By Richard McLean, CFO for SAP Asia Pacific Japan
“To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” These powerful words come from Larry Fink, chief executive of the leading investment firm Blackrock. Fink called on chief executives of companies around the world to prove how sustainable their actions are. “Without a sense of purpose,” he continued, “no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders.”
This responsibility doesn’t just fall on CEOs. Among the many charters for a strategic CFO, running a sustainable business is at the top of the list. Of the many facets of sustainable business, in my opinion, there are three that rise to the top: environmental impact, employee engagement, and fiduciary responsibility.
How involved we become as CFOs in managing these aspects of the business can distinguish who we are as leaders and our legacy.
The following focus areas can help CFOs run a responsible and sustainable business:
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- Reduce your environmental footprint. Running a sustainable business means mitigating our impact on the environment and the planet. We have a responsibility to manage our assets and resources efficiently, whether that’s electricity, water, or commodities in the supply chain. As CFOs, we can financially support the adoption and deployment of tools and programs that enable environmental sustainability. It’s a proven view that a sustainable business is good business. A study by The Conference Board shows that revenues from sustainable products and services can grow at six times the rate of overall company revenues within the same sample of companies examined.
- Drive employee engagement in non-traditional ways. There’s also a human aspect to running a sustainable business. To do that, we need to attract and retain the best people. Increasingly, smart people are motivated by more than just taking home a paycheck. What’s more important is having time to explore interests, collaborate with other like-minded colleagues, and to work together to do great things in the world and in society. That can become a very engaging and energizing concept within an organization, if it is harnessed properly.
- Ask tough questions related to compliance, business ethics, and trade. Running a sustainable business must also focus on compliance, fighting corruption, and ensuring fair trade practices. With better transparency into the supply chain, for example, companies can identify and eliminate use of slave labor in the manufacturing process and supply base. As CFOs, we can help to ensure that our organizations have the transparency needed to avoid those practices and defend our business against suppliers that are not trustworthy in this regard.
One of the purposes in running an intelligent finance organization is to make sure the business is doing the right thing for its customers. The importance of doing this is best illustrated by looking at what happens if company culture fails to reward honesty and integrity. Consider the royal commission that’s happening in Australia at present, investigating misconduct among banks and financial services firms accused of subverting their customers’ best interests to improve their own financial results. Board members are resigning, institutions are being fined in the millions, reputational damage is profound– and it’s not over yet.
Staying the course
Among all of the companies pushing for success in a very competitive environment, some have lost their way. Without a guiding purpose, it can be easy for a brand to find itself on the wrong path. When the right questions aren’t asked, companies risk losing integrity and trust by the bucket load – and it’s easy to see how this could happen. We’re all under pressure to deliver short-term results but focusing on internal requirements or sales targets to the detriment of our customers is not a recipe for long-term sustainable success. Short-term ups and downs in business are normal. What’s most important is that the decisions CFOs and other senior executives take are aligned with the long-term interests of customers and the long-term business’ strategy.
Running a sustainable and purpose-driven business is not just the CFO’s responsibility; it ties back to the board. CFOs often sit on the board to ask the tough questions– for example, “Do we have robust policies around compliance and programs focused on customer success? Does our culture embrace acting in the best interest of the customer?”If CFOs are not asking these questions, then chances are nobody else is. We need to understand and accept that that’s a big part of our job.