- Sustainability has worth, but it’s difficult to figure out how to quantify it.
- Corporate sustainability is becoming a core part of the business model and vital to long-term profitability.
- This makes it the CFO’s job to figure out how to measure ESG impact.
We know sustainability has worth, but it’s difficult to figure out how to quantify it. We also know that sustainability is becoming a core part of the business model in the face of expectations from investors and customers. There’s also pressure from regulators, all of whom are demanding that business step up and play its part in addressing the climate crisis.
This makes the CFO the first responder in tackling climate change. Helpfully, today’s CFO already likely sits at the nexus of all the key conversations about corporate sustainability, acting as the honest broker in the pursuit of net zero while also answering to market requirements and expectations. The CFO is already master of a company’s data, processes and reporting, and as it becomes ever-clearer that a company’s worth goes beyond what financial data captures, it is incumbent on the holder of this role to work out how to measure and report this added value.
Unsurprisingly, however, many CFOs are struggling to translate corporate ESG (Environmental, Social and Governance) commitments into something tangible.
How do you measure corporate sustainability and its impact on the business?
Innovation and being at the cutting edge of finding solutions to the world’s biggest problems are part of the Forum’s DNA. Sustainability is no different, and as we learn, we’ve shared – and continue to share – our experiences. Last year was the first year that we published a Stakeholder Capitalism Report, which worked well as its own section within the organization’s wider Annual Report.
To produce it, we used the ESG and Stakeholder Capitalism Metrics, which the Forum produced in 2021 with the Big Four accounting firms and through consultation with more than 200 companies. The metrics offer a universal way in which companies can report on their corporate sustainability, producing verifiable, comparable data.
Already it’s evident no one size fits all and that each industry will move at its own pace in the face of different challenges and opportunities. At the Forum, we have focused on embedding new metrics into our reporting, and then, importantly, kept developing and refining them, adding ‘granularity’. Alongside this, we’re enhancing our skillset, with the Finance team expanding to include people with impact measurement skills.
Davos 2022 – a net zero event
The Annual Meeting has become something of a test bed for our sustainability thinking and metrics. We use measurable targets that are continually developed, from which we are now in a position to chart quantifiable, year-on-year progress.
In the first tangible manifestation of this, we secured ISO 20121 accreditation in 2018. The process didn’t stop there. At each Annual Meeting we are audited. We have dedicated resource in our Finance team working with the certification company to ensure that we not only maintain our certification, but importantly progress beyond it annually.
We work with the event teams to ensure the greenest choices are made in terms of materials used (and reused), food sourced, and minimal waste produced, the aim being to reduce the percentages for each of these at every meeting, while still delivering the high-quality experience that participants expect.
The media frequently reports on the transport required to travel to, from and around Davos. What the headlines don’t capture are the rather less glamorous hours we spend working with Zurich airport’s authorities to ensure a more sustainable fuel option is available for those travelling by air, the work we do to encourage participants to travel by train, and the fleet of zero-emission vehicles employed at the event itself.
Finally, we invest to offset the event’s remaining carbon emissions, helping us make the Annual Meeting at Davos a net-zero event.
What have we learned in the past year about measuring and reporting ESG and corporate sustainability metrics? A lot, particularly as a result of producing our first Stakeholder Capitalism Report. While the process remains a work in progress, we’ve learned the importance of identifying, honing and consistently reporting on our metrics.
The bottom line? Corporate sustainability is now vital to long-term profitability
Being able to measure happiness accurately would be a ‘nice to have’. We don’t have this luxury with sustainability. We can’t yet monetize non-financial data, but we need to find a means of measuring ESG’s impact. Over time, as we figure this out, we’ll arrive at a place where we have two P&L statements, one for finance and the second for impact.
This is on the horizon and there’s a lot of ground to cover in between. The conversation is getting easier; there’s enough evidence to show that a sustainable business model will ultimately be a more profitable one, which is a marked change on the debate pre-pandemic.
It is now incumbent on the CFO to rise to the challenge, and it’s a big, complicated, largely unknown challenge at that – think three-dimensional chess! For this, the CFO will need to be, by turns, a champion, pioneer and sponsor of sustainability. Why?
Because the bottom line quite simply is that the CFO’s remit is the bottom line, and for some ESG represents a ‘triple bottom line’: sustainability is now vital to long-term profitability, making it the CFO’s work to figure out how to address and measure the impact of corporate sustainability.
Julien Gattoni, Managing Director; Chief Financial Officer, World Economic Forum
This article is republished and originally appeared in the World Economic Forum.