Changing finance function performance

Historically, the finance function’s focus has been around promoting organisational efficiencies and reducing operational costs. The mandate articulated in interviews and roundtables, however, sees the finance function expanding its role to be at the centre of organisation’s sustainability activities. They help define, enable, and articulate how an organisation creates and preserves sustainable value for both the entity and society.A Business Services Director, at a UK retail company, described the changing finance function role as follows:‘The trick is to be a bit braver about doing more. I don’t think there’s one size fits all. The reporting might scarily drive us down the route of one size fits all. But the reality of it is, if you’re going to be creating the kind of purposeful culture that people will be attracted to in future, it’s got to feel like it’s your skin. You own it and it’s particular for your organisation’.In our interviews and roundtables, we asked why finance can take on such an important role in driving the sustainability agenda. Respondents specified the following:

‘Finance is trustworthy’.
_{Internal Audit Manager, Banking, UK}

‘The finance function already controls the flow of money, which is critical in enabling or hampering what an organisation does’.
_{Finance Director, Manufacturing, Ghana}

‘Finance professionals make good business partners and are currently tasked with providing information that is vital to decision-making. Sustainability information falls in this category too’.
_{Financial Controller, Transport, UK}

‘It has not originally been assigned to finance — marketing, external relations or a different department taking ownership of sustainability — but it became necessary to get finance to lead on it the moment regulation on reporting was introduced’.
_{Associate Professor, Education & Professional Training, Pakistan}

Finance function sustainability performance themesUnderstanding the changing performance to meet the sustainability challenges is an important part of our research. We found that money/cost (45% of the participants mentioned this), time (40%), metrics (36%), and data (31%) were dominant themes across our interviews. These findings were also corroborated by the roundtables.

Money/costsSustainability initiatives are not only perceived as more costly and resource intensive, but also as challenging to quantify. The following quote, is a good reflection of the existing concerns and challenges associated with budgeting for sustainability.‘If there’s not an invoice for it, it doesn’t go in the system. One of the big problems with sustainability is how you cost and price those initiatives. You often need to complete the activities/initiatives before you can even get the system to record any associated costs. This is still a big issue’.
_{Financial Controller, Transportation, sector, UK}TimeThere are several angles and perspectives participants had on time when it comes to sustainability adoption. Here are a few of insightful comments illustrating the nuanced conversations on time amongst our participants:

‘The biggest challenge is the timeframe to achieve net zero and how you pace your initiatives so they remain affordable’.
_{Vice President Finance Operations, Media, Communication & Information, UK}

‘Finance professionals really need to invest time to understand the nature of the business so they can perform well in their changing roles’.
_{Financial Controller, Transport, UK}

[Consensus that the role is changing due to increasing sustainability practices organisations endeavour to undertake]

‘The industry is morphing, and sustainability already became a huge pillar of the company’s strategy. Three years ago, I used to spend 5% of my presentation time talking about ESG. Now, half of the time of my quarterly earnings presentation is spent on ESG’.
_{Chief Financial and Investor Relations Officer, Oil & Gas, Brazil}

‘The challenge is to find the time to figure sustainability out, on top of your day-to-day job’.
_{CFO, Media, Comms & Entertainment, US}

Metrics Although sustainability standards vary across the world, there is consensus that putting the right metrics in place to measure sustainability performance, such as KPIs, poses a significant challenge to organisations and finance functions. A lack of understanding of available sustainability data sources and how they can be translated into actionable insights amplifies this challenge.DataSustainability decisions in organisations must be data-driven, which means that accuracy and quality of data is of utmost importance to guide measurable and responsible business practices. Our interview and roundtable participants identified several challenges associated with sustainability data management, including:

Understanding the data:
‘This is a whole new world of data, isn’t it?’
_{Vice President Finance Operations, Media, Comms & Information, UK}

Locating and accessing the data:
‘The challenge we face is that the actual data supporting sustainability reporting is held in different pockets of the business. So, it’s coordinating that and checking the validity of it’.
_{Head of Finance, Local government, UK}

Getting the data tagging right:
‘Data is used throughout the business and correct tagging or labelling of data will become vital for future insight generation’.
_{VP M&A Integration, Software, South Africa}

To maximise machine readability, the narrative tagging of sustainability data will become more important as digital adoption advances and the ‘generating insights’ process gets automated.

Customers and vendors data standardisation:
‘Trying to get to that level of customer and vendors data standardisation is a challenge’.
_{CFO, Banking, Financial Services & Insurance, UK}

According to GHG Protocol (2013), a leading standards provider, organisations are required to report on processing, use and end-of-life treatment of sold products as part of scope 3.⁹ Standardisation of the data is necessary to fulfil these kind of compliance requirements.Based on these findings, one may conclude that finance functions are becoming curators of sustainability data, entrusted with ensuring data quality and clarity.TechnologyWhile people, processes, and the environment themselves are important driving forces, technology represents an enabler to achieve sustainability. In the sustainability space, better technology supports the maturity journey of organisations from shareholder to system value perspective.The issue for many finance functions is that, as they develop new sustainability capabilities, they are constrained by inherited legacy technology systems not designed for the complexities within the ESG space. Finance functions are in danger of moulding themselves to fit the technology they already interact with rather than seeking new tools to help unlock the complexities of sustainability.A Finance Director from a multinational consumer goods manufacturing company in Ghana stressed, ‘We report sustainability through technology’, which is why, ‘finance professionals are deeply concerned with how we are using the technology to ensure the controls are established in the organisation, so the reporting is accurate’.