CFOs take the lead
The role of the Chief Finance Officer (CFO) is always evolving. That has never been truer than it is today. The pandemic, increased awareness of Environmental, Social and Governance (ESG) issues, and technological advancements have created an era of intense change. But with this change has come great opportunity.
In this article, we explore why CFOs must play a leading role in addressing ESG, how the finance function can enable this transition, and the long-term value of embedding sustainability into business strategy.
The writing is on the wall for CFOs
Businesses can no longer ignore the environmental, market and regulatory impacts of climate change. Increasing stakeholder pressure means businesses need to play a more significant role in building a sustainable future. The CFO and the finance function is centrally positioned to drive the direction of ESG, both now and into the future. In fact, at least 50% of CFOs have already realised that better ESG performance leads to reduced cost of capital and improved investor perception. Our ESG and Finance flyer is a fantastic resource if you want to learn more.
The new mandate of the CFO
Climate change and sustainability are forcing people to think differently and as a result, stakeholder priorities are altering. Stakeholders are increasingly demanding more from organisations than a commitment to short-term profitability. They are questioning how much of a company’s value is reflected in its financial reports.
Traditionally, CFOs have been responsible for managing financial value and reporting to key stakeholders. Their unique set of skills also account for measurement and tracking, risk analysis, as well as governance, internal monitoring, prevention, mitigation, and third-party assurance.
As ESG becomes a key business priority, the CFO is required to be “fluent in environmental metrics, sustainable supply chain dynamics, and carbon accounting spreadsheets,” according to Goodlab’s CEO and Co-Founder, Andries Verschelden. They are poised to take on sustainability as a strategic area of value creation.
Ernst and Young have in fact, identified that CFOs will have two leading roles:
- C-suite member: Supporting senior management to build sustainability into business strategy and drive integration across all business functions
- Function leader: Embed sustainability across all areas of the finance domain
CFOs drive business metrics
CFOs deliver several benefits for the businesses they serve by supporting the transition to a model aligned with sustainability and a low-carbon future. These include:
- Increased investor confidence
- Financial savings through greater efficiency
- Enhanced brand reputation
- Increased operational resilience
- Competitive advantage
- Attraction and retention of great talent
“This presents an exciting opportunity to attract new talent to the finance profession. Businesses with a strong ESG focus will become an employer of choice, in turn attracting and retaining great people who support their values,” said Moir Group’s Director, Stephen Moir.
Key ESG focus areas for CFOs
Some key areas of focus for the CFO include:
Moir Group’s carbon emission reduction plan
With such a high interest on ESG by investors, CFOs (or in the absence of one, the finance function), need to be active participants in a carbon emissions reduction strategy. They are best equipped to answer the question, “What are the costs to the organisation for the release of carbon emissions?” They are also the ones most prepared to manage portfolios holistically and to serve multiple stakeholders.
Moir Group is highly passionate about sustainable business and living by their values. This led the team to design an emissions reduction strategy, considering all activities of the business, to move us closer to having no net negative impact on the environment.
Our future focus
“Our plan is to be a carbon negative business, which is different to carbon neutral,” said Stephen. “Carbon neutral is a state that occurs when net greenhouse gas emissions are equal to zero. Carbon negative means going beyond this, making additional positive contributions to the environment. This involves reducing more emissions than we release and taking other positive actions towards restoring our environment,” he added.
Moir Group also endeavours to become a B Corp organisation in the future. This is the private certification of for-profit companies of their social and environmental performance. It demonstrates impact, accountability, and transparency on factors such as employee benefits and charitable giving, to supply chain practices and input materials.
Final Thought
Moir Group regularly runs discussion groups and webinars on ESG topics. Don’t miss out on our next event.
