Environmental, social, and governance (ESG) factors and metrics, along with global sustainability standards, will transform the role of management accounting and finance professionals as dramatically as technology is transforming finance-function operations and processes. In a conversation with Strategic Finance, Marie Myers, CFO of HP, and KC McClure, CFO of Accenture, talk about the finance function’s ability to take on a leadership role in collaborating across the business to capture and report ESG data in a reliable and consistent way.
SF: How can CFOs and other management accounting professionals contribute to their organization’s efforts to achieve sustainability objectives?
Myers: The CFO is very influential in the organization because you have this unique seat—you cut across the whole company, so you’re a great partner to the CEO and the board in terms of advancing the agenda. Moreover, your ability to ensure that we’re reporting the right disclosures with the right metrics and that we’re making the progress we want to make and to bring that conversation into the executive leadership team and the whole company is important. I must give all the credit to our treasury team for the sustainability bond that we drove. It was a great example of how our finance team can set the bar very high with a build-out and create a capital strategy that allows you to then deliver on these programs.
McClure: The conversation around sustainability was once focused on compliance, which is why people thought about finance. Then sustainability moved into the corporate responsibility arena: It’s the right thing to do. But now it’s evolved into business competitiveness—to be a competitive business, you need to make sustainability commitments and actually deliver on them. We’re working with our clients to help them move from commitment to action. And why is that? Our recently published research on ESG measurement found that companies are behind on the three basics needed to get to outcomes and actions for ESG: data, technology, and skills. We found that almost 80% of finance leaders want to understand the financial risk that sustainability presents to their business, but only 47% have defined the key metrics and data sources for their ESG reporting, and only about a quarter (26%) have clear, reliable data to measure and monitor their goals.
What can companies do? At Accenture, we believe that transparency and accountability build trust with all our stakeholders and help us make more progress. We’ve created a dedicated ESG team within our finance organization, coming out of the controllership organization, which coordinates with an ESG governance board across all Accenture functions. Additionally, we’ve published our inaugural integrated 360-degree value reporting experience, a digital hub that fully describes the value we create through—and measures our performance against—all current key sustainability frameworks.
There’s a lot that needs to be done to rationalize the [ESG factors and sustainability standards] frameworks. But as our research demonstrates, companies are still behind on the basics—data, technology, and skills to move from commitment to action on ESG:
- Data: Only 26% of surveyed finance leaders could agree they have clear, reliable data to measure and monitor their sustainability goals. In many cases, companies need to collect their own data and data on their supply chains.
- Technology: Only 31% of companies surveyed have fully embedded ESG data and measurement into their systems.
- Skills: More than half of finance leaders cite inadequate skills as a challenge to measuring and reporting ESG performance.
SF: What are the best ways that CFOs can promote adherence to sustainability reporting and disclosure best practices?
McClure: Transparency and accountability are critical to building trust and are what stakeholders, who expect tangible progress in ESG and sustainability, want to see all companies and organizations make much more progress on together. Accenture has committed to net-zero emissions by 2025 and to gender parity by that same year; these are business imperatives for us. Companies with consistently high ESG performance tended to score 2.6 times higher on total return to shareholders than medium ESG performers. Sustainability is great for business—not just good, but great for business.
Myers: We’ve been publishing a sustainability report for more than 20 years at HP. [Cofounder] Dave Packard believed that a company that focuses solely on profits ultimately betrays both itself and society. From a cultural perspective, there’s a long legacy and history inside this company of having a broader view on the sense of purpose. We’ve always had a sense that we’re here to not just sell great products, but also do it in a way that creates something better for society. For us as finance professionals, it isn’t an afterthought. It’s part of everything we do here at HP, from working off recycled plastic laptops to the fact that gender parity is one of our goals for 2030, to have 50% female executive management teams. We have a women’s leadership program series inside finance. We play a stewardship role around the [ESG and sustainability] data and disclosures. There’s no better function out there to do that than finance. We’re also an important part of the corporate culture in terms of influencing and helping to reinforce the importance of the ESG mandate across the company. The roles in data and disclosure are a very natural fit. But there’s also an enormous role that we can play in terms of helping to drive that culture and make it part of everyday business because the last thing you want it to be is an add-on. It’s got to be authentic.
