Sustainable Finance for the Future
Each Next Generation CFO workshop features fantastic boardroom speakers sharing their insights into the role of the CFO. In March, we had the pleasure of welcoming Andrew Bonfield, CFO of National Grid, to speak about his experience of harnessing sustainability in his organisation. Andrew is Co-Chair of The Prince's Accounting for Sustainability (A4S) CFO Leadership Network. Established in 2004 by HRH The Prince of Wales, to “help ensure that we are not battling to meet 21st century challenges with, at best, 20th century decision making and reporting systems”, A4S inspires finance leaders to pursue resilient business models and a sustainable economy.
What does sustainability mean?
The drive for sustainable business practices is the result of a decade which hasn’t seen business at its best. In the last ten years we have experienced a financial crisis from which we haven’t fully recovered; the standard of living hasn’t improved for many and there is a perception that the 1%, often thought to be comprised of business, are immune to the impact. Events like the Deepwater Horizon and reports of tax evasion by large organisations have meant organisations are increasingly under scrutiny, and transparency and accountability have become central to survival.
For me, sustainability has come to mean leaving behind a business in better shape than I inherited. Did I do the right thing? Did I create the best business I could? Did I positively impact the culture and practices? As a CFO, my value is in doing the right thing for the long term, but in businesses today, thinking and decision making is often grounded in the immediate.
Sustainability requires considering the long term.
At National Grid, we work in an infrastructure that was created in the 1960s whilst the industry is future focused, constantly evolving, moving away from traditional energy sources and exploring alternatives. We had thought that by 2020 the UK would reach 10GW of solar energy, but that was reached in 2016 - progress has been much faster than we expected. As a result, we have to adapt more quickly and reconsider our legacy, embedding sustainability at every level of our infrastructure and creating tangible, long term targets for every part of our business.
What does this mean for finance?
The short term vs long term nexus is a difficult one to manage. The shelf-life of a CFO is short and geopolitical and economic uncertainty makes it a challenge to think long term. However, only through long term, sustainable business planning and practice can we add future value, rather than reactively focus on today’s share price. Whilst it is a challenge to consider what the impact of a decision made today might be in five or ten years, it remains critical to keep this in mind.
At National Grid, in addition to developing long-term targets for environmental sustainability - for example, we have goals for our 2050 greenhouse gas emissions - it also means evolving our everyday practices. For instance, reconsidering how we calculate resource decommissioning costs, such as nuclear plants or oil rigs, as the cost is substantial and always comes back. Sustainability means thinking of our organisation’s future business model, which we are building in our practices today.
A4S is working to foster this type of thinking among finance professionals. It supports finance leaders to shift towards sustainable and resilient business models, to take an integrated approach to decision making, reflecting on the opportunities and risks posed by social issues and scaling up our actions across the global finance and accounting community. The knowledge hub on the A4S website has really practical information on how to integrate sustainability into your practice. Being part of the CFO Leadership Network also provides a great opportunity to learn from peers, develop leading thinking and share what we are doing with others.
There is an interdependency between finance, society and the environment and when the organisations I have worked for have faced issues, it has often been as a result of not thinking about these interactions and the long term implications of decision making.
Sustainability for our businesses will involve changing the culture within our businesses and engaging and incentivising our people into this way of thinking. It will also mean getting the long term view into the conversation with investors and quantifying the impact of sustainable practice on business performance.
Crucially, sustainability means being flexible. Sustainability today won’t be the same in five years’ time, and it’s important to ensure that our business environments remain adaptable to the changes to come.
Steps that you can take:
- Make a positive impact - leave the organisation in a better place than when you started - if you feel that this option isn’t available to you, you need to explore why.
- Be transparent with investors - get them thinking about the long term but be transparent when you communicate with them, nothing is perfect all of the time and being honest is the best defence when things go wrong.
- Think long term - if you have a short term-long term trade off, consider what the long term impact will be in 3-4 years’ time. If you are forced to focus on the short term, ask why that is.
Andrew Bonfield, Finance Director, National Grid and Co-Chair of the A4S CFO Leadership Network
Andrew was appointed to the National Grid Board as Executive Director in November 2010. In addition to his responsibilities as Finance Director, he is responsible for Property and Shared Services. Andrew is a qualified chartered accountant who began his career with PwC in South Africa, after studying at the University of Natal, Durban.
He joined SmithKline Beecham in 1989, rising to CFO. In 2001 he moved to BG Group plc as Finance Director, and then to Bristol-Myers Squibb as CFO, where he was based in New Jersey, US. In 2009, he joined Cadbury plc until March 2010, on the completion of the Kraft takeover. He is a non-executive director at Kingfisher plc and Chairman of The 100 Group.