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