Put Finance at the forefront of your Sustainability transition to build trust and drive sustainable value
Sustainability in Finance
In recent years, businesses have been sent a clear message, especially by external stakeholders: conduct business responsibly. Stakeholders have expanded beyond shareholders to include regulators, investors, consumers, financiers, insurance carriers, suppliers, employees and the communities they serve. Their expectation is clear: that businesses operate in line with the parameters of sustainable development. The products of today should not become the problems of tomorrow, and businesses should focus equally on long-term impacts and short-term profits.
And while corporate sustainability is receiving increasing attention from regulators, investors and consumers, global non-financial reporting standards and other sustainability regulations are being rapidly developed.
To show that they are transforming their business to meet these expectations and regulations, companies are entering a new era of environmental, social and governance (ESG) transparency and accountability. CFOs have a key role to play in this endeavour.
Finance function — A key business partner in the ESG transition
As ESG becomes integrated into the whole business, every department must be part of the ESG transformation. Finance is uniquely positioned. As ESG becomes more and more integrated into the business, and as companies integrate financial and sustainability ambitions, the Finance function will increasingly be a key strategic partner to the business.
Finance professionals have unique skills and capabilities. They can help companies better manage their data quality, implement disciplined processes and controls and integrate them with performance management, and liaise with auditors to provide assurance. And they bring a unique commercial perspective on how the business operates.
Integrating sustainability into the Finance function
Finance functions have already begun their transition to sustainability enablement, for example by addressing historical sustainability reporting requirements. Sustainability issues have moved up the business agenda and boards are now setting clearer strategies on sustainability for the whole organisation.
The integration of ESG into the Finance function is happening at different rates, usually linked to the company’s overall maturity in ESG integration into the business.
The graphic below shows the level of different functions as ESG maturity increases.
Common challenges to prepare for Sustainability in Finance
- Finance organisation and structure
- Finance workforce and capabilities
- Process excellence and automation
- Cloud ERP and digital platforms
- Automated controls
- Advance analytics, insights and actions
- Strategic finance business partnering
Finance organisation and structure
How do we update the governance structure to reflect the finance organisation's ESG roles and responsibilities?
Finance has a view of the entire company through the different data it collects. We see the Finance department as a true business partner taking on more ESG responsibilities, which need to be incorporated into the formal governance of the organisation. In addition, Finance has a role to play in the new committees that will need to be established across the organisation.
Finance workforce and capabilities
How do we handle upskilling?
Upskilling is essential for the Finance function to start adding value to ESG activities and achieve the right quality of finance ESG deliverables. Most finance professionals do not have huge experience in the area of ESG. So to really understand the new ESG activities, they will need to become knowledgeable about each of the E, S and G topics.
Process excellence and automation
How do we design and automate the processes that are required to deliver accurate, complete and assurable data for sustainability reporting and decision making?
For example, robust processes for collecting financial data across the business are already in place, as are the mechanisms for consolidating and disclosing financial information. These competencies can now be leveraged for collecting and collating the data required for sustainability reporting and ensuring there is adequate evidence for assurance.
Cloud ERP and digital platforms
To date, methods for sustainability data management and calculations have largely been manual and spreadsheet-based. Going forward, how do we set up an ecosystem of digital solutions, including ERP, and digital platforms in order to cope with the increasing size, complexity and frequency of sustainability data sourcing and calculation?
Automated controls
The Finance function has responsibility to ensure compliance with sustainability reporting standards and to produce financial and non-financial sustainability reporting. How do we design and automate controlling regarding the newly established processes and data?
Advance analytics, insights and actions
Models should deliver real-time, predictive ESG planning, forecasting and business insights that define the actions that should be taken to drive business decisions. How do we leverage advanced analytics in order to disclose significant insights and link this to the required decision making process?
Strategic finance business partnering
Business partners leverage real-time and connected data to provide actionable strategic insights to drive commercial decision making and business performance, supporting the pivot to an insight-led advisory function. How do we develop ESG insights and steer the business to drive enhanced ESG results/value, for example in strategic decisions or specific investment analyses?
Case study: integrating environmental impact into financial planning & analysis (FP&A)
Background and challenges: A global clothing brand that manufactures a broad range of T-shirts wanted to monitor the full expected environmental impact of each of its T-shirt production runs.
Solution: To help this client monitor their environmental impact, PwC started by quantifying the impact of different choices across the entire value chain in terms of raw materials, distribution channels and store consumption. Subsequently, PwC generated a dashboard powered by Anaplan (a cloud-based business planning software) to generate insights into the environmental impact throughout the value chain. Outputs can be used for scenario analysis, target setting, measuring progress against strategy, and for internal and external reporting. This resulted in enhanced insights and allowed for better decision making with regards to sourcing and product mix. PwC integrated this dashboard into the entire FP&A process.
This project enabled the client to embed ESG factors into their business decision-making process and run scenario analyses based on ESG data.
Partner with PwC on your ESG journey
At PwC, our suite of credentials, expertise and offerings pertaining to an ESG-infused Finance transformation continues to grow. We are able to support your company every step of the way, covering:
- maturity and baselining
- strategy development
- transformation planning and roadmapping
- implementation (design, develop and implement)
- operationalising and delivering sustained outcomes.
Sustainability in the Finance function
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