How central to a CFO’s job has ESG become? Here’s one way to look at it.
A core if sometimes unsettling truth for finance chiefs is that they serve many masters. They are high-ranking executives of course, but in various ways, they seem to report to almost everyone: investors, banks, board members, regulators, customers, employees, and society itself, among others.
Collectively, such stakeholders are exerting strong pressure on CFOs to take more action on sustainability issues, according to new research.
Four in five CFOs (81%) said they feel pressure from at least three stakeholder groups. Among single groups, survey participants pointed to regulators and board members as the greatest sources of pressure.
Among more than 700 finance chiefs polled by Accenture, more than 90% agreed that ESG issues will be a major focus for them over the next five years.
Regulators worldwide have trained their eyes on companies’ sustainability profiles. Among the many actions taken, the highest-profile ones include the U.S. SEC’s climate-related disclosures, the European Union’s Corporate Sustainability Reporting Directive and requirements developed by the International Sustainability Standards Board.
Board members, for their part, recognize the growing risk of failing to comply with all the new requirements.
As shown in the chart above, a fair amount of anti-sustainability sentiment remains. In fact, a majority of one important stakeholder group, employees, is pressing employers to take less action in this area.
However, according to Accenture, the pressure CFOs are feeling over sustainability has a clear silver lining. The new requirements “present an opportunity to leverage a rapidly expanding set of new technologies to help gather better information, make smarter business decisions, and create value from sustainability,” Accenture wrote in its survey report.
How to Move Forward
Based on the research, Accenture identified nine technology- and talent-based capabilities that companies must develop to move beyond mere compliance and create competitive advantage through their ESG-related activities.
Three of these capabilities address the measurement of ESG:
- Data collection: to what extent a company has automated it
- Data quality: the existence and sophistication of frameworks and controls to measure automated ESG data quality
- Data availability and integration: access to ESG data across business units and functions through an integrated platform.
Four of the capabilities are about managing ESG:
- Transparency and integration of non-financial key performance indicators: the extent to which they are defined and linked to financial reporting
- Analytical and forecasting technology: the existence and sophistication of AI devoted to this purpose
- Leaders’ access to and consumption of ESG information: how they use it for strategic decision-making through real-time insights and customizable data visualizations
- ESG considerations in business decisions: How well ESG factors are integrated into business strategies
Two of the capabilities are about talent:
- The level of ESG skills in the finance team
- The level of finance skills within the sustainability team
Most surveyed companies have started to develop some of these capabilities, particularly around measurement, Accenture wrote in its survey report. For example, 55% are capturing ESG data automatically, and 62% have frameworks and controls in place to document ESG performance.
However, only about 15% of companies have what Accenture judges to be “strong” ESG measurement and management capabilities.
Such companies not only automate ESG data-gathering and use the data to improve real-time strategic decision-making. They also use predictive analytics to “identify potential ESG-related risks and opportunities, and foster collaboration by cultivating complementary skills within their finance and sustainability teams,” Accenture said.
Notably, while two-thirds (68%) of CFOs at companies with weak capabilities said balancing sustainability and profitable growth is challenging, only 20% of companies with strong capabilities felt the same.
Similarly, only 20% of CFOs at the strong companies said focusing on sustainability negatively affects the interests of shareholders. Three times that many CFOs (61%) from companies with weak capabilities held that view.
