Why sustainability and finance?

The transformation of finance is essential to achieving a sustainable future.

Finance teams are an asset to their organization and a vital element in building a sustainable world. However, this can only continue if they are able to recognize the risks and opportunities associated with sustainability and are equipped to act on them. Without this understanding, the finance function in an organization can act as a significant barrier to change.

Finance teams are extremely powerful in an organization because they:

  1. Control the flows of money and finance that are critical in enabling and blocking what the organization does. 
  2. Provide the information that is vital to decision making.
  3. Are influential in compelling others to take action.

Sustainable businesses deliver financial returns in the short and long term whilst generating positive value for society and operating within environmental constraints. Organizations that do not address their environmental and social impacts risk their own existence. As The Prince of Wales has commented:

"It is not necessarily a choice between making money on the one hand and ‘doing the right thing’ on the other. On the contrary, once it is recognized that ‘business as usual’ is unsustainable it follows naturally that those organizations which start to develop resilient business models will be the ones that succeed."

How sustainability benefits finance

Our research shows that there are many financial benefits to considering sustainability in your decision making. These include:

Cost cutting and efficiency

Creating a sustainable business has the potential to deliver significant cost savings and efficiencies. For example, using fewer resources (such as carbon or water) will have a direct impact on costs.

Risk mitigation

Environmental and social risks can also be material financial risks. In an ever more complicated and interconnected world, an integrated approach to risk management is essential. This has been evident from the growing insurance claims as climate change increases losses from extreme weather. There were $144bn of insured losses from natural catastrophes and manmade disasters last year according to Swiss Re, the most expensive year on record. This is a trend set to get worse as the consequences of climate change intensify.

New competitive and revenue opportunities

By applying an integrated approach to strategy, from business planning to creating new sources of revenue, members of the A4S CFO Leadership Network have found that sustainability and profit are interconnected.

There are also significant opportunities presented by the global shift toward a sustainable economy. Morgan Stanley’s recent research looked at data from nearly 11,000 mutual and exchange-traded funds, and found that investing sustainably had no financial trade-off versus traditional funds but did have lower risk.[1] There is also increasing evidence of the link between sustainable business models and improved commercial returns.

 

[1] https://www.morganstanley.com/pub/content/dam/msdotcom/ideas/sustainable-investing-offers-financial-performance-lowered-risk/Sustainable_Reality_Analyzing_Risk_and_Returns_of_Sustainable_Funds.pdf

Innovation

Long-term integrated thinking helps finance teams to foster innovation by updating their business models, technology and processes. The experience of members of our network has demonstrated that sustainability drives both organizational and technological innovations. For example, Royal DSM have found their Eco+ products, created to meet sustainability challenges are outperform other areas of their business.

Improved employee development and retention

Valuing social and human capital and investing in people enhances business resilience and increases competitive advantage. This includes stronger stakeholder relationships, cost savings, improved reputation and better access to, and retention of, talent.

CFO Leadership Network members in Canada have recently published worked examples on integrating social and human capital accounting. Brookfield Asset Management found that 60% of their market capitalization was in their human capital, their staff being worth twice the value of the cost of replacing them.

Why A4S?

A4S provides a unique space for inspiration and action.

A4S's work is led by A4S Network Members - engaging organizations and finance leaders for practical action.

A4S has a truly global network where our members can share from best practice, peer support and collaboration. We work with:

  • Chief Financial Officers (CFOs) and finance teams
  • The accounting community
  • Investors, capital markets & the wider finance community
  • Governments, regulators & policy makers
  • Business schools and academia

Our CFO Leadership Network operates in 190 countries, and our Accounting Bodies Network (ABN) represents two thirds of the world's accountants.

 

A healthy society and environment must underpin our economies. The future of business, and our planet, depends on our ability to rethink and evolve our business models. Simply put, investing in sustainability makes good business sense.”

Mark Hawkins, President and CFO, Salesforce and Chair, USA Chapter of the A4S CFO Leadership Network