The business of green and the role of CFOs

Thursday, 5 January 2012 00:00 - - {{hitsCtrl.values.hits}}

In the light of growing awareness of environmental impact and calls for the private sector to become integrally involved in the $ 100 billion Green Climate Fund, Chief Financial Officers (CFOs) should increasingly be the leaders driving company initiatives for sustainability, Deloitte Director Duane Newman said recently.

Newman’s comments come as the discussions in the United Nations 17th Conference of the Parties (COP 17) enter the second week. In the past week business has consistently highlighted that ignoring the private sector would be perilous to establishing the fund.

There were also substantial opportunities for businesses embracing the green economy, particularly in developing new green technologies. The International Energy Agency has stated the world could need around $ 280 billion to finance energy efficiency initiatives in developing countries, reflecting the Green Climate Fund would be insufficient to deal with the problems.

Newman, who is also the National Leader of Deloitte Sustainability and Climate Change Services, said an independent survey commissioned by Deloitte recently reflected that CFOs were positioned to shape strategy while carrying out their core functions. From their vantage point, the CFO would increasingly recognise the relevance of sustainability initiatives to their responsibilities and seek a greater role in driving those initiatives.

The survey had found that in the current changing global environmental outlook, CFOs would benefit from answering several questions integral to their company’s survival.

These included fully working through the basics of sustainability management in terms of the finance; analysing the extent environmental sustainability impacts on capital investment and mergers and acquisitions; understanding the company’s position in markets linked to the environment and considering stakeholders’ stance on environmental sustainability.

“A large majority of CFOs are aware that sustainability will profoundly affect their mainstream duties, but also that they need to take a more energetic role in embedding sustainability into the business strategy,” he said.

Essentially, astute CFOs could help their companies gain a competitive advantage by developing strategic insights on costs, benefits, risk and opportunities arising from the sustainability imperative.

“The solutions to climate change need to be driven by business,” Newman said.

One encouraging signal emerging from the survey was that nearly half those surveyed were planning investments in equipment for increasing energy efficiency; generating on-site renewable energy or reducing industrial emissions.

These investments were critical to driving down operating and compliance costs and Newman believed CFOs had to have specific goals or targets in terms of energy efficiency rates, environmental regulatory compliance, stability and security of energy supply and adequate infrastructure.

“If CFOs can frame sustainability risks in strategic terms, they can better help management teams mitigate risks and take advantage of the openings that risk can create,” Newman concluded.