As part of our series on ESG reporting, we are featuring guest blog posts from our partners. This post from BlackLine explains how the finance team can take the driver’s seat when it comes to sustainability.
Consumers are increasingly looking to do business with sustainable organizations, elevating sustainability to a boardroom level. Organizations looking to compete effectively in a challenging and crowded marketplace must be able to demonstrate their environmental bona fides. However, creating sustainable practices is usually the domain of operational lines of business. Many larger enterprises may have a dedicated role for a sustainability officer, or even a team that works across environmental and social corporate responsibility.
Rarely does the finance team get involved in the early stages of sustainability discussions. If anything, the finance team is usually left to manage the implications of business decisions around changing suppliers, operating procedures, and so on.
However, there is an opportunity for the finance team to take the driver’s seat when it comes to sustainability.
The rise of environmental, social, and governance (ESG) reporting has led to an increased focus on these issues from a risk management perspective. Getting these elements right can also lead to increased turnover and an improved ability to attract and retain staff. For example, 90% of consumers prefer to buy sustainable products and 86% of employees prefer to work for companies that care about the same issues they do.
ESG reporting translates these otherwise potentially hard-to-measure areas into financial results, language, and metrics. This is where the finance team shines. Finance also has access to all of the data across the organization that can be affected by ESG practices, such as sales, supply chain, and cost of goods sold.
Where to Start
Developing environmentally sustainable practices and policies can seem overwhelming, especially given the already large workload that falls on the finance team’s shoulders. Managing existing financial management and reporting requirements while adding ESG strategy, measurement, and reporting may not seem feasible for some teams. However, the finance team’s background in risk assessment and mitigation, data analysis and reporting, and strategic direction makes it perfect for this task.
There are four key questions the finance team should start with on the journey towards driving sustainability:
- What ESG components will affect the business, including stakeholders and customers?
- What metrics and targets should be managed, monitored, and reported on?
- How can financial and non-financial data be integrated into reporting?
- Are specific reporting models required for ESG and, if so, what are they?
While it may seem overwhelming for finance teams to dive straight into ESG and driving sustainability, there are immediate steps that can be taken to improve sustainability. For example, finance teams can make their own practices more sustainable and lead by example.
It may also be worth investigating ways to streamline and automate existing processes to pave the way for increased responsibilities around ESG management and reporting. By automating processes that previously took days or weeks of manual work, finance teams can free up talented professionals to focus on innovation and sustainability. This will also improve the team’s access to real-time data, which can be used to drive sustainable decision-making and, eventually, accurate reporting around ESG activities.
Read more in our series on ESG Reporting:
FP&A Done Right: ESG Reporting Tools
FP&A Done Right: Finance’s Role in ESG Reporting
More from BlackLine:
How Finance & Accounting Can Champion Sustainability in Business
This blog post was originally published on the BlackLine blog.