Meeting the Demand for Sustainability Disclosures and Investments

Globally, climate change is forcing people to think differently and, as a result, priorities are changing for private citizens and corporate ones. Stakeholders increasingly demand more from organizations than a commitment to short-term profitability. This drumbeat of demand includes a call for increased corporate accountability, in particular for streamlined, formalized corporate sustainability disclosures.

By embracing and prioritizing sustainability initiatives, finance executives can supply what stakeholders want and create economic value for the organization. Leadership, decision support, and oversight will be critical.

Build Personal Awareness

Build your knowledge of environmental, social, and governance (ESG) trends and recent developments on reporting requirements. In March, the Securities and Exchange Commission released a draft of new climate disclosure rules for public comment. In the same month, the new International Sustainability Standards Board (ISSB) issued its first two sustainability standards for public exposure.

Prepare the Team

Educate staff and cross-functional partners about sustainability-related trends that could impact the organization. Then provide recommendations on how they can proactively prepare for the changes. If your company is not currently providing sustainability information in its financial disclosures, start putting processes in place.

Ensure Appropriate Controls

If your organization is already issuing a sustainability report or otherwise using such information, internally or externally, ensure appropriate controls are in place. For example, maybe your company is claiming 50% of its electricity comes from renewable sources, is recycling 90% of solid waste, or has reduced water usage by 25%. To instill trust and confidence in those claims, they must be substantiated. Leverage rigorous controls and provide effective oversight, just as you do for financial reporting.

Seek Positive ROI Initiatives

Beyond preparing to meet reporting requirements, sustainability initiatives can impact long-term planning and value creation. Seek sustainability initiatives with a positive return on investment (ROI) to benefit the organization’s bottom line.

The recommendation is considering sustainability initiatives in two categories:

1. High-profile investments. Consider investing in a solar field, wind farm, or biogas facility.

2. Small Investments that add up. High-profile investments will generate buzz, but smaller investments and process changes, collectively, may represent the greater opportunity. Some examples include:

• Replacing fluorescent light fixtures with more efficient LED lighting products;
• Using motion-activated lighting;
• Incentivizing solid waste recycling;
• Investing in water recycling technology;
• Sourcing raw materials in bulk.

As the drumbeat for change grows louder, CFOs can take the lead by adopting a mindset of sustainable business management.

Adapted from: “Meeting the Demand for Sustainability Disclosures and Investments”, by Steve McNally, CMA, CPA, chair of the Institute of Management Accountants and CFO of The PTI (Plastic Technologies Inc.) Group of companies, published on CFO News on 03 May 2022.