With increasing regulatory pressure, expanding sustainability priorities, and the growing consumer relevance of climate-ready business models, the Chief Sustainability Officer is no longer a business rarity. It’s grown from a niche position to a must-have.
With ‘Sustainability’ in the title, it’s easy to think the CFO can entrust emissions reporting and emissions reduction to the CSO. That is not the case. The CFO is just as important when it comes to driving business sustainability, and demonstrating climate leadership. So how do these roles overlap, and how can CFOs and CSOs work best together?
Climate-change will drive structural changes in the economy that shift financial incentives and drive new business models. From physical risks such as weather events disrupting supply chains, to transition risks like reputation and cost of capital, executive teams need long-term risk visibility and how the business will address them.
As CSOs seek ways to lower emissions, CFOs support them by clearly communicating the financial impact through inaction. Climate inaction has consistently been rated by the World Economic Forum as the biggest threat to the global economy in the mid and long-term. CFOs and CSOs must work together in strategic planning to manage risks, financial impact, and long-term viability. Forward-looking analysis is key because efforts to mitigate and adapt to climate change are without historical precedent.
CFOs also need to communicate short-term risks. When some executive team members don’t see sustainability as a priority compared to the quotidian tasks of selling goods and services, CFO’s can ensure they understand this isn’t the case and use scenario analysis to articulate strategy and risk in a language the board fully understands.
As CSOs construct business cases for new initiatives to adapt and mitigate, they must model cost, revenue, and sustainability outcomes. To ensure initiatives deliver planned objectives, CFOs examine financial feasibility, for example by estimating opex savings across production and distribution processes, along with validating sustainability metrics. But proactive CFOs don’t wait for initiatives to land on their desk to rubber-stamp. They work with CSOs to build initiatives from the ground-up, ensuring financial robustness with forecasting models, and allocating sufficient capex to deliver Return on Investment.
CFOs also need to communicate revenue and profitability potential from policies and strategy. Adapting to climate change can provide competitive advantage, from outpacing competitors not setup for a shift to a low-carbon economy, to working with value-chain partners in innovating new goods and services. Change brings opportunity along with risk, and CFOs can help convert new organisational capabilities into financial outcomes.
In mid-sized firms, the role can be even more concentrated. Without dedicated sustainability departments, CFOs and finance teams must often take on CSO-type responsibilities. The IFRS General Sustainability-related & Climate-related requirements, for example, bring sustainability reporting on-par with financial disclosures.
To learn about critical success factors, organisational readiness, and the target operating model for the sustainable finance team of the future, schedule a workshop with Getting to Zero now.
