It is commonly perceived that chief sustainability officers (CSO), senior executives and in some cases corporate secretaries are the ones responsible for a company’s sustainability initiatives. But as sustainability issues and financial performance have begun to intertwine, chief financial officers are now rolling up their sleeves and getting personally involved in the measurement and reporting of a company’s CSR activities, says a report from Ernst & Young.
Sustainability is having a major impact on a company’s corporate governance practices; shareholders are now paying more attention to resolutions that relate social and environmental performance to issues such as compensation and the qualifications of board members.
According to the advisory firm’s report, one recent resolution advocated using sustainability metrics as inputs in determining executive pay, while another sought to ensure that board members had sufficient expertise to deal with sustainability and related environmental issues.
But despite having a full plate, the pressure mounts on financial chiefs to start staying on top of sustainability initiatives, since it has become part of companies’ risk management and overall business strategies.
‘[CFOs] need to prepare for hard questions from stakeholders, and to demonstrate a heightened commitment to ESG (environmental, social and governance) performance,’ the report says.
And some CFOs have been getting ahead of the game. John Liu, NYC’s comptroller/CFO, earlier this year, called on Peter Loscher, CEO, Siemens AG, Europe’s largest engineering company, to retract its membership from the US Chamber of Commerce. The business federation, which represents the interests of more than three million businesses, previously opposed environmental reforms. ‘It’s not right for our shareholders’ money to support efforts that perpetuate environmental harm,’ Liu said. ‘Siemens is known for green innovation, but it’s supporting a group that bends over backwards to stand in the way of environmental protection.’
Liu took an active stance in alerting executives at Siemens of the chamber’s lack of support for environmental reforms. Also, he sought to engage with shareholders and have them cut all relations with the chamber, which is supposed to set an example for other businesses.
The Ernst & Young study proposes five actions that CFOs can take now to enhance corporate value through sustainability: