Sustainability - why CFOs should care
"Companies are now required by governments and stock exchanges to be transparent about their sustainability performance for all stakeholders, including investors, to see and evaluate," writes Stephane Bello, Executive VP and CFO at Thomson Reuters.
As stewards of capital, today's CFOs have a unique opportunity to oversee far-reaching sustainability efforts in business. Emerging regulation and operational risk in our marketplaces globally are driving increased attention to measuring and managing sustainability-related performance. The evidence is growing that firms which capitalise on this trend end up becoming more efficient, more competitive and better long-term creators of value than firms which do not.
A logical first step in driving sustainability efforts is to look for initiatives which can drive an environmental benefit while simultaneously improving a company's cost structure and operational efficiency. CFOs have the ability and occasion to head up these endeavours. Efforts such as the consolidation of multiple data centres and cutting of real estate footprints are great examples of "win-win" propositions, as they lead both to immediate cost savings and to longer-term environmental benefits.
Another interesting trend is the degree to which our marketplace is including sustainability as part of their evaluation of our competitiveness as a service provider. There is increasing pressure from investors for companies to generate a measurable environmental impact along with a financial return. Sometimes this is a quantitative or score-based criteria included in RFPs from clients. Typical questions involve the extent to which company's track, report out and manage key sustainability metrics such as greenhouse gas emissions or water use.
In fact, sustainability is becoming such a competitive advantage that some of the largest businesses in our marketplace, such as Barclays, HSBC, Bank of America, KPMG, and Simmons & Simmons have gone (or are pledging to go) completely carbon neutral. This is also true of some of the global companies that provide professional services to these institutions.
There is a growing product aspect to sustainability. The ability by CFOs to provide insight on emerging environmental regulation and ESG performance is becoming important to many investors, governments, and legal clients. Professionals and consumers increasingly want to know how firms stack up on managing their sustainability risk, and CFOs can provide that analysis.
Policymakers are sending strong signals about the importance of sustainability. A recent report by KPMG makes clear that regulatory frameworks requiring reporting on sustainability - both mandatory and voluntary - are increasing rapidly across the global economy, particularly in Europe, Latin America and the Asia Pacific region. Companies are now required by governments and stock exchanges to be transparent about their sustainability performance for all stakeholders, including investors, to see and evaluate.
Comparisons on performance are then made between companies in a sector, or against the standards set by the UN's Sustainable Development Goals. Even the Financial Stability Board recently issued guidance for "all financial and non-financial organisations with public debt or equity" to report scope one and two greenhouse gas emissions. The trend on policy may not be in a straight line in all jurisdictions but the global evolution over time is clear.
Talent development Alongside these trends, CFOs are also witnessing sustainability as a growing driver of talent and employee engagement. As we improve our sustainability performance in our operations and our products, we are seeing an increasing level of engagement and interest from women and millennials, who both view sustainability as a front-line issue.
Millennials are the first generation to have grown up with the concept of corporate social responsibility. Studies continue to show that today's best and brightest want to work for ethical companies that prioritise positive community impact alongside capital growth.
As we become more competitive on sustainability, we increase our odds of attracting and retaining key talent, which in turn increases our competitiveness and ability to innovate.