CFO: need to know
More than green: sustainability is an economic driver
Sustainability impacts almost every function of an organization, spans the entire value chain and can’t be relegated to the sustainability function alone. It helps companies make money, save money and manage risk – items at the top of the CFO’s to-do list.
Expanding the CFO role
Sustainability has broadened the CFO’s role, particularly when it comes to the risks associated with sustainability:
A challenge facing CFOs is to ensure that tax directors and sustainability officers are in regular communication. Getting tax involved early in the sustainability-strategy planning process can help companies succeed financially, particularly in a resource-constrained economy. From planning to executing initiatives, tax and sustainability must work together.
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CFOs and sustainability
A CFO’s role to manage risk in a resource-constrained world.
What every CFO should know about sustainability:
- Non-financial reports are becoming as important as financial reports.
- Three areas of non-financial information that companies report on are environmental, social and governance (ESG).
- Carbon taxes are becoming increasingly prevalent. It’s vital to get Tax involved to plan for property, sales, value-added and consumption energy taxes.
- More and more stock exchanges around the world are requesting or requiring sustainability reporting; companies that don’t report must explain why not.
- A lot of non-financial information – including sustainability information – is included in the Bloomberg Terminals already. They report on more than 100 sustainability indicators, and if you don’t report them, industry averages will be put in for you.
Reputation: online and on the line
Sustainability affects reputation. Reputation affects the bottom dollar. Quickly. Through social media, a local sustainability incident can spark global concern once it hits the internet. For example, human rights issues due to conflict mineral mining in the Democratic Republic of the Congo – once largely regionalized – are now a global concern.
Incidents can sway stakeholder sentiment or consumer preference and can cause losses, regardless of materiality or responsibility. Also, employees increasingly seek employers whose values reflect their own. How do they find out? Sustainability reporting, which discloses organizational values.
Manage resource risk. Now.
In a recent EY-GreenBiz survey, 51% of respondents saw natural-resource shortages as posing a real risk to their business within three to five years. But only 30% are actually doing any sort of scenario planning and modeling. So they’re not really addressing sustainability risk.
CFOs play a key role in managing risk in a resource-constrained environment. Understand what natural resources are requisite for your business and operations, and develop actionable plans to make sure that those resources will be available for you in the long run.
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Viewpoints expressed on this page are exclusive to Ernst & Young GM Limited.