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CFOs’ impact on authentic sustainability in 2024

February 4, 2024

CFOs have seen their roles expand across organizations. Some of this increase is organic, such as partnering with chief information officers to build a tech investment strategy. And in the past few years, CFOs have gradually become key players in environmental, social, and governance (ESG) issues. One of the subsets to ESG — sustainability — is an area where finance chiefs can have a significant impact.

Sustainability requires finance’s attention because of the costs associated with making real sustainable changes to the business. And while CFOs should be aware that ESG has faced backlash due to its ambiguity, accusations of quick paydays for executives, social pressures, and greenwashing, it still can have a profound positive impact if appropriately managed. Supply chains, technology integration, business travel, and even the communities businesses call home can benefit from a company’s sustainability efforts (or lack thereof).

Supply Chain’s Massive Impact
“I was just at an event before this call, and a major topic of discussion was how we could get CFOs involved in sustainability and supply chain efforts, and what they could bring to the table to organizations, I kid you not,” Maria Villablanca, CEO and co-founder of the Future Insight Network, a leadership group that promotes networking and collaboration between supply chain leaders, told CFO.

ESG’s oversight of the upstream parts of supply chains has resulted in not only the development of the world’s most profitable organizations in history (think Apple or Microsoft), but it has also impeded their efforts toward sustainability by making life difficult in places where many people don’t see. “The quest for end-to-end supply chain visibility when we talk about sustainability has been talked about for many years, and it’s still an [ongoing effort],” said Villablanca.

“I think this need for transparency, especially regarding sustainability, is very important,” she said. Whether it’s [corporate social responsibility] issues or sustainability efforts, there’s a lot of regulation around things like forced labor that further drives this need for end-to-end visibility.”

Villablanca advised CFOs to look outside of the organization when approaching sustainability, especially regarding the part supply chains can play. “Supply chains are complex, they are not linear, and when it’s not your supplier, it’s your supplier’s supplier, that might not be of interest to the CFO,” she said. “But, as CFOs take on more responsibilities around risk, they will need to have a very vested interest in the layers of their supply chain ecosystem.”

While many organizations focus on offsetting executive travel through tech recycling, moving vehicle fleets to all electric, or using less plastic in their products, some view sustainability as a way to preserve the community around them.

Candice Holcomb, CFO of Generation West Virginia, leads a nonprofit focused on attracting, retaining, and advancing young people across the state. Her organization’s goal is not only to partner with coalitions to make the energy industry more sustainable but also to combat the talent drain.

By creating pathways and communities for young people to network and grow within, her organization can combat the unsustainable problem facing the state: its habit of losing its smartest people to other parts of the country.

“My story is the same as a lot of West Virginians,” said Holcomb. “When I was growing up, I thought if you wanted to be successful, you had to leave.”

In a place that has been credited historically by politicians as “the richest state in the country with the poorest population,” the winding down of West Virginia’s coal mining industry has not been accompanied by a rise in other economic opportunities. The result is a population decline, especially among its most intelligent and ambitious people.

“You have to be very mindful and respectful of our history when talking about these sorts of things,” she said. “There are so many people whose families go back generations that were able to sustain themselves on the energy resources we have here. We must be very aware in [our energy sustainability efforts] to drive a clear message that we aren’t trying to disrupt our culture or people’s way of life.”

“We’ve been so dependent on coal for everything here,” Holcomb said. “We can still be a producer, but we need to diversify where our energy comes from and how our energy works. It’s a huge topic here, and through organizations and initiatives like ACT Now, Appalachia’s finance leaders are having a great impact.”

While the state has seen some traction in tourist interest over the recent years, she says, her goal is to market her community’s ability to serve as a place to grow a career and a family for West Virginians. “People are now realizing this state is more than just white water rafting, hiking, and ziplining,” she said. “This is a place where we take care of each other, have an unbelievable passion for our history, people, and communities, and it’s a great place to live and grow. And, I think the secret is getting out, which will hopefully keep more of our people here.”

Finance and Legal’s Collaboration
Dave Curran, co-chair of the New York State Bar Association’s ESG committee, told CFO that many sustainability initiatives have already kicked off. Finance can help expedite the process.

“Strategy alignment is key for the effective governance and functioning of an organization,” said Curran, co-chair of the ESG advisory practice at Paul, Weiss. “Connecting sustainability strategy to the organization’s overall business strategy is essential. It is critical that finance teams, which often include risk management and insurance functions, closely partner with legal and compliance teams to address systemic sustainability issues and challenges.”

Curran also advises that CFOs act as “strategic partners” in the decision-making process around sustainability decisions. “The fulfillment of sustainability initiatives often requires dedication of financial resources toward such initiatives,” he said. “Finance [may also] assist with ensuring the organization’s sustainability strategy and initiatives are aligned with, and contemplated within, capital allocation, forecasting, and budgeting of the organization.”

He noted that if CFOs took sustainability as seriously as they took some finance practices, their contribution would be very valuable.

“As sustainability disclosures become subject to heightened scrutiny from an array of stakeholders, finance can contribute by ensuring, and supporting the implementation of, the same rigor being applied to sustainability disclosures as is applied to financial disclosures,” Curran said.

by Adam Zaki


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