Is this the end of the CFO role?

CFOs are becoming more involved in non-financial reporting and need to start changing the organisation’s strategic targets into sustainable milestones. Instead of just focusing on day-to-day numbers, they are looking at the social and governance aspects as well. Does this mean that the “F” in CFO has become irrelevant?

Tangelo Software founder Erwin Groenendal says that while there is still a lot of debate about who should own sustainability within an organisation, he believes it should be owned by the CFO due to the financial aspects involved in sustainability.

Driving ESG
ESG and sustainability lead at 8hundred, Julie Rosa explained that the concept of ESG is one that’s been around since the '60s, but what is new is a change in the concept people have of value.

The three driving forces of this recent focus on ESG are:

1. The change in the definition of value from purely financial to also including non-financial value as well as pre-financial information. Companies need to translate their environmental, social, and governmental tools into sustainability milestones and there must be a budget for it. The skillset to report these ESG targets is already within the finance team, as well as the ability to develop and execute that strategy.
2. The movement and allocation of conscious capital, sustainability linked loans, and green bonds. This is a critical role of the CFO and a credible ESG story is essential. Julie added that Morningstar reported a nine percent quarterly increase across all asset classes and that at the end of last year there were almost 6,000 sustainable funds globally. This raises the question of whether a credible ESG story will be a barrier to entry to access finance.
3. The future of leadership: companies who bring ESG to the boardroom often have multidimensional, forward-thinking leadership. If you get buy-in from the board and the CFO, you can drive a lot of positive change. ESG needs to be supported by the top of the organisation to have any impact, which makes it so important to have leadership involved in ESG.

Welela Dawit, CFO of Microsoft South Africa, added that ESG and sustainability centres around data and being able to interpret it. She continued, saying that finance is at the intersection of this; finance is the output of business activities.

She explained that she spends the majority of her time focusing on the activities that generate numbers, saying that the role of the CFO is to focus on the pre-financial metrics.

The custodian of ESG
Welela said that finance does play an incredibly relevant role in investor relations, managing stakeholder expectations and communicating what the ESG strategy is. She added that ESG is centred around data and “when it comes to data, the custodian of data is finance”. The finance function will have a significant role to play as ESG disclosure becomes a regulatory requirement for companies.

According to Transaction Capital CFO Sean Doherty, finance personnel understand ESG, which is why it has a home in the sector. He stated that he does not believe that the ESG strategy fits solely in the CFO space, it is multidisciplinary, and the CFO brings it together and allocates value in these spaces. He concluded that finance teams need to think like “product people” and understand what stakeholders want as sustainability tools are developed.