Chapter
The role of CFOs in enabling sustainability transformation
The scope of finance function support will undoubtedly change, but its core role will not.
CFOs have traditionally been responsible for managing financial value and reporting to key stakeholders. Therefore, CFOs will have a vital role in supporting organisations in navigating expanding views and expectations around value creation, and responding to stakeholder demands for more insight on ESG. Doing this successfully requires embedding ESG principles into organisation-wide strategy, to deliver enhanced resiliency and relevancy as an organisation. Therefore, the CFO will have two leading roles:
- As a C-suite member, to support senior management to build sustainability into organisational strategy and drive integration across all business functions, so that sustainability is truly embedded throughout the organisation.
- As a function leader, to embed sustainability across all areas of the finance domain, as highlighted in ‘The CFO Universe’ below.
Sustainability and ‘The CFO Universe’
Our work with CFOs has identified sustainability as critical to ‘The CFO Universe’. How is sustainability disrupting the CFO agenda?
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The shift to a business model that embeds sustainability does not fundamentally change the role of the finance function, but it does extend the scope of focus and support that finance provides, for example, sourcing funding options for green initiatives, evaluating business cases that include nonfinancial value, and reporting on ESG-performance metrics. Achieving this will mean reconsidering all finance activity through the lens of sustainability, including updating policies, processes and data, and upskilling teams to build a sustainability-aligned finance function fit for the future.
However, this also comes at a time when finance functions are under ever-increasing pressure to cut costs. So why change now?
Chapter
The advantages of transitioning to a sustainable business model
Six ways in which businesses can benefit from successfully transitioning to a sustainable business model.
The transition to Net Zero is creating the greatest commercial opportunity of our age.
Finance function leaders can deliver a number of benefits for the businesses they serve by supporting the transition to a business model more aligned with sustainability and a low-carbon future. Whilst we explore the benefits in detail in the full report, these include:
- Increased investor confidence
a. Increased share price
b. Access to a lower cost of capital - Financial savings through greater efficiency
- Enhanced brand reputation
- Increased operational resilience
- Competitive advantage over those who do not act quickly enough
- Attraction and retention of talent
The vital role that finance must play in supporting a successful transition to a more sustainable business model presents an exciting opportunity to attract new talent to the finance profession.
Chapter
How the finance function can enable this vital change
There are a number of ways in which the finance function can enable successful sustainability transformation.
I’m now convinced. Finance teams will play a pivotal role in driving the transition to a low-carbon world, by applying our discipline, rigour and mindset to the challenge.
The finance function is ideally placed to enable this vital transformation given its scope of influence over key decisions and processes. According to the CFO universe, these are:
- Fund the business and manage the investor community
- Allocate resources, plan the business and drive performance
- Control the business and operate processes
- Comply with fiscal and regulatory requirements, and manage regulators
To successfully deliver sustainability transformation, the finance function’s operating model will need to pivot to adopt new processes, build the right capability and leverage technology, to act as a true business partner and support their organisation to navigate towards a triple bottom line.
For more detail about how the finance function can enable successful sustainability transformation please register to download our report.
Chapter
Next steps to building a sustainability-aligned finance function
Determine your readiness for these changes with a rapid maturity assessment.
Ultimately, at the heart of every sustainability transformation is a finance challenge — how do you turn your organisation green, without going into the red?
The greater the sustainability appetite and ambition of the finance function, the better positioned it will be to support its organisation in solving this critical question.
CFOs will need to support the translation of their organisation’s sustainability strategy into tangible actions, from implementing changes in reporting requirements through to driving cultural change in value-based decision-making. Ultimately, the CFO has a crucial role to play in developing many of the practical steps required across the organisation to deliver the vital changes needed.
In doing so, this can support the wider aims of CFOs by modernising the finance function.
Organisations that act proactively and rapidly on climate change and decarbonisation will be best placed to capture the value-creation opportunities from sustainability.
The EY DNA of the CFO found that 73% of CFOs cited ‘changing the culture of [their] team is a major priority’ and 71% of CFOs agreed that ‘traditional back-office behaviours and mindsets in finance are slowing the modernisation of the function.’ Therefore, the changes required by sustainability present a real opportunity for the finance function to lean into this change, redefine itself as the custodians of value for the organisation and become a true business partner, supporting their organisation to navigate the crucial changes ahead.
By running a rapid maturity assessment of your finance function to compare it against EY’s sustainability-aligned future finance operating model, we can help you to determine your readiness for these changes.
We believe that the finance function has a rightful place at the heart of sustainability transformation. Are you ready for the challenge? To get our recommended seven priority actions for CFOs to prepare for this transformation please register to download our report.
Special thanks to Dom Hollis, Carolyn Cole, Matt Bell, Rebecca Farmer, Ben Castell and Brian Hatton for their contributions to this report.
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Summary
Businesses are under pressure from a wide variety of stakeholders to play a greater role in driving sustainability. Part of this involves introspection — to look at how businesses themselves can become more sustainable. To do this, businesses need to transform aspects of their operations. As with most business transformation initiatives, the finance function should be front and centre to help the business it serves play a greater role in building a sustainable future.
