by Sophie Graham, Chief Sustainability Officer, IFS
Almost all industries are currently working out how best to adapt to the increasing demands for environmental, social, and governance (ESG) accountability, while still driving profitability and efficiency.
Around the globe, ESG reporting is becoming a mandatory requirement. The Corporate Sustainability Reporting Directive (CRSD), for example, will have significant impact across the EU, increasing the number of firms that must comply with it to approximately 49,000 in 2025. Demanding ESG standards are also becoming increasingly prevalent among organisations such as the International Financial Reporting Standards (IFRS), Global Reporting Initiative (GRI), and the International Sustainability Standards Board (ISSB), showcasing its significance.
Achieving sustainability and increasing growth are, however, not conflicting objectives. Sustainable practices reduce costs, and ultimately, create enduring growth. In many sectors, businesses can employ the in-depth ESG data they are obliged to collect to drive their business forward and contribute to strategic planning. The accurate data needed for reporting forms a foundation for informed decision-making, revealing risks and opportunities for improvement and innovation.
The CFO plays a central role
The growing emphasis on ESG practices built on data is reshaping the CFO’s role in many businesses. It is not every firm that has a chief sustainability officer (CSO) to help to define the vision, goals, and policies related to sustainability in line with company strategy.
While boards grasp the importance of ESG, it is often the CFO who is the catalyst for change, being so widely involved in business initiatives as well as the fulfilment of reporting and audit obligations. CFOs know how to go beyond the metrics and use their deeper understanding of the entire business ecosystem.
They have a multi-faceted role as vital “translators”, obtaining feedback from customers and then helping develop ESG strategies that embed not only financial guidelines, but shape goals to be acted upon by the business. They assess the implications of sustainability initiatives, bringing much-needed transparency to reporting, aligning ESG strategy with financial goals to ensure investments in sustainability yield results and are viable.
Good governance is required
Good governance is essential to this endeavour, but establishing it relies on everyone in the organisation being on board, ready to work collaboratively to achieve targets, using standardised metrics to measure progress. Sustainability needs to be embedded within the organisation and implemented holistically, not treated as a standalone initiative. The CFO’s role is to bring everyone together and inject some rigour into the process.
The CFO is therefore becoming pivotal in ESG success. A survey from management consulting firm, Ernst & Young (EY) found that ESG matters are an urgent concern for CFOs globally. Polling 1,000 CFOs from 21 countries, the survey ranked ESG as a top priority, alongside technology and digital innovation.
Being in such unique positions, CFOs should embed ESG across all departments and processes of their organisation. The finance function can, for example, request a flow of data about the carbon impact of specific products or services, measuring the sustainability performance of departments or business units alongside other measurements.
By weaving ESG strategy into financial action, CFOs channel capital towards ESG investments and make sustainability feasible. This holistic approach to reporting – merging financial insights with sustainability data – is critical to success in aligning ESG with fiscal goals
Adapting with regulation through agile data management
Governance is not static either. In industries such as energy, logistics or shipping, ESG governance requires continuous adaptation and engagement at all levels, from board members to frontline employees. This dynamic approach welcomes passionate individuals, fosters innovation, and yet retains an organised methodology. In essence, it simplifies sustainability, making it an organic component of the business fabric.
Companies must, of course, ensure they have a foundation in accurate reporting data, using solutions that for example, reconcile spending assessments and emissions estimations to provide greater precision and reliability.
The swift pace of regulatory change necessitates agile ESG reporting. While many companies grapple with redundant work or excessive time spent on report generation, technology offers the solution. The advent of artificial intelligence (AI) and advanced data management solutions streamline the collection, analysis, and reporting of ESG data, ensuring accuracy and comprehensive coverage. Tools such as EcoVadis and CDP aggregate and compare emissions data, driven by demands from investors, customers, and value chain partners.
By embracing the latest technological advances, businesses can therefore turn what often appears to be the major challenge of ESG reporting into an operational strength. Sustainable governance, led by CFOs, enables forward-looking enterprises to meet ESG mandates and paves the way for a more sustainable future. The task may be daunting, but with the right governance structure in place, and the CFO leading cross-functional collaboration, businesses can achieve ESG compliance while embedding sustainable profitability.
