Sustainability CFOs are coming to the table
A recent study by Deloitte on sustainability shows that corporate Chief Financial Officers (CFOs) are engaging with sustainability1 in increasing numbers.
This study surveyed CFOs from companies each generating at least US$1 billion in revenue, drawn from across 14 countries on five continents. It paints a clear picture of the CFO function in transition towards sustainability.
For many CFOs, sustainability has become integral to how their businesses run. These attitudes are reflected in the following ten key findings.
1) Sustainability is seen as a key driver of financial performance. 49% of CFOs saw a significant link between sustainability performance and financial performance.
2) Organisations are transforming in response to the sustainability imperative. 34% of CFOs said they are in the process of implementing an organisational transformation relating to energy, environment and sustainability. A further 22% plan on doing so in the next two years.
3) Sustainability is becoming operationalised. While a significant number of CFOs still noted that sustainability authority rested with their CEOs (44%), this figure represents a significant decrease from 2011’s figure (56%). Similarly, those reporting that authority rested with corporate heads of sustainability (12%) decreased from 2011 (16%).
4) CFO involvement with sustainability is deepening. Two-thirds (66%) said they were “always” or “frequently” involved in driving execution of sustainability strategy in their organisations. More than half (53%) said their involvement had increased over the previous year. More than three-fifths (61%) said they expected their involvement to increase over the next two years.
5) Sustainability aspects of tax and financial reporting gained significant mindshare among CFOs in 2012, perhaps reflecting regulatory developments. As integrated reporting gains momentum (legislated in South Africa), and the impacts of changing green credits and incentives measures are felt by companies worldwide, CFOs have responded by moving sustainability aspects of tax and financial reporting up their agendas.
6) Energy management still topped the list of issues considered “very challenging” (30%), but this finding did reflect a drop-off from 2011’s finding (38%). Similarly, while 35% of CFOs in 2011 found IT systems for sustainability “very challenging”, only 23% had the same perception in 2012.
7) Gaining ground on the investment front: videoconferencing equipment, data centre improvements, and electric vehicles. This finding resonates with the public dialogue around reducing the sustainability impact of company travel (which would be addressed by video conferencing and electric vehicles), as well as increasing public critique of energy use from data centres.
8) On the risk front, energy and commodity price volatility and availability remain top of mind. CFOs also continue to be concerned with assessing sustainability compliance risk – and are increasingly concerned with assessing sustainability supply chain risk. In 2012, much as in 2011, CFOs were most concerned about risks deriving from energy prices (22% rating this a “very significant risk” compared to 19% in 2011). In both 2011 and 2012, nearly three-quarters of CFOs planned to assess sustainability compliance risk (74%). Interestingly, as supply chain pressures mount worldwide, 65% plan to assess sustainability supply chain risk, compared to 56% in 2011.
9) Superior sustainability information is somewhat elusive for CFOs. Only 12% of CFOs believed they had “excellent” sustainability information. 37% rated their information “good,” with an equal percentage calling it only “adequate”, 14% said they had either inadequate or no sustainability information at all.
10) Which CFO audience has become increasingly concerned with sustainability in 2012? Employees. 39% of CFOs believed it was “very important” to communicate about sustainability to employees, versus 23% in 2011.