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Author's profile photo Murali Narayana Murthy

Business Case of Corporate Sustainability – Role of the CFO


Organizations with sustainable business practices have over time enjoyed a higher loyalty and perception value on their products and services.  They enjoy a greater amount of trust amongst their employees, business partners, consumers, and the society at large.  A sustainable enterprise enjoys a larger intangible and tangible advantage.

However, sustainability initiatives must be thoroughly evaluated before embracing them.  It is not about executing periodic activities under the garb of sustainability and using them purely from a branding standpoint.  It is a something that must be woven as a part of the fabric of the organization’s culture.  It is to be institutionalized as a part of the core DNA of the organization where it is practised and nurtured as a culture.  A well thought of sustainability strategy will ensure that the entire lifecycle is well designed. Right from the strategy / idea to its qualification, determine the funding strategy, establish the execution plan, set up the measurement criteria and conduct regular assessments to qualify the relevance all of it with established responsibility and accountability.

It is important to understand in a lay man’s term what is corporate sustainability. There are numerous definitions available on this topic, but if we try and summarize it in terms of what it implies in simple terms, perhaps the following can come very close to it.

What is Corporate Sustainability

Corporate sustainability is an approach aiming to create long-term stakeholder value through the implementation of a business strategy that focuses on:

  • Environment friendly business practices, products and services.
  • Practising a socially beneficial and inclusive business culture (employees, external business partners and larger community).
  • Demonstrating sound governance, transparency and timely compliance in the accounting and reporting processes. (ensuring profitability and generating cash flows to support sustainable business practices).

Based on the above let us double click on the following:

  • Corporate sustainability strategy has to be sponsored by the board of directors, senior leadership, promotors etc. In other words they need to be top driven.
  • Mid to long term objective of corporate sustainability is to enhance stakeholder value.
  • It has to be within the guidelines of the regulatory framework.
  • Corporate sustainability Initiatives have to be sustainable by design.
  • It has to be collectively owned and practised by all within the organisation.
  • The Initiatives have to be constantly measured and assessed for their relevance.

Corporate Sustainability Strategy

Corporate sustainability goals need to be incorporated into the vision and mission statements of the company.  It would mean institutionalizing it as a part of the core business of the company by establishing the following:

  • Corporate Sustainability Goals (Environmental, Social and Economic) are well understood. In other words, clarity on the purpose behind running the business.
  • The execution framework of the sustainability initiatives
  • The measurement criteria to ensure relevance with time.
  • Real time transparent disclosure

It is extremely important for all companies to prepare a Business Case around Corporate Sustainability.  A Chief Strategy Officer working closely with the Board would draft what are the initiatives that the Company should embark upon to demonstrate Corporate Sustainability.  In short, a business case must be thoroughly deliberated and then operationalized once that would make mid to long term business sense.

Identifying the Sustainability Initiative

Following are examples of sustainability initiatives.  The purpose is however, not to get into the technicalities or the procedural aspects of the following examples.

Environmental objective:


  • Products having the least or near zero carbon footprint.
  • Services that reduce wastage and are optimally designed to cause least harm to the environment.
  • Incorporating Energy Efficient Processes
  • Reducing emissions whether direct or indirect

Social objective:

  • Socially inclusive policies on matters impacting the overall society
  • Ensuring community wellbeing
  • Women Empowerment
  • Literacy Goals, Skill Development etc.

Economic objective:

  • Demonstrating sound governance and compliance
  • Funding Sustainability initiatives using the cash generated from core operations.
  • Ensuring Profitability to increase the investment and focus in driving sustainability objectives
  • Transparent Reporting practices across Environmental Goals, Social Goals and Economic Goals
  • Superior access to financial resources through public and private equity markets. Capital markets are eager to identify sustainable growth opportunities and have historically rewarded such businesses

Whether an initiative primarily falls under the dimension of the environmental pillar or social pillar or economic pillar, they are interlinked and interdependent.  Each initiative will have to be assessed from all the three dimensions.

Role of the Chief Financial Officer (CFO)

The role of a CFO is very critical in firming up the corporate sustainability strategy.  Any plan that is deliberated with the Chief Strategy Officer, Chief Sustainability Officer, Board of Directors, Promotors will have to be studied from a financial perspective.  Following are some of the points where a CFO along with his team needs to assess the sustainability strategy:

Impact Assessment

  • Cost benefit analysis of the changes that are expected across the company when it comes to its product or service lines?
  • Are we looking at launching newer products and/or services?
  • Will the newer products and/or services warrant their own recording and reporting structures?
  • Will any of the existing product lines or service lines sunset because of the sustainability initiative?
  • What is the implication on current production lines, business partners and employees?
  • The brand perception and the potential tangible and intangible benefits?
  • Regulatory Mandates and exposures?
  • Additional overheads around audits, disclosures, and reporting frameworks?
  • Clarity on targeted sustainability performance ratings?


  • What is the additional investment required for the sustainability strategy?
  • Will it have a measurable return on investment?
  • Can the investments be internally funded from the cash generated from core operations?
  • What will be extent of external financing required and the cost of borrowings?
  • How long will it have to be supported through borrowings?

Simulate and Study Plans and Budgets, Cash Flows etc.

  • Simulate the various cost elements and revenue impacts with appropriate planning and budgeting tools for the said initiatives
  • Simulate projected cash flows
  • Study the potential impact on the Financial Statements

Minimize Exposure

  • Identify additional audits / scope changes as required. As currently auditing of the efforts that fall under sustainability initiatives require a more precise audit guideline.
  • Design background screening mechanisms where work involves hiring third party agencies like non-governmental organizations etc.
  • Design processes and mechanisms to prevent leakages, waste, or abuse of funds.
  • Assess regulatory compliance requirements, tolerances, and exposure both tangible and intangible.

In addition to the above, organizations that incorporate sustainable business practices report on the triple bottom line covering key performance indicators across environmental measures, social impacts, and economic outcomes. This would mean the CFO’s office will have to gear up for a more comprehensive reporting process and the resultant clarifications.


A sustainable strategy is therefore key for any sustainability initiative to serve the purpose for which it is designed and not fall in the trap of Greenwashing.  A CFO plays a very critical role along with the Chief Strategy Officer and the Chief Sustainability Officer in this process by providing valuable guidance from a finance standpoint.  The three key pillars of sustainability namely, environment, social and economic are tightly interdependent and should not be seen in isolation. An organization having a sustainable and well thought through sustainability strategy is sure to enhance stakeholder value in the long term.

Please do let me know your comments and feedback on the above as the topic of sustainability has been around for long and provides us with opportunities at regular intervals to provide serious attention to it.  Perhaps the time for such an attention is now.

You can find more information on the solutions offerings from SAP on sustainability by clicking HERE

In addition, I will also encourage you to follow the following topics

1) read the SAP S/4HANA Finance topic page

2) ask your question here

3) read other blog posts on the topic.

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