Anyone who has tried to implement an ESG or sustainability-related program in their company knows that these issues cannot be confined to one department or function, they live throughout the organisation. The most successful companies are those that implement cross-functional, collaborative processes to help break down silos.

Materiality is the foundation to reporting; sustainability is no exception. The first step in connecting sustainability and financial performance is identifying clearly the sustainability matters that are significant to the company — regardless of the materiality lens chosen.

The second, and arguably most critical step, is to include the Chief Financial Officer (CFO) – or their equivalent – in conducting a sustainability assessment exercise and developing the strategic and operational plans to support it, whether it’s for the overarching sustainability approach or an issue-specific program to put in place.

The CFO is the key person to lead this cross-functional collaboration. If cash is the ‘lubricant of business activity’, the CFO is the glue that enables the organisation to operate effectively. They have the full picture of its strategy and operations, as well as the planning capabilities and capital allocation authority.

Why is this step so important? Because, as the examples used throughout our guidance on connecting sustainability and finance illustrate, the translation from sustainability matter to financial implications usually happen during the operational planning and forecasting processes, ie, when managing sustainability matters.

This process will, by the same token, naturally seek to identify and address material dependencies, risks, opportunities and impacts. 

As a CPA Australia publication predicting the key trends CFO’s need to know for 2024, put it: “CFOs can help to ensure an organisation’s commitment to ESG is translated into meaningful outcomes. This is not just by measuring and reporting on ESG indicators, but by influencing resource allocation, such as investments in eco-friendly tech, energy efficiency measures, waste reduction programs and projects with social impact.”