Flip the Script in Finance – The Treasurer as a Sustainability CFO

As stakeholders increase their calls for bolder climate action and social responsibility in 2024, corporate treasurers find themselves intertwined with rising ESG expectations. Their financial oversight and risk lens make them worthy champions of sustainability in today's businesses.

However, organizational silos and competing priorities continue to prevent finance departments from leading ESG efforts in most companies.

The Ministry of Finance is essential for implementing ESG

Of all the finance functions, corporate finance teams perhaps pride themselves on having the most direct visibility into specific ESG progress and reporting. They structure financing arrangements to fund green infrastructure projects. They manage investments and cash that is allocated based on ESG criteria. They focus on risk management and incorporate sustainability considerations into their strategic decision-making. Understanding data streams and compliance requirements also enables comprehensive and consistent ESG disclosures.

Simply put, treasurers' commitment to ethical and responsible growth reaches deep into modern complex organizations. As expectations rise, their increased participation is essential to align companies with society's needs. Especially as governments agree to bolder emissions targets and investors tighten targeted ESG obligations.

However, few corporate finance teams are currently implementing sustainability considerations across relevant elements of their roles, despite the potential impact being enormous. As organizations place greater emphasis on environmental and social governance during 2022, most businesses continue to struggle to play catch-up.

Resource and data constraints hinder progress

What explains this lag, given that Treasury appears to have significant capacity to drive positive ESG change? without worrying about spearheading major financial initiatives, just fighting to juggle extensive day-to-day responsibilities. Some lack the professional skill set or sustainability fluency to lead with confidence. Some point out that ESG comes with compliance risks that need to be carefully assessed before engaging.

However, Treasury's most consistent pain points center around resource constraints, lack of data, and organizational misalignment that prevent teams from realizing ESG potential.

1. Overburdened teams struggle with ESG implementation – Corporate treasurers grapple with a wide range of cash, risk and liquidity management priorities every day. A small team has little bandwidth to properly track sustainability metrics or program climate change mitigation efforts without increasing headcount. It is difficult for distributed staff to meaningfully incorporate yet another complex set of priorities.
2. Fragmented access and visibility to ESG data – Required emissions, diversity, ethical sourcing, and other ESG data resides across different silos within a company. Without a centralized pool of information, finance teams will face a huge uphill battle to manage and report on the sustainability footprint of their entire enterprise.
3. Misaligned incentives and performance metrics – The success of corporate treasurers still relies heavily on traditional metrics such as working capital efficiency and bad debt reduction. Without tangible sustainability results and incentives tied to action, it's difficult to keep the team focused on his evolving and amorphous ESG concerns.

Closing the ESG ambition gap

Still, treasurers keen to drive progress enjoy a clear path to addressing the resource shortages, data access issues and incentive misalignment that currently hinder ESG participation. Companies that can expand can gain internal influence, professional development, and competitive differentiation.

Treasurers prioritizing substantive ESG initiatives can consider the following actions in 2024:

1. Clearly secure dedicated team resources to lead ESG finance initiatives as part of a multi-year growth plan
2. We actively train our staff on environmental, social and governance issues, including through internal workshops and external certifications.
3. Deploy a financial system that centralizes real-time ESG data across your enterprise to enhance intelligent decision-making and reporting transparency.
4. Establish ESG key performance indicators linked to sustainable lending volumes, ESG ratings of investment portfolios, emissions reduction financing, etc.
5. Develop a formal partnership approach with your corporate sustainability team to break down silos and align priorities with mutual goals.

Through strategic allocation of resources, skills development, data integration, shared accountability, and aligned incentives, corporate treasurers can pivot their organizations from ESG inhibitors to ESG drivers in 2024. Masu.

Organizational and social opportunities outweigh inertia. Solutions exist for motivated teams to bridge the ambition gap. Through this decade of proactive financial management, we can demonstrate that climate resilience, ethical integrity, and economic prosperity do not have to be mutually exclusive. Competent and motivated corporate treasurers can play a key role in creating a sustainable future.