will be rewarded in the marketplace and by policy makers and investors too.

Many in corporate circles rail against the fickleness of politicians, consumers and investors, all of whom seemed to be up for bold change’ until the bills rolled in. But there’s a mirror to be held up too by the C-Suite. Too many corporate ‘plans’ have failed to stand up to first substantive challenge to Net Zero. Recent surveys by organizations as diverse as the Carbon Disclosure Project (CDP), EY and IPPR have shown that at best 1-5% of companies have a detailed, robust and resourced plan to deliver Net Zero in practice.

So the Net Zero ‘tide’s ebbed’, and too many boardrooms have been shown to be swimming naked’. But better we know this now, not in 10 years’ time, when it will literally be too late to fail. Better to go back to basics now and ask ourselves hard questions about how companies actually deliver effectively and efficiently a Net Zero transition.

And at the heart of this robust delivery of Net Zero is the Chief Financial Officer (CFO). New research from SAP Concur, focusing on corporate approaches to travel and expenses, has found that more and more companies are making the CFO central to practical Net Zero delivery by:

Measuring performance with near real time intelligence and insight - 31% of companies struggle with implementing the right programs and policies, despite having the desire and will to become sustainable businesses. And one of the most profound obstacles is the inability to track spend and access timely financial data to make crucial decisions. For example, 61% of finance leaders lack near-real time visibility into their employee spend data on travel and expenses and associated carbon costs.

Shifting from an efficiency to an optimization mindset – 48% of business travellers say information, such as visual indicators of environmental impact, is very or extremely important as they seek to optimize their travel plans across considerations such as the need for face to face client interaction; work life balance; the carbon impact of travel; and the financial cost too. This word, optimization, is crucial for companies planning their Net Zero transition.

The shift to Net Zero will be complex for companies and the CFO (and Chief Digital Officer) will be crucial actors in managing and optimizing performance. They need granular, robust and timely data on all aspects of their carbon footprint, across all parts of their value chain, often encompassing 100s it not 1000s of suppliers, business partners, customers and products/services sold. Whether their carbon footprint is driven by energy use for heating, cooling and lighting; travel and logistics; or raw materials etc the ability to measure accurately a carbon and financial baseline; model and optimize the pathways to reduce it; and set, track and report on reduction targets is crucial.

The research shows that companies that use software as a service are 1.67 times more likely to make direct ESG investments into their finance organizations. Midsize and large companies spent nearly US$3 million on software for ESG management in 2022 alone. And 46.6% of business leaders expect to increase their organization’s sustainability related spend over the next 2 years.

In a complex world, companies who can draw all this together into a compelling, measurable and actionable business case underpinned by readily available, accurate and near real time data are those that will win the future. Because, whatever the online ‘noise’ about the climate crisis, the real, irrefutable scientific ‘signal’ is that the world is heating up rapidly with enormous implications for social and economic stability.