ESG is climbing to the top of the CFO's agenda
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ESG has been written off by some commentators (and many business people) as a buzzword - just the latest flash-in-the-pan phrase.
In fact, it's anything but. Environmental, social, and governance concerns are amongst the most important priorities facing CFOs and other business leaders today. As an emerging field, ESG encompasses businesses' commitments to the world in which they operate; to their people and other stakeholders; and to their investors.
While the parameters or 'rules' of ESG are still being hashed out, it is already clear that the activities that come within this umbrella are going to become the touchstones for reputable and sustainable businesses throughout the next decade. And, perhaps counterintuitively, it is CFOs who will be leading that charge.
Let's look at why that is.
Investors care about ESG
ESG commitments are rapidly becoming one of the key factors affecting or even determining investment decisions. Investors of every kind, from the largest funds down to individual angels, are increasingly reluctant to become involved with organizations that don't have firm plans and processes in this field.
There are several reasons for this. For one because of the huge wave of public pressure now being exerted on businesses, with deeply-rooted social movements demanding environmental commitments (or reparations) from every business.
ESG is good for business
But investors also understand that ESG commitments, if genuine, are simply good for the bottom line. There is, as the saying goes, 'no business on a dead planet', and investors know this. In order to properly discharge their responsibilities in investor relations, CFOs, therefore, need to dedicate themselves to ESG.
And, of course, the existential threats that ESG activities are supposed to combat (whether those are environmental or otherwise) are of interest to every stakeholder simply because they have a material impact on the future of our organizations. We should be concerned about the things ESG aims to tackle because they represent significant risks to our businesses - and, by extension, to our jobs. ESG is therefore as much about self-preservation as it is about a loosely-defined idea of altruism.
ESG is about who we are
Today, ESG is also an absolutely fundamental part of broader questions of company culture. In many cases, it is now the cornerstone of the story a brand will tell about itself - as evidenced by the huge success of initiatives such as BCorp certification.
Customers, investors, employees, and the public at large all care about the future of the environment, the future of society and the workforce, and the role that businesses have to play in ensuring that those futures are as good as we can make them. ESG is currently one of the best tools in our toolbox to drive this agenda.
Do this today
Despite its importance, ESG remains fairly poorly defined. There is confusion about the way in which commitments are measured, and about the parameters of businesses' responsibilities.
Today, take some time to interrogate your own understanding of ESG, and the way in which it intersects with the role of the CFO. And make sure you subscribe to this series ahead of the next installment, where we'll be looking in-depth at some of the key ways CFOs can establish, measure, and communicate ESG commitments in an effective way.
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This was the second article in my latest series "Beyond Finance" and you can read the previous article(s) below.
If you didn't get a chance yet then take some time to catch up on my latest article series "Changing perspectives on Finance". You can find all seven articles below.
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Anders Liu-Lindberg is the co-founder and a partner at the Business Partnering Institute and owner of the largest group dedicated to Finance Business Partnering on LinkedIn with more than 10,000 members. I have ten years of experience as a business partner at the global transport and logistics company Maersk. I am the co-author of the book “Create Value as a Finance Business Partner” and a long-time Finance Blogger on LinkedIn with close to 65.000+ followers and 140.000+ subscribers to my blog. Recently I became an advisory board member at Born Capital to help identify and grow the next big thing in #CFOTech.
Chartered Professional Accountant (CPA, CMA) *** My opinions are my own ***
3y...... climbing very fast!! Let's hope for Greta thunnberg to go unemployed over the next few years. .... 🙂 Bill Gates Digna Obar Andrew MacRitchie, CPA, CA Antonio Zivanovic
Chief financial officer- Finance, IT & Logistics.
3yYes, It is interesting but looks like will be hugely challenging from financial decision-making. For example; New untasted technology Vs Risk, Yield Vs spread, New opportunity Vs economic viability, Incremental cost Vs pricing, P&L Vs P&L+ Emission reduction, etc... In addition to Government's role in policy, incentives and infrastructure will be key to these changes. Let us see.....