The Business Case for Implementing Sustainability Programs Under Finance

My team participated in an executive exchange of ideas as part of a UK-based event organized by Connected Global Group. Together with the CFOs and heads of regulatory compliance and technology at UK’s top banks, insurance companies, and investment organizations, we spoke about finance modernization: the changing and expanding role of the finance officer and the importance of data and insights in fueling growth.

Unsurprisingly, a lot of questions and discussions centered on ESG (environmental, social, and governance) issues as a big forcing function for the modernization efforts in finance. A recent PwC UK study of CEO priorities found that 70% of CEOs are concerned about climate change and 53% want to improve the way they report their environmental impact. And this is not just a UK trend. Data from Deloitte suggests that CFOs across the European zone are concerned with justifying, reporting, and tracking sustainability efforts across their organizations. These metrics encourage shareholders to better understand the broader purpose of their investments and keep employees happy with company values. Furthermore, a recent IDC and Oracle study about CFOs' outlook on driving finance modernization found that 37% of financial leaders expect climate change to be a top macroeconomic driver to redefine the strategic role of the finance function in the next 24 months.

Forward-looking risk and finance professionals, like the ones who participated in the UK event recently, are on the frontline of banking innovation and finance modernization. They want their teams to spend less time cleaning and crunching data and more time delivering business insights to their leadership teams. We are seeing added pressures to “turn the pyramid on its head,” invest in ways to automate and speed up data processing, and leverage professional expertise in interpreting the insights and offering much-needed recommendations to the business.

There are a few key takeaways from the conversations at this finance modernization event:

Data and reporting fragmentation is endemic in many businesses

Traditional banks' legacy systems may complicate the consolidated view of data. On this foundation, Net Zero and climate change requirements present yet another challenge to connect disparate data sources and navigate numerous standards and guidelines.

ESG is quite new to most organizations

Companies must answer CO2-related questions and verify disclosures from clients, third-party vendors, and supply chain partners, not just their own business. Before answering questions, though, they must know which data to collect and track, and how to report on it.

Regulators (at least in the UK) are taking an iterative process

1. Focus on making guidelines easier to understand
2. Work to create common data standards
3. Address how information is collected because many companies collect data only for regulators and this was not the intention.

A key internal challenge is getting the budget for back-office projects

Here the role of CFO and finance function becomes critical to reshaping the future of banking. Technology can be a great supporter of the finance function by providing the right level of data to “push” for hugely impactful initiatives like ESG. Using cloud-based tools can further support the case, helping sway the board of directors to support these initiatives.