Senior managers, including CFOs and financial directors, influence an organisation's long-term sustainability by shaping strategy, financial decisions, risk management, and governance.
Nature and biodiversity are increasingly important considerations for businesses. Accountants play a vital role in integrating nature-related risks and opportunities into financial decision-making. It’s becoming a crucial factor in value creation and risk assessment, aligning with broader trends such as stakeholder capitalism, which promotes measuring success beyond just financial metrics like earnings before interest and tax (EBIT) and earnings per share (EPS).
Businesses are being called upon to address environmental concerns, and financial professionals must ensure that nature-related factors are incorporated into strategic planning, risk management, and reporting.
The role of senior managers in nature-related accounting
As a senior manager, you play a key part in shaping and delivering the organisation’s strategy and ensuring risks are adequately managed. This means acting in the best interests of your organisation, focusing on its future value creation and resilience, connected to which nature is an increasingly important factor. In fulfilling this role, it is important to acknowledge movements such as stakeholder capitalism, which increasingly challenge traditional measures of success such as earnings before interest and tax (EBIT) and earnings per share (EPS). This creates opportunities and reflects the need for those in roles such as CFO to measure and drive various types of value beyond the financial. This includes nature.
Here is an overview of how nature connects with the typical responsibilities of a senior manager:
- Corporate governance: Stay current on evolving nature-related requirements and best practice, using this and insights provided by analysts to support the ‘business case’ for nature to board members.
- Strategic planning:Integrate nature-related risks and opportunities into financial strategies by assessing how they impact, for example, asset valuation, investment decisions and business strategies
- Stakeholder communication: Ensure effective communication of nature-related risks and opportunities and financial impacts to stakeholders.
- Performance monitoring: Aligning nature-related targets with financial goals.
Five key actions for senior managers to get started
1. Understand nature-related materiality assessment findings/processes
To operate effectively you need to understand your organisation’s relationship with nature and how this might present risk and opportunity.
- Businesses depend on nature for raw materials, water, and ecosystem services. Degradation of these resources can lead to supply chain disruptions, increased costs, and regulatory challenges.
- Conduct or review nature-related materiality assessments to gauge the organisation's exposure. Understanding these impacts helps accountants quantify financial risks related to environmental degradation and resource scarcity.
- Utilise frameworks like the Taskforce on Nature-related Financial Disclosures (TNFD) LEAP guidance to identify material issues. These guidelines help businesses assess their dependencies on nature and their exposure to nature-related risks, ultimately informing better financial decision-making.
The unique insight you hold into your organisation’s operations will add significant value to nature-related assessments, allowing you to work collaboratively with relevant experts and identify and understand the key nature-related issues that may impact your organisation’s strategic plans, financial decisions, risk management and ethical practices.
2. Identify nature-related legal and regulatory requirements and what best practice looks like
While the board is ultimately responsible for ensuring compliance with governance principles and regulations, as a senior manager you also have a responsibility that good governance is adhered to. Therefore you need to:
- Stay informed on evolving nature-related legal obligations, such as those under IFRS Sustainability Disclosure Standards, EU’s Corporate Sustainability Reporting Directive (CSRD), and the Global Reporting Initiative (GRI). These frameworks mandate disclosures on environmental performance and risks, making it essential for finance teams to integrate nature considerations into reporting processes.
- Assist board members in meeting compliance and governance expectations. CFOs and finance directors must ensure that the organisation is prepared for future regulatory changes that could affect financial reporting, asset valuation, and investment strategies.
The increasing regulation and scrutiny of ESG makes this a growing responsibility of board members who rely on senior managers to support this area to understand the implications for your organisation.
3. Work with stakeholders to establish and implement your organisation’s nature strategy
As a senior manager a key part of your role to support the board is to bridge the gap between strategic aspirations and operational realities.
- Apply accounting expertise to integrate nature into the organisation’s strategy.
- Consider how nature affects asset valuation, investment decisions, and business strategies.
- Re-evaluate assets based on exposure to nature-related risks and opportunities.
Collaborating with stakeholders to develop and implement a nature strategy ensures effective management of nature-related risks and opportunities, making you a vital part of the strategic planning process.
4. Incorporate nature into performance monitoring and target setting
As a senior manager you need to incorporate nature-related issues into performance monitoring and target setting aligns organisational goals with responsible environmental practices.
- Integrate material nature-related issues into performance monitoring by making sure nature is fully integrated into your organisation’s risk management processes.
- Work with analysts to establish and track nature-related goals, alongside systems of recognition and management that help manage material nature-related risks and opportunities eg, physical or transition risks and opportunities, the organisation’s direct operations or upstream and downstream in the value chain, factors within and outside your control of influence).
- Ensure targets are ambitious, achievable, and aligned with financial strategy. Commit to nature-related targets that align with UN Sustainable Development Goals and other accreditations.
- Prepare to adapt to nature-related factors outside the organisation’s control.
Incorporating nature into performance monitoring and target setting ensures environmental considerations are an integral part of organisational performance management, leading to credible and useful nature-related information disclosure.
5. Engage with stakeholders on nature
Engage with stakeholders and provide them with accurate and comprehensive information on nature-related issues. This is crucial for transparent and effective communication.
- Ensure accurate disclosure of nature-related risks and opportunities in annual reports.
- Connect nature-related issues with climate change and social ambitions for a holistic approach.
- Keep board members informed of disclosure requirements and best practices.
- Make recommendations for integrating nature into organisational strategy.
Engaging with stakeholders on nature-related issues fosters transparency and helps align organisational strategies with environmental and social goals, enhancing stakeholder trust and organisational reputation.
These actions will enable you to effectively integrate nature into your role, ensuring compliance, enhancing strategic decision-making, and improving stakeholder engagement.
By understanding their organisation’s relationship with nature, identifying legal requirements, setting a strategic vision, ensuring management accountability, and engaging with stakeholders, board members can drive meaningful action on nature-related issues. Organisations that proactively integrate nature into corporate governance will be better positioned to navigate future challenges, build stakeholder trust, and create long-term value.