CFO’s role in sustainability initiatives has grown
Few accurate sustainability reporting tools to meet rising demand
By Celia Alphonsus
Sustainability reporting is on the rise and, importantly, chief financial officers (CFOs) are rolling up their sleeves in the monitoring and reporting of sustainability initiatives.
That was two of the six trends that a new Ernst & Young survey with GreenBiz Group uncovered. The report stated that employees are emerging as a strong proponent of sustainability initiatives, trailing close behind customers who have been one of the main forces driving corporate sustainability.
In spite of the lack of regulation, companies are keen to voluntarily report on their greenhouse gas (GHG) emissions. There is interest as well in monitoring water usage.
Stakeholders are also increasingly interested in sustainable sourcing of dwindling resources that are integral to the operations of the company, as well as of highly sensitive raw materials that are detrimental to the environment but essential to production processes.
These are the six sustainability trends:
1 Sustainability reporting is growing but the tools are still developing
The demand for accountability is increasing from customers, employees, investors, shareholders, policymakers, activists, analysts and suppliers.
Challenge: State-of the-art reporting systems remain nascent. Growth of reporting is impeded by the tools companies are using to produce them. Most respondents cited using spreadsheets as the primary tool, with about one in four (24%) using packaged software.
2 The CFO’s role in sustainability is on the rise
Fifty-two percent of respondents say CFOs are getting involved in the management, measurement and reporting of the company’s sustainable activities. This is largely due to an increased level of scrutiny by equity analysts, as well as the fact that cost-reduction is a big driver of sustainability.
Challenge: While the CFO is getting more engaged on sustainability issues, the survey also highlighted many missed opportunities to reduce the cost of environmental sustainability initiatives through the use of tax incentives.
3 Employees emerge as key stakeholder group for sustainability programmes and reporting
Employees are now a key audience for sustainability reports, the second most important audience behind customers. Conventionally driven by customers or investors, many a company’s sustainability efforts are now being led by its employees.
Challenge: Companies need to know what kind of tools to use to engage employees on sustainability to identify untapped opportunities to reduce energy use and waste, as well as to embrace employee engagement as part of the company’s values.
4 Despite regulatory uncertainty, GHG emissions reporting remains strong, along with growing interest in water
Climate change has become a strategic concern at many companies despite a lack of regulatory requirements to measure, manage or report emissions. Seventy-six percent of respondents voluntarily reported their GHG emissions.
Challenge: A large part of a company’s carbon footprint comes from their supply chains and a company’s reputation is at stake if their supply chain is not green enough. Many companies are now urging suppliers and trading partners to report and reduce their emissions to improve their own corporate rating.
5 Awareness is on the rise regarding the scarcity of business resources
Resource availability is rapidly becoming a de facto reporting requirement for some companies.
Seventy-six percent of survey respondents say they anticipate their company’s core business objectives to be affected by natural resource shortages in three to five years.
Challenge: A growing concern is “conflict minerals” – those mined in conditions of armed conflict and human rights abuses. Another concern is palm oil, a commodity widely used in the commercial food industry that some blame for causing irreversible environmental damage. Faced with activist and customer scrutiny, large companies have had to certify that their resources are produced sustainably.
6 Rankings and ratings matter to company executives
Fifty-five percent of respondents say that actively responding to sustainability ratings questionnaires is a primary means of communicating with investors about their sustainability performance and initiatives. The Dow Jones Sustainability Index, for instance, is well regarded by 33% of respondents.
Challenge: It takes time and expense fulfilling sustainability reporting requirements as diverse information from all over the company is needed and the data requested may vary from one questionnaire to another.
Committed to providing nutrition, health and wellness products worldwide, this multinational developed a sustainability living plan with three major goals to achieve by 2020: halve the environmental footprint of their products; help over a billion people take action to improve their health and well-being; and source 100% of their agricultural raw materials sustainably.
For its reporting mechanism, Unilever adopted the Global Reporting Initiative’s (GRI) G3 Sustainability Reporting Guidelines. Through its defined application levels, the company, in a self-assessment in its Sustainable Development Report 2010, graded itself as a B+ reporter. GRI G3 provides a comprehensive set of indicators covering the economic, environmental and ethical impacts of a company’s performance.
Progress in its sustainability living plan in 2011 included reaching 34.5 million people through its Lifebuoy brand’s hand-washing programmes, reducing greenhouse gas emissions to 117.41 kg energy per tonne of production and purchasing 64% of the palm oil it uses from sustainable sources.