We recently held an ESG event with Paul Dobson, Deloitte Asia Pacific Partner in the Climate and Sustainability Practice. The topic for this event was “Elevation of ESG into the CFO Suite”.
Most executives believe that the world is at a tipping point for responding to climate change, with 95% of companies reporting to already be impacted by climate change. In this event, we discussed some of the key findings from a survey conducted in late 2021. Within it, CFOs respond to questions on ESG including reporting and the future of reporting, the opportunity to create competitive advantage, and how CFO’s can take a lead on the strategic initiatives in this space.
Growing Climate Concern
As more people are practically affected by climate events, the climate change concern has become a real, urgent matter for businesses. When compared to global opinions, Australia is 12% more concerned about climate change, and 67% of Australian companies predict that there is a very high likelihood that climate change will impact their overall strategy in the future.
Survey Results: Top 5 climate change issues already impacting businesses
- Operational impact of climate-related disasters (54%)
- Cost of climate change mitigation (51%)
- Regulatory/ political uncertainty (51%)
- Pressure from civil society (49%)
- Scarcity of costs/resources (48%)
Survey Results: The top 3 drivers of ESG Action
- Investor or shareholder demand (67%)
- Competitive/reputational advantage (48%)
- It is the right thing to do (36%)
Event poll: What do you believe are the top 3 drivers of ESG?
Event poll: What do you believe are the top 3 barriers to ESG efforts in your organisation?
Activities where CFOs are most confident and progressed
According to the survey, CFOs are most confident driving leadership and board alignment on ESG actions, managing material ESG risks, and integrating ESG into the organisational strategy.
Activities where CFOs are least confident and progressed
When it comes to lesser confident ESG activities, CFOs are less comfortable with undertaking emissions planning, budgeting and forecasting. Additionally, integrating ESG considerations into cost/benefit analysis and resource association frameworks are not strong areas.
A Shift from Voluntary to Regulated Reporting
In the future, many companies should expect to have their ESG reports regulated, alongside their financial statements, and reported on a regular basis. This is fuelled by global standards being raised; the rule-oriented United States making regulation changes; investor interests shifting; and the need to attract wider stakeholder audiences such as new talent.
Questions Boards Are Asking – Are You Ready?
It is important to be prepared when stakeholders ask board members about climate considerations as these questions trickle down to management and CFOs.
- Has your board determined how to effectively integrate climate considerations into the board committee structure?
- How does your board ensure that climate considerations are given sufficient attention (e.g. being discussed in the audit, risk, nomination or renumeration committees)?
- How can executive and non-executive directors play complimentary roles in meeting the board’s accountability with regards to climate?
- Has the way your board embedded climate allowed for effective interaction with relevant members of the executive management (e.g. if climate is embedded in the risk committee, does this committee ensure that climate is also addressed by the CRO)?
- Has the board considered appointing a climate expert, or creating an informal or ad-hoc climate advisory committee of internal and external experts?
What should CFOs be doing now to prepare themselves?
Often, there are already many ESG initiatives that companies have taken part in, but they have not been collated. The first step is to understand the current state, bringing together all data across environmental and social governance, and comparing it with the current standards.
Communicate with your Stakeholders
Your stakeholders are going to tell you what is most important to them when it comes to ESG, so open the conversation to determine what they consider essential vs. simply nice to have.
Measure Your Footprint
If you are not sure where to start, begin with climate. Measure your carbon footprint to understand in numerical values where you can input carbon offsetting or sustainable alternatives.
Although recent climate events in Australia and globally have been nothing short of catastrophic for communities and companies, the strong response to climate change proves that the future of ESG is generally positive. With pressure from stakeholders including investors, current and new employees, companies will have no choice but to prioritise and invest in more sustainable practices.
Moir Group runs many events across the year for early and mid-career professionals. Sign up for our upcoming events here.
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