When Finance Meets Sustainability
Accountants are leading sustainability efforts at the highest levels of organizations. Their rigor transforms sustainability management.
A new report, Sustainability CFO: the CFO of the Future, shows that accountants are increasingly managing companies’ non-financial, or sustainability, performance. These “Sustainability Chief Financial Officers” are bringing new skills to monitoring and reporting organizations’ contribution to sustainable development.
What does this trend mean for organizational sustainability and individual careers? Two experts weigh in:
Laura Palmeiro is one of the leaders featured in the report. At Danone, Laura was the first Vice President for Finance, Nature – essentially the finance director for Danone’s Nature or sustainability unit. She is currently seconded to the UN Global Compact, where she is advising on metrics for reporting on the Sustainable Development Goals.
Delphine Gibassier is one of the authors of the Sustainability CFO report. She is a senior research fellow at Birmingham Business School in the UK.
Edited excerpts from the podcast are below.
What is a Sustainability CFO?
Delphine Gibassier: Increasingly, the finance function within companies wants people from their team to help sustainability become more embedded. And that’s a shift because the connection with finance has not been in evidence in the past. Now organizations recognize that they need somebody who can be a bridge between the two areas.
Laura Palmeiro: When I started as a VP Finance for Nature, mostly the unit needed someone who had the ability to prepare numbers to make decisions in order to make new investments and plans, in order to reduce impacts on nature. So my role was more on the controlling side and not that much on the financial side of my experience.
Nevertheless, now I would say that many people are demanding data in order to make decisions on investments: asset managers, asset owners and all the different agencies. That data has to be given in a certain way and prepared with a certain rigor and for that we need people that are used to doing this.
Laura, what was your specific task in that role at Danone?
Laura Palmeiro: My first task was to put in place accounting for CO2. When you have topics regarding water or waste, you have technology to count the amount of tons that you have or the liters of water. In the case of CO2, it is different. You have to create the amount by making quite complicated calculations. So this is extremely complex. When I began the job, I had to create a way of not only calculating these amounts but also putting in place the whole methodology and system to account for these emissions.
Then I went on with other key performance indicators that were more simple in their calculation, but I would say that 80% of my time was consumed by this GHG accounting.
How do people get into the role of Sustainability CFO?
Delphine Gibassier: Mostly the people who go from finance to being sustainability CFO don’t have a sustainability background. What motivated them was that they saw different value drivers and different value creation processes that are coming into our world. In interviews, when we asked them, “Were you an activist before,” the answer was, “No, we just realized how important this is going to be for our profession.”
Laura Palmeiro: The first sustainability reports that were issued many, many years ago, you can see very clearly that they were issued by experts in and environmental issues, but the figures were not really treated with the rigor that a financial controller would have used.
If we really think that environmental, social, health, and governance issues are important for the new world that we want to build all together, and if we accept that we cannot control what we're not measuring, then we really need to have experts measuring these new topics.
Laura, what’s been your personal journey working on these issues?
Laura Palmeiro: I have always been interested in these topics, even though I wasn't a technician of them. Right before becoming VP Finance, Nature, I was part of the investor relations department.
Our CFO was made responsible for this new Nature department. He said, “I need someone from finance.” He had all this data that no one figured out how to put together. So he said, “Well, I need someone who knows how to do this in finance and who is crazy enough to jump to something that is totally unknown.” But I immediately loved it.
I had to start from scratch in terms of what was behind the numbers that that I was looking at, but I can tell you that there is no difference in terms of the numbers themselves. There is no difference accounting for Euros, pesos, pounds, or tons of CO2.
And the big reward is that you get to learn a lot about the topics, the content of what you are managing with your numbers, because you have to be constant decision making contact with engineers, people working on waste, recycling, social issues.
Are finance professionals getting engaged at all levels of companies? What’s your advice for those who want to work on sustainability?
Delphine Gibassier: Sustainability CFOS are senior. Talking to investors, seeing regulation coming and making decision for investment — when you make that kind of decision, you're at a senior level. I think if I was a student coming out of the business school, a job like this is really hard to find. My advice would be, go into an accounting team and open their eyes to sustainability. Partner with procurement, supply chain, and R&D.
Laura Palmeiro: There is space for all kinds of levels of seniority on this. We need people at the VP Finance level and we also need people at the junior level who will make this their whole career. Maybe they will become the future CFOs on sustainability.
Read the Report
Gibassier, D., Arjalies, D-L., & Garnier. C. 2018. Sustainability CFO: the CFO of the future. Institute of Management Accountants. Available at https://www.imanet.org/insights-and-trends/external-reporting-and-disclosure-management/sustainability-cfo-the-cfo-of-the-future?ssopc=1.