According to the Net Zero Stocktake 2022, over a third of the largest publicly traded companies in the world now have net zero targets. operations. CFOs will be instrumental in closing the gap and creating a critical shift towards decarbonization, says Michele Garra, chief executive officer of Optima Technology.
It cannot be denied that the Net Zero momentum has been slowed by COP26. We have collectively watched as global leaders spoke about the promise of COP27, or “the Implementation COP,” and now we must recognize the persistent global challenges ahead as we accelerate decarbonization and our Net Zero transition.
While momentum may have slowed, stakeholder pressures, allegations of greenwashing, climate risk, energy prices, disrupted supply chains, governance requirements and the carbon cost of doing business have all increased and as a result, they remain at the top of boardroom agendas.
AGL’s recent annual general meeting is just one example of how managing the organizational climate remains a key priority for shareholders, with those companies that cannot demonstrate significant and measurable progress having to respond. Many organizations now recognize that they will be operating in a completely different market within the next five years. A slow Net Zero transition could leave them too far behind their competitors to catch up.
The CFO is key to mitigating risk, exploiting opportunities, planning for growth and creating lasting value. Successfully navigating the disruptive landscape facing many businesses now will require and depend on the skills of the CFO. Similarly, CFOs who are able to integrate ESG factors into their company’s long-term financial plans will position themselves best for success.
According to WEF’s Julien Gattoni, the CFO should be the first responder to tackle climate change. “The CFO is already a master of company data, processes and reporting, and as it becomes increasingly clear that the value of a company extends beyond the acquisition of financial data, it is up to the holder of this role to understand how to measure and point out this added value”, said Gattoni.
Here are three reasons why CFOs will increasingly play a critical role in the Net Zero transition.
CFOs unlock long-term value
Sustainability is now recognized as a primary driver for business decision making, investment, innovation and strategic acquisitions. As the strategic leader within any company, CFOs possess significant opportunities to prepare their companies for long-term value creation by identifying economic opportunities in their Net Zero transition.
What gets measured is managed
According to Accenture, companies with Net Zero goals significantly outperform their peers in reducing emissions. Those with more sophisticated goals across operations can reduce their emissions even faster. CFOs can play a role in incorporating decarbonization levers into all operations, such as optimizing data management, energy efficiency, using more renewable energy sources or electrifying fleets and logistics .
Bring climate risk into everyday decision-making
Increasingly unpredictable and severe weather events motivate CFOs to consider the financial impacts of climate risk on operations, whether through revenue, expense or liability. Better climate risk analysis, supported by data, helps drive long-term planning and more accurate carbon accounting, and will ensure your business is more attractive for capital investment.
Standardized sustainability metrics help identify value creation
Following a long-running call for more standardization in sustainability measurement, we are now seeing a globally aligned wave of climate-related disclosure regulation. While we await mandatory disclosure in Australia, the risk of losing international investors is enough to see many companies anticipating regulation.
According to EY’s fourth Carbon Barometer, Australia is ahead of the global average in the coverage and quality of climate-related information. Consistent and comparable reporting standards will make it easier for investors to compare apples to apples, and hold accountable the CFOs of companies who are really taking action to prove it.
For CFOs not currently using ESG data to inform their business strategy, these new regulations will ensure data is available to begin making meaningful progress toward a Net Zero transition.
As energy prices continue to remain high, robust decarbonization strategies need to be implemented, supported by automated, accurate, near real-time data. Integrating emissions data and insights into core business decision-making will help CFOs prioritize, execute and scale decarbonization faster and more efficiently.
Currently, over 55% of companies store their ESG data in spreadsheets, ensuring that the collection and reporting of critical ESG information remains a highly manual and resource-intensive process that leaves companies vulnerable to errors.
The Net Zero transition is vital to long-term economic growth and profitability, which means CFOs will be instrumental in assisting their company’s responses to climate change, measuring its impact and progress, and establishing a clear path that supports to the opportunities of a Net Zero Economy while supporting economic growth – and their greatest ally will be the reliable data that informs everything.