McClure: ESG can’t be a bolt-on to your strategy—it must be embedded as a business priority. For example, like all companies, Accenture does measure financial success, but we also need to attract the best people. Employees want to work for companies that do the right thing and have values that reflect their own, so we also measure 360-degree value for all our stakeholders, which helps answer key questions: How are we helping Accenture to run better? How do we help our clients to create business value and sustainable impact? How do we work with our stakeholders in all our communities on sustainability and create a culture of shared success?
SF: How can companies promote trust and confidence in sustainable business data?
Myers: The CFO plays probably the most important role in the house for that governance. Both our controller and head of audit are playing crucial roles in ensuring that we’re well prepared for the SEC’s [U.S. Securities & Exchange Commission] impending disclosure requirements. We’re setting up data frameworks right now with our internal audit team to assess the independence of our own data. HP publishes a sustainability report that our external auditors validate every year or two, just like we do with our financials, using a very similar approach to authenticate the data. We want to ensure that our investors and customers feel that the data they receive is credible and can be relied upon. Investors don’t feel like there’s a level playing field in terms of [ESG and sustainability] data because it isn’t being disclosed formally, so they’ve found it very difficult to understand one company’s position vs. another’s. Until disclosures become a requirement and the SEC takes that next step, it’s going to be very difficult for investors to make informed decisions.
McClure: A number of frameworks exist and, regardless of what the SEC and other governing bodies determine, there are three approaches on which most people would agree. First, we need to harmonize all the regulatory frameworks. Second, let’s not recreate the wheel, since a good number of metrics across frameworks are very similar. And third, we have to make reporting the metrics doable for small and medium-sized companies, which may not have the infrastructure or the ability to create a dedicated ESG team as we did.
Having quality data demands that we have one source of the truth. As a result, you’ll see that a lot of companies in our research have put the CFO in charge of their ESG organization. Once you have a single source of truth, you need the infrastructure to get the data, and you also need to do it with speed and agility, because things continue to change quite a bit. In the meantime, at Accenture, we’re making sure that our data quality is where we want it to be so that we’re ready or ahead of anything that might be required from a regulatory standpoint. We’re partnering with our ecosystem partners to help companies embed sustainability into their business in order to help them meet the expectations of all their stakeholders.
We report on six different frameworks, and we have a digital menu in our new 360-degree value reporting experience that allows all of our stakeholders, including our investors, to see all of our metrics against whichever ESG framework they use for reference. We work with our internal audit team and are working more and more with our external auditors to obtain more assurance over our data, in anticipation of any future SEC requirements. So, we aren’t waiting. We’ve been reporting ESG data, but we knew that we needed to look at our overall sustainability objectives in a broader way and ensure we had all the right tools and processes to capture that data in a reliable and consistent way. We have some dashboard reporting and other various analytics reporting that we’re working on, including for our emissions.
Myers: We’re actually now seeing the requirement in bids, particularly from Europe, on transactions and deals, where we’re being asked to provide a whole set of disclosures for a local deal. It falls naturally into finance and controllership to provide that when the deal comes in, “It’s the X, Y, Z Nordic country that needs this level of assurance around these particular criteria.” So the controller is now in this new seat of also having sustainability compliance [responsibility]. I find it a natural extension of the controller role because they’ve got such good compliance skills. Sustainability compliance is the next hat that I can see controllers and finance professionals having to wear in country to support local business. Finance roles are going to have a very different nuance to them going forward. The whole sustainability compliance element is going to become part of the finance menu of services in the future. If you’re a finance professional, because of the skills that you acquire, it’s a more natural extension to support sustainability initiatives.
April 2022
