Finance Monthly CFO Awards 2021

- 78 - F i nance Month l y CFO Awards 2021 - SPECIAL FEATURE - stakeholders in a sustainableworld and, for the first time, climate change contributed to all five of the top global risks in The World Economic Forum’s Global Risk Report. But for many companies, sustainability still is not considered a core competitiveness issue, and it doesn’t receive the financial and human capital necessary to tackle a challenge of its size. Sound decision-making relies on accurate and useful data. But companies encounter a significant barrier when their reporting systems fail to capture the data needed to inform capital allocation decisions. Yet, even with improved access to relevant data, many companies still lack the ability to properly manage environmental sustainability. Quantifying climate risks and opportunities is critical to managing exposure to energy price volatility, water scarcity risks, water and waste regulations, and environmental impacts in the supply chain. From an organisational perspective, existing processes and metrics aren’t designed to foster engagement between sustainability and finance functions which can delay or impede the achievement of sustainability goals. For example, sustainability teams are often brought into project planning too late to influence project design and cannot make an effective case to financial decision-makers. This can lead to finance teams overlooking meaningful short- and long-term financial benefits of sustainability strategies, such as enhanced reputation and reduced climate risk. Without having shared, quantifiable success metrics, such as reduced carbon emissions, teams lack effective incentives to innovate and collaborate across departments. Finally, for years corporations have cited a lack of available capital as the primary barrier that slows or halts implementation of critical sustainability projects. As a result, a myriad of service models, debt instruments, and new forms of capital have emerged to lessen the financial burden, share risks, shift the needs for upfront capital, and even reconsider the importance of asset ownership. While there’s a growing awareness of sustainable finance strategies like sustainability-linked loans or internal carbon pricing, knowing when and how best to implement them remains a challenge. By identifying the barriers most acute in their respective companies, finance leaders can take action to minimise the costs and risks associated with sustainability projects and ensure their organisations successfully capture both the environmental and financial benefits at stake. Stages of integration for aligning finance and sustainability ambition The rise in increasingly ambitious sustainability goals clearly demonstrates that corporate leaders see value in climate action – both to address stakeholder demands and to mitigate near- and long-term risks. The finance team plays a critical role in realising this value but, to do so, they must be fully integrated into – and feel a sense of accountability for – the company’s sustainability transformation. Drawing on our work with global organisations, ENGIE Impact has identified three stages of evolution in this integration process: opportunistic, thematic, and holistic. Progression through these integration stages is essential for companies, both to achieve their sustainability goals Earlier this year, 3,000 global leaders convened in Davos to discuss their roles as key stakeholders in a sustainable world and, for the first time, climate change contributed to all five of the top global risks in The World Economic Forum’s Global Risk Report.