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The importance of sustainability and finance alignment
How can sustainability leaders get CFOs on board with their strategies? They must speak the same language. Cut the jargon and translate sustainability values into business terms.
As corporate budgets tighten, sustainability initiatives often face cuts.
This is primarily because sustainability and finance don't speak the same language. Many executives view sustainability as an initiative that requires more upfront costs -- for example, investing in sustainable materials and waste management programs -- without an immediate ROI. When sustainability teams approach a chief financial officer (CFO), they come armed with the universal sustainability benefit: protecting the environment. What the CFO wants to hear about is quantifiable growth, which ultimately leads to ROI.
"We need to actually get our hands dirty and start talking the language of business, and we need to see and understand how we contribute to the profit-making engine," said Steve Rochlin, CEO of consulting firm Impact ROI, in a session at the GreenBiz conference in Phoenix.
What sustainability leaders are investing in
All business leaders understand risk management. And that's what sustainability leaders are investing in, said Dr. Matt Gardner, founder and managing partner of Sustainserv, a sustainability consultancy.
"[Businesses are] investing in climate risk and resilience. They're understanding risks and dependencies of their supply chains and building systems for their supply chains to adapt to disruption," he said in an interview.
When businesses invest in risk management, they prepare to withstand disruptions, including geopolitical tensions and pandemics such as COVID-19, which affect supply chains.
Supply chains, in general, are also critical investments. Policies such as the Trump Administration's tariffs have forced organizations to reevaluate their supply chains, potentially leading to additional costs. Further investments in supply chain mapping tools can help organizations mitigate many of these risks.
Whether an organization must account for its Scope 3 emissions or adjust its supply chain partners, it won't know the real issues it faces without quality data -- which, in turn, requires additional investments. With the right tools and methodologies, businesses can improve their supply chain data. However, data can still be tricky to gather, making it harder to translate for CFOs and finance teams.
How to get support from CFOs
At their core, sustainability efforts have one key underlying strategy: Investing in sustainability is the right thing to do, and investing in sustainability means investing in the Earth. Yet sometimes hope is not the best strategy -- and it rarely delivers tangible ROI.
However, sustainability does have tangible benefits. If it didn't, greenwashing wouldn't happen. So, it's a matter of proving its ROI in terms that finance leaders understand to overcome the language barrier between sustainability and finance teams.
Sustainability and finance teams share a crucial commonality: They both have complete views of the entire business. While their lenses differ, this shared view can help sustainability leaders meet finance teams where they are.
To start, sustainability leaders can achieve quick ROI wins in areas with clear financial benefits, such as energy efficiency and renewable energy. Bigger wins require sustainability leaders to understand finance teams as much as they want a reciprocal understanding of sustainability.
For example, sustainability leaders can read their business's quarterly earnings reports or other public financial documents, said Christine Daugherty, chief sustainability officer at Conagra Brands, during a GreenBiz session. These forms show what groups within the business are performing well, which aren't and how the business makes money. With that insight, sustainability leaders can build stronger pitches that are more likely to secure financial support.
Moreover, bringing wins to the company during times of disruption is critical, Daugherty said. This can involve documenting exactly how a particular investment supported a specific sustainability attribute -- for example, renewable energy.
Translating sustainability goals into broader business language
Overall, sustainability and finance teams must trust each other. When that happens -- and when CFOs understand that sustainability teams also want to bring the most value to the business, its finances and its reputation -- they are more likely to get on board with sustainability initiatives and even grow their own ESG muscles and vocabulary.
And it's possible. Daughtery said her company's finance leaders know the differences between Scope 1, 2 and 3, and their associated risks. Teams that can make these fundamentals clear and easy to understand -- and cut the jargon -- are more likely to gain the backing they need from finance teams and CFOs.
"Go back to this value creation concept -- really focus on the fundamentals and think about things in terms of risks and opportunities, because that's a language that any C-suite or risk committee on a board of directors understands," Gardner said.
Michaela Goss is a senior site editor for the IT Strategy team at TechTarget.
