Finance professionals and finance functions all have an important role to play in understanding their business impact and the opportunities for change across the three core elements of environmental, social and governance (ESG) that the 17 goals encompass.
Finance professionals Stefen Schaltegger, professor of Sustainability Management and head of the centre for Sustainability Management at Leuphana University, Lüneburg, notes that the goals present,
The skill set of a management accountant is highly relevant to helping organisations align with the goals. They also present an opportunity for management accountants to take a leading role. However, rather than having to invent new techniques to work with the goals, it is a case of adapting and recalibrating current practices. (See How to integrate the Sustainable Development Goals into an organisation? section)
Finance professionals are likely to be familiar with the concept of SMART measures: specific, measurable, attainable, relevant and timely. The goals, however, demand a slightly different way of considering performance.
It requires thinking about augmenting them with SIMPLE measures: strategic, interconnected, meaningful, purpose-driven, long term and educative. The SMART and SIMPLE framework can help in ensuring that the goals are understood more holistically.
Once the goals have been embedded within an organisation the roles finance professionals play will be diverse and valuable. Their primary tasks are likely to include:
encouraging organisations to meet SDG requirements through improved innovation capabilities.
emphasising the importance of ethical behaviour throughout the value chain.
focusing more tightly than ever on best practices in governance and stewardship
driving the formation of strategic partnerships.
helping organisations to base their corporate reports on the six ‘capitals’ of integrated reporting: human, social and relationship, intellectual, natural, manufacturing and financial.49
Finance functions Finance functions have an important and broad role to play in translating the goals into organisational value creation and preservation. It should not just be an exercise about reporting goal results as this has the propensity to become corporate greenwashing. The goals must become embedded into an organisation so that they lead to business model innovation, informed investment decision-making and the management of future risks and opportunities. It requires a shift from shareholder primary to understanding how the goals can help organisations build value and relationships with the wider stakeholder community. A systems thinking/integrated thinking approach will help here. (See A mindset for the goals: systems and Integrated Thinking in the How to integrate the Sustainable Development Goals into an organisation? section of this report.)
One way of demonstrating to stakeholders how an organisation’s strategy contributes to society is to identify and quantify impact pathways (e.g., inputs, activities, outputs, outcomes and impacts) through the business and link them to the corresponding SDGs.
Finance functions need to be driving this with a focus on the four lenses of governance; strategy; risk management; and metrics and targets. Together, the four lenses can help embed the goals across an organisation.
Governance — What is the organisation’s governance around the SDG risks and opportunities?
Strategy — What are the actual and potential effects of SDG risks and opportunities on the organisation’s business model, strategy and financial planning?
Risk management — How does the organisation identify assess and manage SDG risks?
Metrics and targets — How are metrics and targets used to assess and manage SDG risks and opportunities?
There is also a need to find innovative ways of measuring, monitoring and evaluating organisational performance by looking for new forms of evidence.
Finance functions occupy a unique position. Information and data within an organisation flies in many directions. However, they generally flow in and out of the finance function. This provides the finance function with numerous entry points of communication between itself, other internal business functions, supply chain partners and external stakeholders in the wider ecosystems. It can break down one-way communication that obscures complex problems the SDGs are trying to solve.50
The resulting collective diversity builds better strategic thinking, decision-making and leads to SDG innovation. Steven Johnson, in his book, Extra Life, notes,
The finance function is an important bridge between unrelated internal departments and external Interdisciplinary stakeholder groups when leading SDG innovation.
As organisations around the world are resetting the way they think about business value and the goals in an integrated way, it’s truly an exciting time to be a finance professional.
