Finance professional, finance functions and organisations
'Organisations around the world are resetting the way they think about sustainability, and this has significant impact on stakeholders’ trust in their non-financial data, risk management procedures and business recovery. As core members of almost every business, government and non-governmental organisation, CGMA designation holders play a pivotal role in providing non-financial and financial management information to drive business performance, develop strategies and influence decision-making. They bring a unique set of skills and knowledge to the table and can work with stakeholders to integrate responsible practices into their business and operating models'. Andrew Harding, FCMA, CGMA, Chief executive — Management Accounting, at the Association.
The finance professional
Finance professionals have a pivotal role to play in supporting their finance functions and organisations on their ESG journeys. An obligation to upskill and understand how sustainability issues affect their organisations’ resilience and that of wider society. As accountants, we are the trusted advisers and not only bring credibility to information, but also insight, influence and impact. We must analyse and advise on ESG factors, that tend to be non-financial, to help our organisations make informed and holistic decisions.
The social factors are complex, requiring finance business partners and finance professionals to engage with social scientists, human resource experts and regulators in technical conversations. These are interdisciplinary and transdisciplinary conversations. However, by asking the right questions, investigating the logic and verifying the technical findings, finance professionals become the bridge back into the finance function and can translate results into a familiar business language. Through analysis and validation against an organisation’s business model, they turn social data into commercial insight.
The finance function can then communicate these insights and contribute an objective, responsible perspective to influence organisational decision-making. This is done while, at the same time, guiding actions and ensuring an organisation achieves the required impact through control systems, such as strategic planning, budgeting and performance measures.
If you, as a finance professional, are not yet engaged in these kinds of social areas, it is time to upskill and find professional development opportunities to increase your social inclusion knowledge. But some words of warning — this is not about you becoming an expert in any particular sustainability issue. It is about having a broader understanding about what it means and connecting them into your organisation’s control systems to provide insight, influence and impact into organisational decision-making.
Finance functions As finance functions work with the rest of the organisation, they can break down siloed activity and thinking around sustainability. They can also encourage diverse ESG thinking from across an organisation and its supply chain. This is because they can circumnavigate the usual top-down ‘chain of command’ approach in favour of a ‘chain of communication’. 47
The Global Management Accounting Principles define management accounting as ‘the sourcing, analysis, communication and use of decision-relevant financial and non-financial information to generate and preserve value for organisations.’48 This applies equally, across the ESG pillars, to sustainability information where finance acts:
As a trusted source of the management information providing sustainability data integrity
As a commercial analyst, providing sustainability insight into the drivers of organisational value
As the subject matter expert and steward, contributing the sustainability perspective to strategic decision-making
Through partnering, using sustainability insights to address performance issues and enables solutions to create value49
The finance function is uniquely positioned to understand the end-to-end view of an organisation and the interactions of the organisation with its societal ecosystem. They can demonstrate the delivery of value from its organisation’s products and services and then link these through to capture value for the different societal stakeholders.
Organisations In his book Green Swans, author John Elkington, focuses on the software and algorithms controlling capitalism: Their focus on financial value above all other forms has delivered huge rewards for those in capitalism’s driving seats but also burned through unconscionable amounts of natural, social and human capital along the way.51
For organisations, and in fact for finance functions and finance professionals, to integrate ESG factors into their strategies, business models and reporting requires a change in thinking. It requires moving from mechanistic thinking, where the focus is about increasing efficiency, to systemic thinking, where the focus is about being effective. Dealing with complex ESG issues requires a holistic approach that moves from:
Disconnection to interconnectedness thinking
Linear to circular thinking
Silo to emergence thinking
Parts to whole thinking
Analysis to synthesis thinking
Isolation to relationship thinking52
The evolving ESG landscape Finally, it is worth remembering that an organisation’s environmental focus will continue to evolve as ESG and stakeholder priorities change. Bergstrom and West have observed that ‘science is a haphazard collection of intuitions, norms, customs and traditions that have developed by trial and error over the past several centuries’.53 The same is true of the sustainability space, and this has implications for finance professionals. We will all need to continually adapt our learning and engage in multi-disciplinary conversations if we are to create and preserve organisational value for the long-term.
