Sustainability Rises: On the CFO's 'To-Do' List

LeBlanc, Brendan. (2012). SUSTAINABILITY RISES: On the CFO’s ‘To-Do’ List. Financial Executive, 28(2), 54-57.

"Chief financial officers are becoming increasingly familiar with sustainability, due to a heightened understanding of the impact of social and environmental policies on a company's financial performance."

Sustainability issues of concern: 

1) Stakeholder engagement - In recent years stakeholder expectations have been increasingly focused around the company's social and environmental practices and polices. New resolutions in the boardroom are not only including more environmentally conscious issues, but are receiving the support by vote to make significant changes in the company's policies and actions. 

"The 2011 proxy season was a clear indicator of where things are going - with votes on the largest category of all shareholder resolutions focusing on social/environmental issues."

"In 2005, less than 3 percent of all shareholders' resolutions on social and environmental issues reached the critical support threshold of more than 30 percent. By 2010, 26.8 percent hit that level, and in the 2011 proxy season, the number was 31.6 percent." This drastic increase in percentage indicates that the new focus was more than just a trend.

"This boardroom movement towards more responsible practices and transparency is clearly tied to the company's purse strings. Investors are being guided by more clearly defined social principals and companies must follow suit or risk losing needed capital"
 
2) Resource use
3) Green house emissions

Financial Risk Management

It was through the Financial Risk Management segment that sustainability became more prevalent.

"In 2009, the U.S. Securities and Exchange Commission began to allow the term "financial risk" in shareholder proposals discussing environmental and other issues. Then, in February 2010, the SEC issued guidance to companies regarding their responsibility to disclose material risks related to climate change".

Once the SEC took action in their guidance methods, CFOs began integrating sustainability with finances. Using data CFOs could see how much water and energy was used, "greenhouse gas emissions, employee transportation, telecommuting, virtual conferencing, copy paper purchases, supply and distribution chain polices and practices - anything that contributes to the company's environmental impact." Global impacts of multinational organizations have also been added to the list of interest.

"Even if legislation does not require additional reporting, companies will have to continue to respond to shareholder pressure. CFOs, seeing financial risk tied directly to sustainability resolutions, are uniquely able to influence their organizations and build a consensus towards action..." 

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