11 July 2011

Timberland Puts Sustainability Management Under CFO

In a previous post ("How Big Is Green?") I speculated that eventually sustainability issues would be managed under companies' Chief Financial Officers, since sustainability management has so much in common with financial management. Now two years later we see an example of this actually happening at Timberland.
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Green Counting and Bean Counting

A recent article in Sustainable Life Media discussed Timberland's hiring of a new VP for Social Responsibility. Interestingly, this new position will report to the Chief Financial Officer.

HaraBara has been following the structure of sustainability management for several years, and this is the first sustainability officer reporting to the CFO that we have seen. (There are instance of the CEO acting as Chief Sustainability Officer, CSOs reporting to the CEO, and many cases of CSOs or the equivalent reporting through corporate communications, marketing, environmental health and safety, and facilities management.)

Most sustainability actions of firms are basically dollars-and-cents decisions (energy savings, cost reduction, waste reduction, supplier behavior, building management, transportation efficiency and the like). To date they have been focused on minimizing waste (and thus reducing costs). Accounting systems essentially similar to financial accounting and control systems have to be set up. ("If you don't measure it you can't manage it".) Why not create these systems within the finance department, where the expertise for such systems resides?

As trading of carbon allowances under cap-and-trade or other regulatory programs becomes more common, the connection between environmental health and safety (EHS) information and corporate finance will become ever more explicit. This is already a fact of life for European companies, and may become so for Australian ones if recent proposals are carried through. California is haltingly developing a cap-and-trade system, and generating plants in the U.S. Northeast already buy allowances under the Regional Greenhouse Gas Initiative.

All of these schemes, and many other regulatory obligations, require quantitative analysis and detailed tracking of many environmental parameters and product components. The data collected must have an audit trail back to the underlying transactions, sensor readings, or event logs. All this sounds like bookkeeping to me.

An obvious byproduct of such environmental accounting is potential business information analysis to assist managers. SAP and many other providers of enterprise sustainability software and services already offer many BI tools for sustainability management. Could carbon, water and other sustainability accounting become as big as financial accounting?

This has been cross-posted to the SAP Community Network here.

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