Chief financial officers should be directly involved in their companies' sustainability programs as investors, customers and other stakeholders see a strong link between sustainability and financial performance, according to a new report from Ernst & Young LLP.
Considering the many risks and opportunities concerning environmental, social and governance issues, the report addresses how CFOs' roles are evolving in investor relations, external reporting, assurance, operational controllership and financial risk management.
The mounting pressure for CFOs to participate in the measurement and management of environmental and social performance has stemmed from institutional investors and equity analysts, especially as environmental, social and governance issues are more accessible.
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"Companies that conduct financial and sustainability practices in silos could miss out on business opportunities and proactive risk management," says Steve Starbuck, Americas leader of climate change and sustainability services of Ernst & Young LLP. "Increasingly, a company's sustainability story is being heard and read by the same stakeholders who read its annual report. Furthermore, the line between accounting records and sustainability records has begun to blur. These factors are creating a need for CFOs to incorporate sustainability thinking into their regular activities."
The paper outlines five actions CFOs can take to enhance corporate value through sustainability, which include actively pursuing a sustainability and reporting program, ensure managers of sustainability do not operate separately from the rest of the company, enhancing dialogue with shareholders, ensuring directors' skills are relevant to major areas of stakeholder concern and considering nontraditional performance metrics.
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