25 August 2011

Sustainability and the CFO

Sustainability, environmental issues and "green" have long since moved from "nice to have" parts of Corporate Social Responsibility, often part of the Corporate Communications (PR) portfolio, toward the center of management of the firm. A sign of this is the increasing involvement of the Chief Financial Officer (CFO) in sustainability issues. Most sustainability and environmental data is like financial data. It is financial data in many cases. (See this previous post for a discussion of the types of green data firms are faced with managing these days.).
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A new report (pdf) from consultants Ernst & Young discusses this trend. It says, among other things:
  • The old "social responsibility" and "corporate citizenship" silos are crumbling.
  • Institutional investors are deciding that "climate change and sustainability issues often bear directly on companies’ risk profiles, their reputations and their financial performance."
  • "These trends are changing the CFO's role in three critical areas: investor relations; external reporting and assurance; and operational controllership and financial risk management." The report discusses each of these three areas.
What does this mean for IT?
Finance, bookkeeping, control, and financial reporting, all managed by the CFO, are leading consumers of IT. Thus the office of the CFO is very experienced and sophisticated about the management of such data, and the products and services that are available. By contrast the Chief Sustainability Officer (CSO) or equivalent manager in charge of sustainability was often connected to PR or communications, corporate health and safety, legal and regulatory, or facilities. These functions don't have the clout and experience that the CFO has in using IT to efficiently manage data, or using data for management (BI).

So my theory is that getting the CFO involved in managing the firm's sustainability will lead to the use of much more sophisticated data management tools and services. Also, mining corporate sustainability data to provide guidance to management will be obvious to the CFO. And the CFO has the clout to get the data management products he or she needs.

External reporting in particular has traditionally been the responsibility of the CFO. The formal quarterly and annual reports, and the auditable data that underlies them, have been his or her job. As companies try to assemble data and submit reports, for instance under the Global Reporting Initiative, they are reinventing approaches that have been mastered by the finance department.

So if you have been involved in designing or implementing financial software, there is a whole new world awaiting your attention.

Reposted from Doc's SCN blog.

Earlier post about Timberland's decision to have the sustainability function report to the CFO.

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