How CFOs can drive ESG

The Chief Financial Officer (CFO) controls more than just the purse strings. The role is a driving force in shaping an organisation’s strategy and execution of environmental, social, and governance (ESG) issues. Diving deeper into the influence of the office, the executive can marry up finances with ESG and sustainability.

The ever-expanding role of the CFO

The Financial Director and CFO work hard to budget, report, and forecast what might happen from a financial perspective. Externally, CFOs are also expected distil market views, hold court and woo major donors, and engage with governance.

Expectations of the CFO are expanding. They may lead the charge on ESG, sustainability, and impact reporting. With skills in finance, planning and benchmarking, the office is well-positioned to lead on ESG. 

Integrating financial and ESG strategy

The CFO’s office is the prime location to map resources for ESG and sustainability strategy. Finance Monthly suggests that: “When incorporating ESG into budgeting and forecasting, CFOs should start by aligning financial goals with the organisation’s ESG objectives.”

In simple terms, CFOs start by considering ESG and sustainability risks within the financial decision-making process. This means asking focused questions around how ESG may impact operations not just financially, but also from a community and social perspective.

A materiality assessment informs the ESG and sustainability strategy. Use the priorities and objectives to quantify, monitor and inform which direction finances should take. ESG key performance indicators (KPIs) are top of mind here, with the CFO taking a strong hand in how values align with financial action.

Digital tools for the CFO

The CFO might have overall responsibility in the execution and delivery of the sustainability or ESG plan. Both comprehensive and functionality-based platforms are available.

For enterprise sustainability platforms, we’ve reviewed Greenly and Benevity in our previous publication. Greenly is comprehensive because it can keep track of strategy, KPIs, and captures the reporting. Double materiality is covered.

Benevity’s approach aligns more with the S and G of ESG. Covering volunteering, fundraising, employee engagement, and diversity, equality, and inclusion (DEI), Benevity puts all efforts into a single platform.

Simpler digital tools make sense for CFOs who want to just tell a story around a single metric. The Carbon Trust’s calculator measurements can be tracked over time. WWF offers another easy option for emissions progress.

From a social and governance initiative, the CFO might lead by example and recruit blindly. Shielding the personal details and background of potential applicants erases the potential for innate biases. Platforms like Beapplied hides details, levelling the playing field.

Another voice for engagement

CFOs have the trust and duty to engage with board members. Together the team may develop the financial and ESG alignment further by leveraging joint expertise. Speaking finances and ESG plans is natural, like any other project. The CFO can show off how complimentary the strategy is and what progress is in the works.

The CFO’s public speaking and social media profile is an opportunity to tell audiences what’s happening. Rather than chiming in on fundraising, the CFO can announce ESG initiatives and successes. Last, the CFO’s voice can be used within the organisation to update staff.

Use the budget

Financial directors play an influential role in determining what the budget is used for. Greening the office doesn’t have to cost a fortune. From an operational perspective. the CFO can make better energy use decisions in various different ways. Just changing providers to renewable electricity sellers can be a key point to tell audiences about. Other real changes include renting energy efficient buildings or those with green infrastructure.

Greening the office is another area where CFOs can lead with impact. Make the switch to Forest Stewardship Council certified paper products or foods with traceability. Then, organisations can be assured that they aren’t buying from dubious sources.

The CFO leading on regulation

Another area where CFOs drive ESG strategy is from reporting. Many of the emerging regulations and accounting standards stem from the financial regulators.

The FCA’s Sustainability Disclosure Requirements is one of most progressive regimes which stipulates that a company under its supervision has to report on both the financial and ESG risks. This is different from previous rules, where firms had to report on the financial risks of ESG. Put more plainly, regulated entities have to acknowledge the impact on people, society and community that their business activities have.

CFOs will also be familiar with the International Sustainability Standards Board. These standards on how to report on sustainability are now rolled up under the International Financial Reporting Standards, the accounting regime. With experience of the regimes, CFOs are advantaged to report and have foresight of what regulators will require.