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How sustainability has expanded the CFO’s role - Operational controllership and financial risk management - EY - United States

How sustainability has expanded the CFO’s role

Operational controllership and financial risk management

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They say time is money. But now, sustainability is money too.

Sustainability has found its way into the realm of controllership and financial risk management.

CFOs will need accounting systems that track any sustainability-related events that are significant from a financial reporting perspective. The line between accounting records and sustainability records has begun to blur — sustainability activities must now be treated like financial activities, with a controller to monitor and account for them.

As yet, there is no dedicated sustainability reporting software comprehensive enough to provide the necessary level of control. CFOs will have to pay closer attention to the sustainability-related aspects of company operations.

Sustainability can also amplify risk in other ways:

  • A carbon tax would force the company to confront new risks, such as asset value erosion tied to a carbon price. Each time the company introduced a new line of products or services, the CFO would have to devise a risk-based cost evaluation that took the carbon price into account.
  • When contemplating acquisitions or large-scale capital projects, companies may need to model various outcomes to calculate the odds that an acquisition target will be subject to new regulations that would drive up its operational costs.

These hypothetical scenarios illustrate that companies will have to make sure that, like their financial data, their sustainability data adheres to the accounting principles of accuracy, reliability, completeness and consistency.

Otherwise, the company will risk releasing inaccurate financial information.

Actions to consider
  • Start analyzing any data that contributes to your company's environmental impact.
  • Create statistical models that help you quantify the cost of these disparate data points.
  • Keep up with impending environmental regulation and impacts to your supply and distribution chain.

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