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Sustainability and the CFO

Sustainability, environmental issues and “green” have long since moved from “nice to have” parts of Corporate Social Responsibility, often part of the Corporate Communications (PR) portfolio, toward the center of management of the firm. A sign of this is the increasing involvement of the Chief Financial Officer (CFO) in sustainability issues. Most sustainability and environmental data is like financial data. It is financial data in many cases. (See The Green Data Firehose: Where Is All This Green Data Coming From? for a discussion of the types of green data firms are faced with managing these days.)

A new report (pdf) from consultants Ernst & Young discusses this trend. It says, among other things:

  • The old “social responsibility” and “corporate citizenship” silos are crumbling.
  • Institutional investors are deciding that “climate change and sustainability issues often bear directly on companies’ risk profiles, their reputations and their financial performance.”
  • “These trends are changing the CFO’s role in three critical areas: investor relations; external reporting and assurance; and operational controllership and financial risk management.” The report discusses each of these three areas.

What does this mean for IT?

Finance, bookkeeping, control, and financial reporting, all managed by the CFO, are leading consumers of IT. Thus the office of the CFO is very experienced and sophisticated about the management of such data, and the products and services that are available. By contrast the Chief Sustainability Officer (CSO) or equivalent manager in charge of sustainability was often connected to PR or communications, corporate health and safety, legal and regulatory, or facilities. These functions don’t have the clout and experience that the CFO has in using IT to efficiently manage data, or using data for management (BI).

So my theory is that getting the CFO involved in managing the firm’s sustainability will lead to the use of much more sophisticated data management tools and services. Also, mining corporate sustainability data to provide guidance to management will be obvious to the CFO. And the CFO has the clout to get the data management products he or she needs.

External reporting in particular has traditionally been the  responsibility of the CFO. The formal quarterly and annual reports, and  the auditable data that underlies them, have been his or her job. As  companies try to assemble data and submit reports, for instance under  the Global Reporting Initiative, they are reinventing approaches that  have been mastered by the finance department.

So if you have been involved in designing or implementing financial software, there is a whole new world awaiting your attention.

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  • We have some CFO involvement.  BUT we really only have it as a guide for new projects.  We prove ROI to the executive steering team.  That is usually what drives our projects.  FDA requests, safety, performance, all of that comes into play.

    Really our accounting / costing projects are usually the last to get attention.  Why?  We usually cannot prove ROI, process improvement, FDA needs,  Yes  there are some regulations around financial data – those projects move up the project ladder, or safety / quality.

    Now having said that.  I believe in a way we do what is suggested here.  The CFO is one of the people on our steering committee.  Sustainability is always a part of our projects.

    Sorry if I missed the point entirely,