The world is changing rapidly, much more than ever before, undoubtedly fuelled in part by our recognition of unsustainable economic activities and their accelerating consequences. Indeed, we now realise that our environmental, social and economic wellbeing are interdependent.

As a result, we are witnessing a global shift, albeit a gradual one, towards sustainability-driven capital allocations and responsible business practices. The success of this paradigm shift depends on a reset of our thinking, operating models and processes, and data needs.

An important manifestation of it is the equally rapid evolution towards corporate sustainability reporting practices that are not only standardised and digitised but also regulated and externally assured. This evolution will inevitably drive greater alignment – or connectivity – between sustainability and financial information.

Reporting requirements aside, a more fundamental transformation for companies lies in their ability to leverage the insights provided by sustainability information and the power of the finance function to better manage material impacts, risks, and opportunities (sustainability performance) that convert into value creation (financial performance). This can only happen if there is a meaningful connection between sustainability and financial information. This in turn requires an understanding of the differences between measuring, reporting, and disclosing performance. Which will help determine where different types of information will be disclosed.

Users of sustainability disclosures are demanding a relevant and clear connection between sustainability and financial performance, which companies would do well to provide. Better disclosures lead to more efficient markets and high-quality disclosures enjoy many benefits, including a lower cost of capital*.

This need for connectivity is driving greater interaction and collaboration between the sustainability and finance departments. It is necessarily pulling the Chief Financial Officer (CFO) into the decision-making process as an essential contributor to support the identification of material issues and implement management programs and initiatives. The sooner this happens the better.

In the adoption of this holistic approach, companies can make the most of the financial consequences of their sustainability performance, create financial value, build long-term resilience, and strengthen reputational capital. Sustainability can ultimately become meaningfully and profitably embedded within their strategy and operating business model.