Business case for sustainability not yet ‘credible enough’
An inability to engage effectively with chief finance officers (CFOs) on the social and environmental merits of better resource management may be hindering the business case for sustainability.
This was one of the main messages to come out of a high level discussion yesterday in London hosted by Green Mondays which brought corporate finance and sustainability leaders together to discuss green strategies for business.
The resounding majority of delegates present (92%) felt that sustainability managers lacked the right tools to engage with heads of finance and investors on such values, suggesting a real polarisation of functions between the two communities.
Language was considered to be a key barrier. Many in the audience believed sustainability managers need to be better educated in how to communicate with greater authority when presenting a business case for investment.
One CFO, Tim Haywood from Interserve, said that among investors, the word ‘sustainability’ had become a “synonym for underperformance”.
“If we moan that the investor community does not understand the sustainability agenda, we must look to ourselves – are we explaining it enough, regularly enough?” he questioned.
According to a respected authority on CSR, John Elkington, CFOs “tend to be nervous” about bringing environment, society and governance (ESG) issues to the boardroom, as they feel the available underpinning data is not yet sufficiently robust or reliable.
“Colleagues may see the quantification of the related risks and opportunities as spurious or even unethical,” he argued.
That said, Elkington acknowledged that some CFOs are “acutely aware” that the growing resource security challenge can make at least some of these ESG issues strategic for particular companies in particular markets.
Ernst & Young’s partner for sustainability Doug Johnson pointed out that finance directors were the gatekeepers of change – and that convincing them could result in transformative progress at operational level.
“If a CFO gets it, it makes a huge difference around decision-making and how sustainability is included in the mix,” he told delegates.
This was echoed by Marks & Spencer CFO Alan Stewart who has fully embraced the company’s Plan A sustainability strategy and advised other finance directors to do the same.
“For us as finance people, there’s a lot more that we can and should be doing on the sustainability agenda,” he maintained.
Since launching Plan A six years ago, M&S has seen new revenue streams take flight as a result.
“We were prepared to spend £40m per annum on Plan A, yet to date it has generated £185m in revenue, a net financial benefit of £105m,” Stewart revealed.
He added that the significance of such outcomes should not be underestimated. “Measuring the business case is extremely important – finance gives it credibility.”
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