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Global finance teams failing to integrate sustainability

Author: ICAEW Insights

Published: 14 May 2024

Rather than waiting for ‘perfect tools’, CFOs and finance teams need to start including sustainability questions into their systems and controls, experts warn.

Just one in 10 global chief financial officers think their finance teams are ready to integrate sustainability factors into management information and reporting, new research shows.

A lack of tools and techniques is delaying progress on integrating sustainability into the wider business strategy, although more companies are considering sustainability alongside financial information, the Accounting for Sustainability (A4S) Finance Leaders’ Sustainability Barometer found.

Less than half (47%) of respondents said their finance team had been fully or significantly involved in overseeing the collection and use of sustainability-related information as part of management information and reporting, despite the central role of finance teams in preparing management information.

Urgent progress is needed from capitals accounting to capital allocation, A4S said. Finance leaders acknowledged that sourcing accurate, complete and comparable sustainability data is challenging, but said the first steps towards integrating sustainability into systems and decisions can be as simple as updating existing tools and templates to include questions on sustainability. 

Stephen Oxley, Chief Financial Officer, Johnson Matthey, who was interviewed by A4S as part of the Barometer, says: “If you integrate non-financial metrics into everything you do, it means sustainability forms a natural part of your decision making, not raised separately. 

“In practice, it means if we’re discussing whether we’re on track to deliver our strategy, the first question will be around our customers and our environmental impact. Setting up your reporting system in a way that encourages this is crucial and the CFO has a critical role to play in this.” 

The Barometer found that the opportunity for finance to help drive strategic decision-making and create value within companies was being lost. 

Richard Spencer, ICAEW Director, Sustainability, says: “ICAEW has long argued that professional accountants have an important role to play in helping achieve the vision of the United Nations’ Sustainable Development Goals. The A4S Barometer makes for sobering reading showing how far we still have to go on that journey. 

“We are determined to provide our members with the knowledge they need both in the ACA and in our continuing professional development materials to enable them to rise to the challenge of sustainability.”

Critically, the research underlined the shift from ‘why’ to ‘how’, as well as highlighting the need for finance leaders to act as a matter of urgency to translate their ambitions for change into concrete action by finance teams. 

Nature counts

Worryingly, respondents said tackling biodiversity loss was less important as an opportunity. Just 14% of global CFOs said biodiversity loss was one of their top three sustainability-related opportunities – down 10 percentage points since 2022. 

The World Economic Forum lists biodiversity loss and ecosystem collapse as the third most severe risk facing the world over the next decade. A4S, however, highlighted the challenge that businesses face translating those economy-wide impacts into risks or opportunities for their organisation. 

“Nature is everyone’s business. Most businesses are impacted by nature, and we all have a role to play... As CFOs and finance professionals, the link to costs, investment and the impact that it creates is immense, as we have demonstrated many times over,” Rishi Kalra, Executive Director and Group Chief Financial Officer, ofi, told A4S. 

Incentives for change

Employee engagement, risk mitigation and customer demands were the top three factors driving CFOs and finance teams to adopt sustainable strategies and processes, according to the Barometer. However, just under two-thirds of respondents said regulatory pressure or investor demand were very important drivers.

The Barometer also indicated a shift away from seeing sustainability as a way to reduce costs, towards a recognition of the value-creation opportunities. Two-thirds of respondents rated innovation, competitive advantage and revenue generation as very important incentives for adopting sustainable practices. 

Katie Murray, Group Chief Financial Officer, NatWest Group, says: “I feel really strongly that finance functions have the right skills, working closely with the rest of the business, to lead on the development of climate transition plans ... it’s too important to delay.” 

The A4S Finance Leaders’ Sustainability Barometer interviewed more than 100 senior finance professionals including Group CFOs to understand their thinking on sustainability within their companies. Nearly half of respondents are from organisations with $5bn or more in annual revenue. A4S supplemented the survey responses with qualitative research from Board Intelligence, which interviewed 100 CFOs. 

Jessica Fries, A4S Executive Chair, says: “We need leadership and urgent action to accelerate the transition to a net-zero, nature-positive economy. The insights in our Finance Leaders’ Sustainability Barometer show where progress is being made, but also where we still have work to do.”

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