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April 23, 2024

The rise of the ‘Chief Financial
(ESG) Officer’

A new figure has well and truly emerged at the forefront of strategic sustainability decision-making: the Chief Financial Officer (CFO) with a keen focus on Environmental, Social, and Governance (ESG) factors. This fusion of financial expertise and ESG awareness signifies a significant shift in corporate governance and underscores the pivotal role CFOs play in driving sustainable business practices, particularly for start-ups and small and medium businesses that may not have the luxury of a dedicated Sustainability Manager.

As ESG is perceived to be material to value, it is of no surprise that it has come under the remit of CFOs and professional accountants. Just as financial data is meticulously reported and audited, ESG data must adhere to the same rigorous standards. 

The BDO 2024 CFO Outlook Survey found that 53% of CFOs have either integrated ESG principles into their core business strategy or are actively pursuing such integration. Moreover, amidst economic uncertainties, 79% of CFOs remain committed to their ESG investments, with 95% having a well-defined ESG strategy in place. This surge in ESG adoption underscores CFOs’ recognition of its strategic importance and link to profitability.

Ensuring compliance – CFOs are uniquely positioned

The CFO stands as the ideal candidate to ensure compliance with new IFRS Sustainability Standards S1 & S2 due to their pivotal role in corporate governance and financial oversight. With sustainability standards mirroring financial accounting standards, and with sustainability factors increasingly material to investment decision-making worldwide, the CFO’s comprehensive understanding of financial reporting is essential. 

The ISSB, operating under the umbrella of the IFRS Foundation, was established to address the demands of investors, companies, and international policymakers for decision-useful, comparable information, thereby streamlining reporting processes and enhancing transparency. Leveraging a transparent and rigorous due process, ISSB Standards ensure market-informed guidelines responsive to diverse global perspectives, fostering investor-company dialogue through globally comparable sustainability disclosures.

Given these dynamics, the CFO’s expertise in financial matters, coupled with their strategic acumen, equips them to spearhead sustainability efforts seamlessly. Their involvement ensures that sustainability-related disclosures can be integrated with financial data, facilitating accurate, reliable, and comparable information essential for investor decision-making.

ESG can improve profitability & secure investment

ESG can be profit-making for a business but be warned, it is only financial-grade, auditable ESG data that can be meaningfully integrated with financial data (e.g. to the profit and loss account). For example, if you save X kg of CO2e, you’re saving Y amount of money.

Working with an ESG reporting provider such as Omnevue that provides financial-grade, auditable ESG data, becomes even more crucial. The assurance provided by professional accountants instils confidence among stakeholders and facilitates informed decision-making.

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As we await the proposed adoption of IFRS S2 & S1 by the UK government (due July 24), more Chief Financial Officers are proactively engaging in ESG initiatives, discussing with their accountant and educating themselves regarding the evolving regulatory frameworks, ensuring timely compliance for when the time comes (and that will be soon!). 

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