Finance for a sustainable future
Reimagining reporting
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‘Ready or not’ isn’t the question you should be asking.
Learn more about ESG frameworks, standards, and regulations around the world:
Global
North America
European Union (EU) and UK
Asia-Pacific
Global
North America
European Union (EU) and UK
- European Union Taxonomy
- Corporate Sustainability Reporting Directive
- Sustainable Finance Disclosure Regulation
- EU Corporate Sustainability Due Diligence Directive
- Task Force on Climate-related Financial Disclosures (TCFD)
- Streamlined Energy and Carbon Reporting
- Modern Slavery Statement
- Diversity and Inclusion Reporting
- Sustainability Disclosure Requirements
- GTAG: Advice on the development of a UK Green Taxonomy
- Transition Plan Taskforce
Breaking it down:
Why finance?
Finance already knows what needs to be done—only through a different lens. Sustainability permeates many activities of a business, and finance has the experience to understand where the organization is on its sustainability journey and where it makes sense to lean in for real impact.
Here are more opportunities for finance
Finance already ‘owns’ reporting
An organization’s finance function is already in place. Broad operations such as controllership, financial planning and analysis, investor relations, internal audit, tax, and others are already built and working. Finance professionals are used to providing consistent data through proxy statements and investor reports, and they’re experienced at helping other business units in the decision-making process. Each of these existing operations has a role to play in sustainability reporting and disclosures.
Finance knows the drill across the organization
With its deep understanding of growth, profitability, and other value drivers, finance is in an excellent position to find, invest, and measure new opportunities. That includes sustainability. Consider what might happen when an organization needs to better understand the impact of a carbon-neutral goal across its factory operations. Finance has the data and skill sets—not to mention the process rigor—to apply a sustainability lens, play a pivotal role in allocation of capital, and predict an appropriate ROI, whether through lowered energy costs, carbon abatement, or increased productivity and revenue.
Finance can make the connections
Finance has been connecting operational and financial data and metrics for years. Now it can do the same through a sustainability lens, recreating key processes such as asset amortization. Need to quantify a climate disruption impact to the P&L? Finance can do that. At an operational level, finance often chairs the specific decision-making events when the enterprise comes together to balance profitability and operational decisions—so adding a new layer of sustainability to these decision conversations is a much more effective way than treating sustainability as its own separate matter.
Great. But what does finance need to consider?
Survive, drive, thrive. Finance can survive by meeting current regulatory needs via accurate internal and external reporting supported by transformed processes and perspectives. It can drive results by helping the organization figure out what’s most important, devising and measuring performance. And it can thrive by instituting new processes, insights, and talent that help push the business toward its sustainability goals and opportunities, even amid sustained disruption. Transformation, automation, and constant evaluation of what’s working are keys to meeting your sustainability objectives. For reporting, that means bolstered data modeling and processes, technologies that allow for on-demand and nuanced pictures of data, and an organizational eye on changing sustainability targets, plans, and regulations. It’s a lot. Read on for what we mean.
Survive
Finance can survive by meeting current regulatory needs via accurate internal and external reporting supported by transformed processes and perspectives.
Strategy
An understanding of the relevant reporting requirements
Materiality assessment and prioritization of internal and external information and metrics linked to sustainability, leveraging peer benchmarking
Defined guiding principles to meet short-term and strategic reporting demands
Process & Technology
Ability to tailor existing processes (both manual and automated) to incorporate sustainability metrics and information
A clear understanding and documentation of manual processes required to collect, aggregate, calculate, analyze, and report on sustainability activity
Data & Analytics
A blueprint of what data is needed, how it is collected, where it is housed, and how it can be augmented to support reporting requirements
An understanding of data gaps and how to remediate them with use of proxies and averages; testing of data sourcing options based on reporting needs
Talent & Delivery Model
Increased awareness and understanding of sustainability metrics and information by finance leaders and workforce
Inclusion of sustainability reporting strategy and execution within existing finance operating structures and workforce
A mindset shift that reporting transparency is a strategic tool to provide consistent, timely, and comparable information on sustainability progress
Governance, Risk & Compliance
Defined SOX-like frameworks to identify risks and controls, document process flows, and identify potential improvement opportunities
Data and performance controls assured and demonstrated accurately internally
Drive
Finance can drive results by helping the organization figure out what’s most important, devising and measuring performance.
Strategy
Ability to interpret and report strategic sustainability decisions into financial and performance impact
Strengthened business partnership between finance and other business units such as R&D, manufacturing, commercial, etc. around aligned sustainability goals and measurement informing decision-making
Process & Technology
Defined future-state technology architecture that integrates ESG tools/vendors with existing infrastructure
Incorporation of sustainability metrics into enterprise performance management and reporting solution implementations
Automation of accounting rules, logic, and sustainability calculations
Data & Analytics
Integration of sustainability operational data from primary sources instead of proxies and approximations
Deployment of common information model for reporting sustainability information
Automation of data collection, cleansing, and attribution; sustainability data mapped with other strategic data
Talent & Delivery Model
Defined-target operating model for measuring sustainability
Use of global business services for data collection and report generation (where applicable) via a shared service or center of excellence
Strategic sourcing of finance talent with experience in environmental science, data science, and social impact
Governance, Risk & Compliance
Sustainability data treated and governed with a similar level of rigor as other strategic data, such as financials, sales, volumes, pricing, etc.
