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From Finance Boss to Chief Sustainability Officer

From Finance Boss to Chief Sustainability Officer

Companies around the world are beginning to take more steps to become environmentally and socially conscious, and much of this responsibility falls into the lap of the constantly evolving chief financial officer.

CFO

Companies around the world are beginning to take more steps to become environmentally and socially conscious, and much of this responsibility falls into the lap of the constantly evolving chief financial officer.

CFO World cites a new working paper conducted by faculty at the Harvard Business School and the London Business School, which found firms that had voluntarily adopted sustainability policies had outperformed those that did not.

In the study, the researchers examined 180 different firms and found that those with the policies fared better in terms of stock price and accounting performance, while top executives more likely to receive pay based on sustainability metrics, according to the publication.

With this in mind, CFOs have taken on a much larger role in sustainability measures, as such policies go hand-in-hand with the overall success of the corporation. This coincides with the more strategic responsibilities being given to finance chiefs, as the bottom line becomes more complicated.

"Traditionally, sustainability issues have fallen outside the jurisdiction of the CFO. CFOs ran the numbers, letting others handle soft issues such as social responsibility and corporate citizenship," a previous CFO sustainability report from Ernst & Young suggested, according to CFO World. "Sustainability issues and financial performance have begun to intertwine. CFOs are getting involved in the management, measurement, and reporting of the companies’ sustainability activities. This involvement has expanded the CFO’s role in ways that would have been hard to imagine even a few years ago."

According to CFO Magazine, sustainability is becoming exceedingly important for finance chiefs as it becomes more closely associated with risk management, particularly as liability reporting increases.

Shareholders are also more interested in and conscious of social responsibility on the part of corporations, noted Ann Brockett, Americas assurance leader in sustainability and climate change for Ernst & Young, told CFO.

"Important mainstream institutional investors are asking questions about sustainability and getting behind these resolutions," said Brockett. "These are no longer just radical groups."

Brock added that finance chiefs need to also make sure that sustainability efforts are not isolated to one small department, but rather practiced by the entire company to indicate a true commitment to investors.

Either way, CFOs need to realize that sustainability is no longer just a "soft" issue, but rather one that seeps into the risk category and therefore the finance chief's desk, according to Brock. 

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