Written by Peter-Jan Roose
Your Chief Financial Officer seems like an unlikely ally when it comes to the global battle against climate change. However, a sustainable transition cannot happen without the finance function. It is the engine room of every business and sets the tone.
“I would argue that the CFO is at the centre of a change that is happening within business. Corporate responsibility is no longer the philanthropic side-line that is a million miles away from the core business; it is now an essential part of the CFO’s toolkit.” Gregor Alexander, The CFO’s Dilemma (2017)
The changing role of the CFO
The primary role of the CFO and finance function is to oversee the recording and reporting of all transactions within a company. This is unlikely to change, but instead of being a partner in compliance and risk, I believe that finance should act as a true sustainable business partner.
Acting as your surf instructor to catch the sustainability wave
All CFOs face a trade-off: making money on the short-term or being a force for good in the long-term. This is not an actual trade-off, but rather a call to action that both can be achieved simultaneously!
The finance leader and its team can provide the leadership to ensure the decision-making process encompasses all aspects. The following arguments show why it is time to act:
- Ethical cost saving
Current decision-making is influenced by the numbers, where the cheapest solution is more than often favorized.
It is time to realize that carbon emissions, water, waste, etc. are all proxies for costs.
Mitigating climate related risks will require significant investments, which will impact the organization’s cost structure in the short-term. However, cutting greenhouse gas (GHG) emissions equals cutting energy consumption, which leads to significant cost savings down the line.
- Impact on Bottom line
Besides cutting cost, as mentioned above, there is one more important topic that impacts your bottom line … People.
Attracting better people and getting more out of them has a significant consequence. Multiple studies have shown that people are happier and more productive in a purpose-led business.
Ingraining sustainable finance principles in your decision-making process will increase retention and make recruitment easier, hence cheaper.
- Instrumental for the mindset shift
The finance function is instrumental to shift focus from next quarter’s results to the long-term, which will automatically encourage the entire business towards a more sustainable and ethical approach. How you choose to present your numbers will shift focus from short-term profit to long-term sustainable growth.
Who knows, removing the pressure might even spark internal innovation leading to new revenue streams.
- Beyond science Customers, employees, society, and investors are waking up to the harsh reality of climate change. The latter is starting to actively push towards climate safe investments and adding climate risk indicators to financial statements or reports. Even large public companies are making bold announcements about their goals to cut GHG emissions across their value chains. E.g. the CFO of Mars announced their “Sustainable in a Generation Plan” reflecting their ambition to grow purposefully in three interconnected areas: Healthy Planet, Thriving People and Nourishing Wellbeing.
- Regulation prevents greenwashing It is very easy for sustainability and ethics to be used by other departments in a shallow effort to build the brand, but this is seen for what it is by increasingly savvy internal and external stakeholders. Isn’t the finance function known for compliance and thus the only true option?
Think about it this way
Why continue to invest in fossil fuel infrastructure, while we know that we will have to dispose or repurpose the infrastructure to meet our goal of becoming carbon neutral by 2050? Recently, Politico issued a map of Europe’s future stranded assets worth about 10 Trillion USD. If we do not start changing now, that cost will be far greater.
How BrightWolves will help you
Sustainability is ingrained in BrightWolves’ vision to deliver positive and sustainable impact to our clients, our talents, and the economy. Besides this, sustainable stakeholder value creation is a crucial part of our values and we consistently aim for long-term impact on all fronts.
So, obviously sustainable finance is the glue that connects our full range of services we offer to CFOs, ranging from strategy to implementation.
Let us start the journey together with an internal workshop to discover the potential of sustainable finance principles within your finance organization!