The sustainability imperative: The integral role of finance—quantified

As climate change intensifies, companies are racing to meet crucial sustainability goals. They’re setting net-zero targets and accelerating their transition to renewable energy. They’re considering climate action in their investments and measuring their carbon footprint across the entire supply chain. They’re participating in the circular economy and developing zero-waste products.

But these goals are only meaningful if they are measurable. As sustainability becomes an integral part of an organization’s business strategy, the CFO must take a leading role. In fact, the United Nations has convened a CFO Coalition for the Sustainable Development Goals, recognizing that “as stewards of trillions of dollars in corporate investments, CFOs are uniquely positioned to reshape the future of corporate finance and investment as a catalyst for growth, value creation, and social impact.”

“CFOs are uniquely positioned to reshape the future of corporate finance and investment as a catalyst for growth, value creation, and social impact.”

CFO priorities around sustainability are expected to change drastically as emerging and complex environmental, social, and governance (ESG) reporting requirements call for greater transparency. These, along with regulator and investor pressures and consumer demands for measurable sustainability efforts, have massive implications for the finance function.

To explore the expanding sustainability scope for finance and what actions organizations are taking, the IBM Institute for Business Value (IBV) partnered with the American Productivity and Quality Center (APQC) to survey 1,085 senior finance personnel, including CFOs, finance directors, comptrollers, and finance managers.

As in the IBV 2022 CEO Study, we grouped our respondents into four categories based on how they characterize their organizations’ investments in sustainable business practices, such as adopting clean energy, improving waste management, and developing a green portfolio:
 

• Assessing finance leaders (17%): Have not yet made any enterprise-wide investments in sustainability programs. While some are exploring options, others have no plans at all.
• Complying finance leaders (26%): Use corporate sustainability investments solely to meet compliance and regulatory requirements.
• Operational finance leaders (47%): View sustainability investments as a business optimization opportunity in core and noncore business areas.
• Transformational finance leaders (10%): View sustainability investments as an avenue for enterprise transformation.
   

Substantiating sustainability: Finance leaders help their organizations gauge the performance of sustainability initiatives.

Our analysis quantifies how Transformational finance leaders are embracing five key responsibilities to deliver real-world sustainability results.

1. Lead on quantification: Involves building business cases, improving decision-making, and assessing effectiveness of sustainability initiatives; also tracking environmental impact in areas such as fossil fuel and water consumption, greenhouse gas emissions, materials, reuse and recycling, compliance, and more.

2. Mobilize capital: Involves obtaining sustainable financing and allocating investments to sustainability initiatives. Also includes providing insights on green bonds and communicating to institutional investors the impact of sustainability on credit and insurance, as well as employee retention, customer retention, and the ability to raise capital.

3. Enable culture change: Involves cultivating a culture focused on sustainability through aligned incentives for both employees and partners to help drive execution of sustainability action items.

4. Operationalize sustainability reporting: Creates transparency around the enterprise’s progress toward sustainability goals and commitments in a fluid regulatory landscape. Also includes partnering across the organization to select the right metrics, quantify and manage risks, and keep external and internal stakeholders informed.

5. Embed sustainability in finance operations: Focuses on reducing greenhouse gas emissions within the finance function with tactics such as offering low-carbon travel choices and pursuing net-zero emissions with finance technology solutions.

We found that Transformational finance leaders use three approaches to position their organizations for sustainability success:
 

• Agile principles to enhance their organization’s flexibility to support business model changes
• Data centricity to facilitate integration and evaluation of nonfinancial data associated with sustainability goals—enabled through a robust data infrastructure
• A nimbler way of working to focus on speed of innovation and partnerships across business functions.

Read the report to explore the data and case studies that demonstrate how Transformational finance leaders are helping their organizations address the climate crisis and build a sustainable future while realizing the business potential of sustainability. A detailed action guide offers specific steps finance functions can take to support sustainability initiatives.