With new sustainability disclosure regulations on the rise, companies face mounting pressure to deliver transparent, reliable reports on how environmental and social issues affect their business. Many are also taking a hard look at how they can drive sustainability initiatives and identifying who in the organization may lead them. In turn, sustainability’s center of gravity is shifting to the chief financial officer (CFO) and the finance function (including the ESG controller). These leaders have the technical acumen to produce this reporting alongside traditional financial disclosures, can align sustainability initiatives with long-term planning and can allocate the capital needed to successfully execute sustainability strategy.
CFOs already hold one of the most challenging positions within the C-suite. They juggle managing financial stability with setting strategic vision. While they specialize in corporate reporting, they aren’t just number crunchers. They’re relationship builders and innovators, vital to the business, who are using technology and data to better assess risks, manage cash flow and identify new growth opportunities. They’re doing all this while navigating a maze of tax laws and global regulations — including those around sustainability.
That’s a lot for the finance function to tackle, but some CFOs welcome this widening of their roles. They see these added responsibilities as a natural extension of their focus on long-term value and performance. And there are powerful incentives to meet this challenge head on. The global transition to a sustainable economy brings opportunities for investment, innovation and growth. PwC research shows that the companies that take more action on climate-related opportunities and risks can have better financial performance.
PwC’s playbook can help CFOs and their teams understand sustainability’s impact on their business, focus on high-value activities and build the skills they need to lead on these issues. It covers key disclosures, compliance and creating value from sustainability investments, equipping your organization to stay ahead.
Sustainability initiatives can be complex. They typically span multiple geographies and locations, require alignment across business functions, can involve working with third parties and necessitate permitting and approvals. At any given time, companies may have multiple sustainability projects happening simultaneously across their operations.
As markets shift, corporate sustainability plans can fall behind. But forward-looking CFOs know that giving these initiatives the same strategic importance as other endeavors and embedding sustainability into corporate strategy can lead to significant financial and operational benefits. To keep these projects a priority, they earmark financing that allows for completion and they establish an internal cost of carbon, which helps them compare the capital costs of decarbonization projects and the costs of other projects on equal terms during the selection process.
CFOs driving sustainability need to unite the organization. Without company-wide buy-in, the strategy may stall.
So how do finance function leaders get the company to think differently about sustainability? Start at the top, with the CEO and the board. CFOs, alongside sustainability leaders, play a pivotal role in showing CEOs that sustainability fuels long-term growth and resilience. Integrating sustainable practices with strategy can boost financial performance, reduce risks and elevate your brand, setting your organization on a strong path.
Meeting sustainability goals with capital projects requires new approaches as they grow in number, complexity and scrutiny. Companies may be planning or executing a variety of projects, from upgrading HVAC systems and installing smart sensors to control temperature and lighting to larger initiatives like solar panel installation or moving to LEED-certified offices. Utilities may even undertake billion-dollar megaprojects like building power plants to meet soaring energy demand, requiring vast resources and years to complete.
The ability to invest in sustainability projects and new technology has never been better because of an unprecedented wave of sustainable tax credits, incentives, grants and other funding sources available to the companies planning, constructing, funding, etc. such projects introduced by the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.
Taking full advantage of these incentives, however, requires careful planning and a nuanced grasp of the evolving commercial, legislative and regulatory landscape, especially post-election. A multidisciplinary approach towards evaluating investments and how the tax incentives and grants can reduce their costs is critical to optimize the cost of the investments. The approach should combine the members of the tax organization with operations, sustainability, capital projects, treasury and business development to optimize the tax costs, increase the return on sustainability investments and deliver value to the organization. Depending on the type of the investment, the tax credits may be transferable creating additional value for the organization.
But there’s a disconnect when it comes to involving the tax team in strategic decisions. PwC’s Global CSRD Survey found that tax was the least involved in ESG reporting efforts of 12 functions studied. That’s a missed opportunity. Tax teams may be unaware of how regulations like CSRD could impact their statutory and tax reporting strategy, governance and risk profile, while sustainability teams often view tax as simply a financial line item rather than an integral piece of the sustainability picture.
In the past, sustainability reporting was voluntary, guided by what companies considered relevant to investors and stakeholders. Now, mandatory reporting has introduced accounting-level rigor to global sustainability disclosures. A key shift? Extraterritorial impact — these rules affect entities beyond their direct jurisdictions.
This new era demands tighter collaboration between finance, accounting and sustainability teams. With penalties for noncompliance, CFOs, ESG controllers and sustainability leaders need to consider developing a keen understanding of how ESG data flows through company systems, from sourcing to collection, cleaning, storage and calculation. Building strong controls and processes around this data allows them to quickly detect inconsistencies.
ESG data of all stripes are the foundation that underpins sustainability strategies. The insights gleaned from this information inform a company’s view of its carbon footprint, help determine the selection and sequencing of projects to reduce emissions and influence the targets you set and the timeframes for meeting those goals. If the data is of poor quality, companies may get the false sense that they’re making progress, leading to wasted resources, time and capital.
CFOs, working with CSOs and technology leaders, can put in place effective controls, processes and governance that allow companies to have greater confidence in the lineage and traceability of data and to seamlessly collect and share reliable and thorough information not only across the organization — finance, operations, procurement, sustainability, human resources, risk — but also between supplier and customer. Equipped with a holistic view of the organization, this process can allow company leaders to make impactful decisions that enable sustainability initiatives to not only be effective but transformative. In turn, CFOs can act confidently to reconcile long-term vision with near-term challenges and regulatory commitments to shape a strategic direction for your sustainability initiatives that drive value to the business.
As the role of the CFO expands with a focus on sustainability, so does the influence of the finance function. But talent with the necessary experience and tech skills is scarce. CFOs may need to reimagine roles and reskill staff, enhancing both technical and nontechnical skills like passion and teamwork, which are equally vital.
Managing a sustainability strategy requires CFOs and their teams to develop key skills, take on essential roles and continuously upskill as sustainability topics evolve. CFOs need to integrate these elements into financial planning, risk management and reporting, using strong analytical skills to assess long-term financial impacts of sustainability initiatives and effectively communicate these impacts to stakeholders.
A crucial addition to your finance team the last few years is the ESG controller, a role dedicated to overseeing the company’s ESG reporting initiatives and a key driver of collaboration across the organization. The ESG controller leads the timely tracking of sustainability metrics, aligning with regulations and stakeholder expectations. By centralizing ESG responsibilities, this role allows CFOs to focus on strategic issues while making sure that sustainability remains a priority.
Every day, leading companies are transforming their operations by embracing and embedding sustainability into their broader strategies. Enabled by technology, these companies look at sustainability holistically, using data, analytics and other tools not just for compliance and reporting requirements, but also for identifying ways to reduce energy demand, cut costs, drive growth and build long-term resiliency.
Even if your company is advanced in its sustainability program, you’ll need to prepare for future requirements. Global regulations may soon mandate reporting on deforestation, sustainable packaging, human rights and nature impacts among other things. This complexity underscores the need for effective sustainability reporting strategies.
This playbook serves as a detailed guide for CFOs, ESG controllers and finance leaders to take on sustainability challenges and drive meaningful change. While the surge in ESG reporting requirements is a primary consideration, CFOs and their teams can also prioritize embedding sustainability across all business functions and integrating these metrics into financial planning, risk management and corporate strategy. This approach not only mitigates risks but also reveals growth opportunities, transforming sustainability from a compliance obligation into a strategic advantage.
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