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With increased expectations to assume the role of climate controller in business, how should CFOs go about measuring the success of their organizations environmental policies?

The changing role of the Chief Financial Officer has been widely discussed inrecent years. CFOs today must be prepared to respond to growing interest fromstakeholders in their companys sustainability practices and are increasinglybecoming some of the most important drivers of sustainability initiatives acrossevery industry. So, lets look at why.

In the face of climate change,transparencyis becoming non-negotiable in modern business. CFOs have always handled financial andbusiness reporting; so, we are a natural fit for to take on sustainabilityreporting. Its not a question of whether CFOs will assume this newresponsibility but rather, when. Robust, data-drivenreportingis key to building and maintaining trust with customers, partners, investors andemployees; and this is something we need to deliver on now.

This shift in public sentiment and expectation shouldnt come as a surprise. Aswe witness the climate changing around us, the average consumer expects thebrands they support to be proactive and communicative about their environmentalimpactand how they will reduce it. Infact, arecent PwCstudyfound that 83 percent of consumers think companies should be actively shapingESG practices. The benefits flow internally, too in a recent study from theEuropean InvestmentBank,three-quarters of young employees surveyed say the climate impact of prospectiveemployers is an important consideration when job hunting.

With increased expectations to assume the role of climate controller inbusiness, how exactly should a CFO go about measuring the success of theirorganizations environmental policies?

The SB Socio-Cultural Trends Research, conducted in partnership with Ipsos, tracks the changing drivers and behaviors of consumers around the intersection of brands and sustainable living. Our latest report explores how brands can maximize the impact of their sustainability efforts by approaching carbon-label strategies through the lens of consumer perceptions learn more in SBs Q4 Pulse highlights report.

As you can imagine, this is not a one-size-fits-all process. Every company andevery leadership team has a unique purpose and set of values; and no twoindustries are necessarily impacting the environment in the same way. As astarting point, your climate strategy must be closely linked to your companystrategy and purpose. Whether an agriculture company has pledged to eliminatepesticide usage or a financial institution is decarbonizing its lendingportfolio,their respective CFOs should ensure clear performance targets are establishedand a company-wide plan is in place so meaningful progress can be delivered andreported on.

Externally, it might be assumed that because tech businesses arent typicallyconsidered among the biggest greenhouse gas emitters, we dont face as muchpressure to reduce and report our emissions. However, every business has a roleto play in supporting the transition to a net-zero economy. The tech industry isstill accountable researchers from Lancaster Universityestimatethat tech companies could contribute 2.1-3.9 percent of global greenhouse gasemissions.

This is why in conjunction with a companys sustainabilityexpertsand leaders across the business tech CFOs should work to integrate theircompanys environmental practices with their everyday compliance and trackingsystems. From there, the idea of publishing their progress is much less dauntingcome reporting season. Whether they decide to mesh their financial andsustainability reporting into a single document such as an Annual Report orpublish them separately, their sustainability practices and performance shouldbe clear for all to see.

In an effort to introduce more transparency around our environmental impact atXero, weve shared ourplans to work towardsnet-zero emissions and set clear emissions-reduction targets which we willshare in our Annual Reports, in line with climate science. We are looking toreduce our carbon emissions right across the business from reducing variouscontributors such as energy used in office spaces to indirect emissions in ourvalue chain from cloud hosting, business travel, corporate catering and ITequipment.

Thankfully, many organizations and standards bodies exist to provide directionfor companies looking to improve their sustainability performance and reporting.For example, the Task Force on Climate-related FinancialDisclosures and the UN GlobalCompactCFOTaskforce areencouraging and supporting companies to integrate sustainable practices into allaspects of their business and report on performance. The InternationalFinancial ReportingStandards(IFRS) is also developing standards for climate accounting that are due tobe released in 2023.

The most important thing to remember in all of this is to approach climateaction genuinely and with commitment. Publicly reporting your sustainabilityperformance has become as critical as reporting financial performance. Not onlyis it the right thing to do; it also gives leaders a broader picture oforganizational performance and will support the long-term success andsustainability of every business.

Published Apr 5, 2023 8am EDT / 5am PDT / 1pm BST / 2pm CEST

Kirsty Godfrey-Billy is Chief Financial Officer at Xero a New Zealandbased technology company that provides cloud-based accounting software for small and medium-sized businesses.

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The Role of the CFO in Sustainability Reporting - Sustainable Brands