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The CFO as an Environmental, Social, and Governance (ESG) Champion

Discover actionable ways today’s CFOs can take the lead in advancing corporate ESG strategy.

KEY TAKEAWAYS

Environmental, Social, and Governance (ESG) has become increasingly important for businesses as key stakeholders demand more transparent accountability. In addition to managing the compliance and reporting aspects of ESG, CFOs also play a valuable role in helping companies meet critical social impact and sustainability goals.

In this final installment of a four-part series covering the CFO role, find out how (and why) CFOs are taking the lead in advancing corporate ESG strategy.

Why ESG is on the CFO agenda

As discussed in an earlier post of this CFO series, the role of the modern CFO has expanded beyond financial reporting and analysis to strategic leadership across a whole spectrum of business issues. And when the organization needs to take action in executing its ESG agenda, the CFO is uniquely positioned to guide those actions. 

Here are three reasons why:

1. Employee Expectations

It’s no secret that employee engagement and working preferences impact company performance. Gartner research found that 65 percent of employees want to work for organizations with a strong social and environmental conscience. Given the impact of this reality on employee engagement and, therefore, performance, CFOs have good reason to ensure the company’s ESG initiatives support rather than hinder its ability to attract and retain talent.

2. Customer Expectations

In a PwC survey, 83 percent of consumers said companies should proactively shape ESG best practices, and 76 percent said they wouldn’t buy from companies that treat employees, communities, or the environment poorly. Given that CFOs recognize the role of customer behavior in driving financial performance, they notice when customers signal a desire for more action on ESG issues. 

3. Financial Stakeholder Expectations

According to Gartner research, the vast majority of insurers (90 percent) and banks (91 percent) monitor their customers’ ESG profiles, alerting CFOs to the impact ESG activities have on the company’s access to capital and financial protection. Individual shareholders and investors also expect companies to manage risks effectively, including those related to ESG.

How CFOs are leading environmental, social, and governance strategy

Given the impact of stakeholder expectations on company financial performance and health, CFOs are monitoring and often leading company environmental, social, and governance activities. A recent Accenture survey revealed that 68 percent of CFOs said they already had ultimate responsibility for ESG performance in their organization. By partnering with peers in the C-suite and driving insightful reporting and analysis, CFOs are actively driving the company ESG agenda.

Collaboration with the C-suite

As the company’s financial leader, the CFO is in an excellent position to help other company leaders understand the costs (and opportunity costs) of environmental, social, and governance actions. It’s not just about reporting, but about helping to guide strategy and execution. As one CFO said in a recent episode of EY’s “Better Finance” podcast, “The CFO’s role today is more proactive. I think it’s evolving to be more instrumental in helping the company and the executive team define what ESG means for our industry and our company. It’s important to help the company figure out what is material to [us] and where we should focus.”

As CFOs act as conversation starters on important ESG topics, they can also provide the data to help company leaders answer critical questions, such as:

Insightful reporting

As the owners of shareholder and regulatory reporting, CFOs and their teams are already in an optimal position to provide additional transparency to key stakeholders. By adding ESG reporting to the mix, the finance team can help the entire enterprise plan and track ESG initiatives more effectively. As discussed in an earlier post in the series, more and more finance teams are using advanced digital tools to leverage big data for insightful analysis. These tools can give finance teams the ability to track key performance indicators for ESG initiatives, ranging from energy consumption and greenhouse gas emissions to employee diversity and governance disclosures.

The continuously evolving CFO role

In many organizations today, the CFO must balance the tactical and the strategic. They must understand the data behind the decisions, and also help the CEO and C-suite navigate complex organizational challenges. They are finance function leaders, but also strategic partners, risk advisors, and sustainability champions. As the business landscape continues to evolve, the CFO role will likely evolve with it and remain an invaluable member of the executive team.

Interested in exploring more about the CFO evolution and what skills and competencies are required of today’s financial leaders? Download our Force Multiplier Report on the rise of CFO and executive finance roles.

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Melanie Haniph is an HR content writer and talent management expert. In addition to her experience leading HR initiatives for large and small organizations, she writes on a range of talent management topics for senior executive, HR, and jobseeker audiences. Her work has been featured on Workforce.com, Adage.com, TopResume.com, and many others. Connect with her on LinkedIn.