Sustainable monitoring program in place for an ESG control environment
Automation of controls and data assurance
Thrive
Finance can thrive by instituting new processes, insights, and talent that help push the business toward its sustainability goals and opportunities, even amid sustained disruption.
Strategy
An enterprise reporting strategy based on enterprise value creation that balances short- and long-term outcomes and acknowledges the diverse range of resources that add to enterprise value
Process & Technology
A flexible and agile reporting and performance management methodology and infrastructure that can evolve over time as sustainability metrics and decision-making needs evolve
Data & Analytics
Sustainability data as a key driver to understand business performance and support decisions, blended with financial and operational data into meaningful key performance indicators
Talent & Delivery Model
Sustainability embedded in the mindset, culture, and process of finance and reporting; included in performance measurement and management
Finance’s role in sustainability reporting attracts and motivates its finance workforce
Governance, Risk & Compliance
Proactively identify potential risk areas in reporting and controls
Third-party risks incorporated into sustainability reporting and decision-making
How to get started.
This is a tall order, so we’ve built a starting point. Remember: This is a marathon, not a sprint. The goal is to get started and build an appropriate ESG reporting and disclosures foundation for your organization.
Become an ally to your chief sustainability officer (CSO)—
if your organization has one, that is. Your CSO likely has one major mandate: to build a clear strategic vision for sustainability across the organization. As a finance leader, your job is to figure out how reporting can support that vision and how finance can help achieve it. A CSO may not know the questions to ask or appreciate all that goes into reporting and disclosures. A finance leader can help guide those conversations.
The same goes for your chief information officer (CIO), your chief data officer (CDO), and your chief operating officer (COO).
Read moreThe same goes for your chief information officer (CIO), your chief data officer (CDO), and your chief operating officer (COO)
The value case for sustainability reporting may be clear to you and your CSO, but you both will need significant buy-in from leadership (both at a corporate and business unit level) to realize that value through technology and data investments. Working alongside your organization’s IT and data operations can help future-proof those investments by avoiding the creation of solutions and support capabilities that don’t scale.
Set the tone from the top
Finance leaders should emphasize the importance of sustainability and why finance should understand it and get it right. Get buy-in from your team, and see to it that each member sees the multiple ways sustainability efforts will manifest across business units—and how finance can track each effort.
Remember, this is different—but it isn’t necessarily new
Seasoned finance professionals may remember the many changes made across organizations from scratch to comply with the Sarbanes-Oxley (SOX) Act of 2002, which imposed greater disclosure and control requirements. SOX compliance is complex—and it can serve as a blueprint for the growing requirements of sustainability disclosures and reporting. Finance can adapt the SOX principles and programs that have already proved effective for their organizations. Remember, too, that many of these regulations, voluntary or not, are global, such as the Global Reporting Initiative.
Drive Trust
Consumers have expressed concerns over the validity and accuracy of reported sustainability data. Because finance is grounded in the disciplines of risk, controls, and assurance, it is uniquely positioned to solve for this, drive trust, and unlock added business value. Higher standards for reported sustainability information are clearly on the horizon; who better than finance to shepherd the extended enterprise through that journey? Imagine how trusted sustainability information could sway new and existing customers as they look to do business with those they have shared values with and the significant role finance can play.
Believe
Rules and regulations are already becoming more prolific around the world, a trend that appears likely to continue. More than 1,800 climate laws and policies have been enacted by governments worldwide, and the Paris Agreement currently has 197 signatories,1 not to mention new regulations such as the European Union Taxonomy, Taskforce for Climate-related Financial Disclosures, and Corporate Sustainability Reporting Directive. Even though policy efforts in the United States are in progress, organizations that want to remain globally competitive should operate within the bounds of a complex and growing global regulatory landscape. An empowered finance function can help clarify the reporting impacts domestically and globally.
Ultimately, the vision is yours.
Reimagine the power of sustainability reporting for your organization. You may start with external reporting and compliance, but as you unlock management reporting and performance management, you’ll be able to support better decision-making and create more value for both internal and external stakeholders. Define a reporting strategy and vision that will help you align the organization on material topics and create a road map of how to address reporting requirements.
Keep Moving.
Generations to come will hold organizations—and each other—accountable for incorporating sustainability concepts into their business and personal practices. The ways organizations handle these challenges will continue to evolve, but one thing is certain: Finance can help at each stage of the journey. Reporting is not just for regulations anymore—it’s for telling the story of a sustainable future. By surviving, driving, and thriving, a dynamic finance function can help tell that story, empower its organization, and shape durable solutions. It’s doable, and it’s necessary for a better future—for an organization, and for all of us.
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Partner, Risk & Financial Advisory
Deloitte & Touche LLP
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