Why sustainability is key to the future Finance Function
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
ESG should mean “value creation”, but does it? In this post, we’ll assess how being part of the finance function of the future means being ideally placed to deliver value through sustainability.
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Can Finance play a more prominent role in promoting sustainability as a driver of value within their organizations?
One of the most important choices a company can make these days is to take sustainability seriously because the private sector has a crucial role to play.
Credible corporate action towards ESG is not only vital for the planet but also can be a positive value creator for the company.
The finance function plays a critical yet often overlooked role in corporate sustainability and to be Finance Function 5.0 ready means leaders need a proactive and positive approach toward Environmental, Social, and Governance (ESG) considerations which can’t happen effectively until Finance is playing a core role.
So, how can we do this? By driving value creation in a way that benefits both the company and society as a whole.
Building a sustainable future with Finance Function 5.0
Finance plays arguably the biggest role as the “gatekeeper” of resources.
This means that there is also an important role to play in embedding sustainable strategies and actions into the culture and fabric of the organization.
It requires long-term thinking and a longer time horizon to reap the benefits but it’s possible to balance those with more short-term financial goals.
In this way, Finance sits at a crucial mid-point, able to balance priorities and benefit all stakeholders by asking critical questions about each initiative and how it’ll contribute to sustainability and generate value for the company.
This kind of oversight brings reporting and strategy together under one roof.
The question simply to ask is, how does this make us more sustainable and how do we create value from it? If you can’t get a good enough answer then there’s no moving ahead on the project.
Taking action: the move from reporting to getting things done
Sustainability is not just about reporting on ESG metrics. It’s also about helping the executive team to talk and think about sustainability in a proactive, strategically influential way that allows it to become part of the culture.
The critical question Finance Function 5.0 needs to ask of each project or initiative is, will it contribute to overall sustainability and generate value wider, or second-order value, for the company?
Helping other functions think about the answer to this question, and how the message is promoted is a key action to take.
Making sustainability part of your DNA?
Understanding the strategic “big picture” when it comes to ESG is vital to making it part of your DNA. What does this mean?
Being value-driven when it comes to sustainability means being able, not only to report on key metrics, but characterize those metrics to show value add.
For instance, human resources and hiring managers might thank you for being able to demonstrate real actions to reduce the company's carbon footprint, for example by creating incentives for employees to use sustainable forms of transportation to get into the office or funding an enhanced “cycle to work” scheme.
Why would HR pat you on the back? According to a recent survey , nearly 40% of millennials said they have chosen a job because of company sustainability. If a promising candidate chooses your firm because of your approach to ESG, that’s a win, while at the same time benefiting the environment.
Finance Function 5.0 is about connecting the strands and pulling them together to drive positive change.
From reporting the numbers to communicating the narrative
Interestingly, according to Deloitte , most Gen Zs and millennials (over 89%) admit they’re at least making some effort to reduce their impact on the environment.
However, only less than 20% of Gen Zs, and even fewer millennials, believe their employers are committed to addressing climate change.
If employees are choosing companies that promote sustainability, then it’s a strong value-creation opportunity, isn’t it? Likewise, savvy consumers make choices about using your products or services.
Finance Function 5.0 means it's time for finance leaders to go through their business and project portfolio and make plans for real change - as well as collaborate with internal and external comms to share the mission and vision far and wide.
These could be ideas and actions for reducing carbon emissions, increasing the usage of renewable energy, improving supply chain transparency, or ensuring ethical labor practices.
The aim should be to make everything the company does more sustainable, and this requires a company-wide commitment and culture of sustainability.
What do you think? Are there some good examples from your company where Finance has led the way in ESG? Let us know in the comments below.
This was the fourth and final article in our new series "Welcome to Finance Function 5.0" and remember to subscribe to catch the upcoming articles. Check out previous articles in the series below.
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Anders Liu-Lindberg ?is the co-founder and a partner at?Business Partnering Institute ?and the owner of the largest?group dedicated to Finance Business Partnering ?on LinkedIn with more than 11,000 members. I have ten years of experience as a business partner at the global transport and logistics company?Maersk . I am the co-author of the book “Create Value as a Finance Business Partner ” and a?long-time Finance Blogger ?on LinkedIn with 250,000+ followers and more than 295,000+ subscribers to my blog. I am also an advisory board member at?Born Capital ?where I help identify and grow the next big thing in?#CFOTech . Finally, I'm a member of the board of directors at?PACE - Profitability Analytics Center of Excellence ?where I support the development of new analytics frameworks that can improve profitability in companies around the world.
QuickBooks Certified Pro-Advisor, XERO Advisor, MSS, M. Com (Accounting), CMA (Final),
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1 年While I completely agree that the finance function has a significant role to play in a strategically influential way that allows sustainability to become part of a company's culture, I would like to emphasize the importance of promoting awareness of sustainability. By offering training sessions or workshops, finance professionals can assist other functions in understanding the significance of sustainability, its financial implications, and how their individual roles contribute to the broader sustainability agenda. This knowledge-sharing initiative not only helps align efforts but also fosters a culture of sustainability within the organization. Thank you for sharing such an insightful post! ??
Chartered Accountant | MBA | FCCA | FZICA | FMVA? | BIDA?
1 年Very instructive article.
Next Trend Realty LLC./wwwHar.com/Chester-Swanson/agent_cbswan
1 年Thank you for Sharing.
European Business & Finance Manager
1 年As usual, your posts are very useful and helpful.