How decisive is sustainability reporting to a CFO's success?

Discover the impact of ESG reporting on a CFO's success. Learn why ESG report, AI and ESG software are pivotal for sustainable financial management.
Fernanda Ferreira
December 4, 2023

ESG Flo is the ESG compliance platform with an AI-powered backend to automate the collection and transformation of data into audit-ready metrics.

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If you're a, I know you have a lot on your plate. You're handling financial strategies, budgets, risk analysis, and strategic implementation, among many other things.

While you might feel inclined to leaveo other team members, sustainability holds more importance than you might initially think, offering numerous benefits for your business. It should be something you prioritize, and you should work closely with your sustainability teams on this issue. Why?

ESG regulations are growing

Let me ask you another question. Do you care about ? Of course, you do. Failure to comply with regulations can lead to substantial fines, legal troubles, and reputational damage for your company.

Well, in a previous article, we talked about how the number of ESG reporting requirements from government bodies around the world has shot up by 74% in the last four years – and more are on the horizon.

Even in the past few weeks, we have seen a lot of focus on The Corporate Sustainability Reporting Directive (CSRD) and the EU Commission's adoption of the ESRS, laying out all the rules of the sustainability reporting game for thousands of companies both within and outside the EU.

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Source: Dun & Bradstreet.

Falling afoul of these regulations comes with more than a slap on the wrist; just ask BNY Mellon Corp. and Goldman Sachs Group, who last year found themselves on the receiving end of a very large fine – $1.5 million and $4 million, respectively –  for making incorrect statements and policy failures. But it is not just regulators and government bodies who are interested in your company's holistic impact on the world; investors are as well.

ESG is among the key factors considered by investors

A 2022 study by asset management firm Capital Group found that 89% of investors integrate ESG issues in some form as part of their investment approach. This is especially true in Europe, where 31% of European investors consider ESG central to their investment strategy.

Here's the real kicker from KPMG's 2023 ESG Due Diligence study: more than half (53%) of investors have called off M&A deals because they discovered significant failings regarding ESG due diligence. But why are investors so interested? Quite a few factors are at play: staying competitive, meeting consumer preferences, sticking to ethical business practices, and responding to regulations.

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Source: KPMG EMEA ESG Due Dilligence Study (2022)

A comprehensive study scrutinising 2000 ESG performance analyses from 1970 to 2014 explored the relationship between financial performance and ESG performance across various business sectors and regions. It found that nearly half of companies displayed a positive correlation between higher financial and ESG performance.

This reflects the shift away from what I call ‘mono-capitalism’, focused solely on financial gains, to a multi-capitalism approach that values not only money but also environmental, social, and governance issues.

Good ESG reporting can boost cost savings and performance

CFOs are also responsible for uncovering avenues for cost savings, and ESG reporting can play a significant role in achieving just that - helping reduce costs substantially. It can help address rising operating expenses, such as raw-material costs and the true cost of resources like water or carbon. McKinsey’s research found that these expenses can impact operating profits by up to 60%.

But it's not only about cost-cutting. ESG reporting also streamlines processes and identifies inefficiencies, saving time and resources. This leads to a stronger bottom line and frees up resources for strategic endeavors and innovation.

So, let’s go back to the question at the start: Is sustainability decisive for your company’s success? The answer is a clear and resounding “yes”. But let's not sugar-coat it – putting this into action is a whole different story.

The challenges of data availability and quality

As revealed by Nasdaq's 2023 ESG & Climate survey, it's clear that one of the most significant hurdles is grappling with the availability and quality of data. The landscape is far from static, with new regulations being drawn up seemingly, every other day.

The survey points out another significant roadblock. More than half of the respondents are grappling with a tough one: getting buy-in from stakeholders. If you're finding it a tough sell to sway your colleagues, try explaining the potential drawbacks of getting emissions and other ESG metrics wrong. So, what's the solution?

ESG SaaS solutions leverage automation to streamline reporting

Instead of devoting 70% of your time to measurement, data collection, and report compilation, why not consider automating these processes – a move that not only improves accuracy but also frees up your valuable time. Innovative tools such as ESG Flo can facilitate this automation, enabling you to channel your efforts into crafting new initiatives and projects and driving sustainable impact.

Ready to revolutionize your ESG reporting? Discover the transformative power of ESG Flo's automation. Book a demo now.

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