CFOs have now become cornerstone leaders for reporting on sustainability in the Asia-Pacific, just as the business landscape shifts with rapid intensity-toward a new era where sustainability is fast becoming a pivotal business focus. In Deloitte’s series of latest reports, “Asia Pacific Mandatory Sustainability Reporting”, 32% of the companies appointed CFOs as accountable executives for the sustainability reporting. Another 16% have shared this responsibility with CSOs. The trend shows that the space of CFOs is increasingly being recognised in sustainability challenges and opportunities.
Growing Relevance of CFOs
As sustainability performance increases in the notice of boards, investors, and regulatory bodies, there is an added responsibility for CFOs to ensure that their organizations meet the stringent demands of assurance-ready sustainability reporting. For example, Josette Soh, Sustainability & Climate Assurance Partner, Deloitte Singapore, emphasizes that the ever-changing and complex requirements for mandatory sustainability reporting needs differ and vary widely by geographies across Southeast Asia. That is to say that in this complicated business environment, CFOs need to really learn navigating through what may seem like complexities of compliance and reporting standards.
However, the challenges that CFOs face are more serious. In fact, 60% of organizations state that they cannot predict accurately how many resources they will need to deal with new loads related to sustainability work. Furthermore, companies that try to estimate their current and future needs state that their needs may double over the next few years. This would be a cause for concern, and companies need to look at the current situation and prepare themselves for the future sustainability reporting demands.
Building blocks for reporting success
The second paper in the series from Deloitte was “The CFO’s Building Blocks for Success” that delivered key areas of focus for CFOs: people, processes, and data management. More than 45% of companies have indicated gaps in their sustainability reporting capabilities that might prevent them from being compliant with new standards. Deloitte’s SustainNext was key to helping clients assess their needs and benchmark to established standards to solve these challenges.
Many companies have adopted, in recent years, an optimization path rather than a strategic investment in new systems. By optimizing data management, consolidation, and automation, CFOs can make sustainability data processes more like assurance standards. Optimizing, in this sense, not only supports better compliance but also enhances operational efficiency.
Value Beyond Compliance
The third in the Deloitte series is “How CFOs Drive Impact and Realise Value, that clearly takes into account that sustainability reporting also creates great value on its own and should not be viewed solely as a compliance obligation. Conversely, CFOs will create business insights from their sustainability data to drive strategic decision-making. Ho Kok Yong, Deloitte Asia Pacific CFO Program Leader, comments, “As boards and leadership teams sharpen their focus on sustainability, CFOs can create positive impact by applying a value creation lens.”.
Interestingly, 35% of organizations report increased revenue as a direct effect of their sustainability efforts. Companies dedicated to ‘people and planet’ also see enhanced employee engagement, which can be perceived as an expression of the company’s interest in sustainability as a strength for compliance and general business resilience.
This evidence indicates there is an organic connection between sustainable practices and good business outcomes.
Future of CFOs
Sustainability reporting requirements are shifting in the Asia-Pacific region, and with this shift, the role of the CFO will be equally important. Regulation is growing, and CFOs must construct a sustainable framework that supports the compliance requirements but still enables delivery of long-term value to the business. Successful leveraging of existing resources across all areas, including data management and stakeholder engagement, therefore enables CFOs to navigate their respective companies through the complexities of sustainability reporting.
In summary, the Deloitte report series demonstrates a very clear pattern in changing corporate dynamics respecting sustainability. The CFO of the future is an indispensable leader on this path to sustainability-a post that wields authority and insight capable of influencing compliance as well as strategic direction. Having assumed the challenge of accounting for sustainability, they will ensure that their organizations meet the rule of law but are successful in a future where sustainability becomes part of business performance.
In the context of such change, effective leadership by a CFO would come to play a decisive role in building a sustainable, resilient business environment in a region that faces significant change, as companies now begin to grapple with transformation. Ultimately, the symbiosis between the finance and sustainability teams would then have established an environment where compliance and innovation thrive together.