The sustainability agenda: Are UK CFOs falling behind?

Finance has evolved slowly over the years, but technologies like cloud and AI give it the opportunity to develop significantly faster.

The function could learn from the rapid evolution of today’s autonomous, connected cars. CFOs stand to make their functions more powerful (using AI as a processing ‘engine’), help them run on new fuel (finding value in unstructured data) and allow the function to become ‘driverless’ (automating transactional tasks). The result is a reimagining of the function’s responsibilities, ways of working, and scale.

CFOs are reluctant to upset the status quo at a time of economic uncertainty, but taking action is essential if finance is to achieve its strategic potential as a driver of growth. In practice, this means:

1.   Stepping up their responsibilities around sustainability

2.   Clearing the decks to embed fiscal agility

3.   Rethinking growth priorities in the wake of Covid-19

This, the first of three articles based on the 158 strong sample of senior finance leaders in Accenture’s CFO Research, looks at sustainability and answers the question: are UK CFOs falling behind?

Sustainability is a priority for the C-suite. The World Economic Forum believes the most severe threat faced by business today is the failure to mitigate and adapt to climate change. In turn, many are looking to the CFO for the strategic guidance and leadership required to take the lead on this most complex of issues.

And yet, in the UK, CFOs may not be making as much progress as they could be when it comes to sustainability. According to Accenture’s new research, fewer than one in 10 cite improvements in ESG performance as a major outcome of their work during the last two years.

There may be an understandable reason for this lack of focus. CFOs in the UK have certainly had their hands full. Not only are they taking on a wider range of responsibilities – achieving new growth and embedding AI being high on the list – but many have also been preparing their businesses for Brexit. More recently, ensuring liquidity during the pandemic has been an all-consuming task.

Nevertheless, as the world looks to a post-crisis future, CFOs can expect growing pressure around sustainability. For one thing, the sheer volume of money flooding into ESG investments is prompting investors to engage with businesses on environmental issues. Moreover, the pressure will grow as asset managers meet the EU’s Sustainable Finance Disclosure Regulation and the UK’s new regime for pension funds.

Enterprises themselves are facing significant ESG reporting requirements, which will be impossible to meet without meaningful input from finance. The requirement on listed companies to provide disclosures in line with the Task Force on Climate-Related Disclosures by 2022 is a case in point.

The good news, at least, is that CFOs are well-equipped for the task ahead. As ultimate owner of enterprise data, no one else is better placed to assess the ROI of sustainability initiatives. Finance’s responsibility for corporate reporting also leaves the function in little doubt as to the scale of the challenge ahead.

The message may already be starting to get through, but so far only in a limited number of companies. In Accenture’s research, 63% of UK CFOs say finance takes responsibility for ESG, which is encouraging but notably lower than the 73% of French and 71% of US CFOs who say the same thing.

Most UK CFOs also admit that their function isn’t yet playing a role in the enterprise’s ongoing sustainability initiatives. Just one in five (22%) says the finance team is meaningfully engaged with efforts to improve ESG performance, slightly below the cross-market average.

The challenge for CFOs in the UK is to take the wheel when it comes to sustainability before the responsibility, and the influence that comes with it, falls to someone else. It helps that specific initiatives, such as the WEF’s efforts to agree common sustainability metrics and standards, may require them to engage more deeply with the issue than they are currently.

Nonetheless, if UK CFOs want to deliver on the full promise of their role, they should think urgently about what needs to change in their business, and how they can be lead drivers in making that change happen.

Take a look at the next article in the series on ‘Clearing the decks to embed fiscal agility’.