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Sustainability: The New Imperative for the CFO

As the financial crisis of 2008 continues to send ripples through the global business environment, business leaders are increasingly recognizing their influential role in rebuilding a shaky global economic model -- through measures ranging from encouraging innovation in their businesses to focusing on the implementation of sustainable business practices.

And as the traditional role of the CFO continues to expand to include a greater influence on corporate strategy and operations, businesses have a greater opportunity than ever before to build sustainability into long-term planning in order for the business to survive and thrive in a reset economy. CFOs, with their unique vantage point within their organizations, have the visibility to understand how sustainability has transformed from a business trend to a strategic business imperative. Yet a global survey of more than 200 CFOs, conducted by Verdantix on behalf of Deloitte Touche Tohmatsu Limited (DTTL), reveals that while a majority of CFOs are aware that sustainability will profoundly affect their "mainstream" duties, almost one third of them -- 31% -- say they are either rarely involved, or not involved, in sustainability strategy and governance at their companies.

Given that the survey also reveals more than half of CFOs surveyed -- 58% -- expect their role in sustainability strategy and governance to become more involved in the next two years, it seems clear that CFOs can and should take a more energetic role in embedding sustainability into business strategy if they want to gain a competitive edge.

To an extent, DTTL's Sustainable Finance survey shows that sustainability is beginning to get on the CFO's "traditional agenda." At the tactical level, many CFOs are meaningfully engaged with sustainability. More than 70% of those surveyed expect sustainability to have an impact on compliance and risk management, and more than 60% foresee changes to financial auditing and reporting. And nearly half of the CFOs surveyed are planning investments in equipment for increasing energy efficiency, generating on-site renewable energy or reducing industrial emissions.

But beyond the tactical level, questions remain as to whether CFOs are remaining one step ahead of evolving trends. Trends can emerge quickly, and it is critical for CFOs to monitor shifts in the marketplace in order to ensure they have adequately incorporated sustainability considerations into long-term strategy. In the current volatile economic environment, in which business models continue to experience rapid shifts as the market struggles to right itself, the CFO's role in anticipating sustainability issues becomes that much more crucial.

Yet when it comes to sustainability as part of the overall business strategy, CFOs appear to have significant blind spots. For example, according to the DTTL survey, only 29% of CFOs believe that merger and acquisition (M&A) activities would be affected by sustainability issues. Since M&A transactions often present sustainability risks in the short and long term (from remediation and indemnification expenses to future costs/availability of resources), CFOs would do well to build sustainability analysis into the entire M&A lifecycle.

It is clear that to stay ahead of trends, CFOs will need to increase their recognition of the relevance of sustainability initiatives to their portfolio of responsibilities and seek a greater role in driving those initiatives.

That said, according to the survey, CFOs' approaches to sustainability, driven in part by variations in national regulation as well as industry profile, are far from uniform across geographies. For instance, Chinese respondents are least likely to name the CFO as responsible for sustainability strategy, overwhelmingly naming public relations/investor relations instead. Additionally, two-thirds of respondents from China see a weak link between sustainability strategy and business performance.

Yet the report also notes that in recent years, there has been a turnaround in Chinese investment in sustainability (most notably by the Chinese government's support at the central and local level of corporate social responsibility), which may very well mark a shift in attitude of Chinese company CFOs toward sustainability.

Indeed, governmental support and/or mandate may influence businesses to assume greater responsibility for sustainability strategy. South Africa's King III Code on corporate governance (which recommends, in part, that companies issue sustainability reports) may be the reason why, of the country groups surveyed, CFOs from South Africa are the most likely to be fully involved in sustainability strategy (50%), to expect to become significantly more involved (35%), and to perceive a strong link between sustainability strategy and firm performance (70%).

CFO attitudes also differ among industry sectors, even sectors that appear to face comparable sustainability issues. Respondents in the construction and automotive sectors see a weak link between sustainability strategy and performance, while their counterparts in the basic materials sector see a strong link. As all three sectors are subject to similar sustainability cost drivers and risks, construction and automotive sector CFOs would do well to examine the long-range sustainability issues that CFOs in the basic materials sector are looking at.

While CFOs may be considering their readiness to act as leaders of sustainable businesses, and are beginning to take steps toward implementation of sustainability practices, it is important for CFOs to orient themselves toward the tactical and strategic dimensions of sustainability in order to truly reap the benefits of the opportunities that sustainability presents.

Nick Main is the global leader of sustainability for Deloitte Touche Tohmatsu Limited.
Eric Hespenheide leads sustainability services for Deloitte & Touche LLP in the United States.

Lundi 12 Décembre 2011