The role of the CFO is changing profoundly. Their responsibility used to be mainly around financial reporting, but now meaningful reporting on Environmental, Social and Corporate Governance (ESG) is expected from them as well. This means having the right data is key. And to achieve this automation is a crucial ingredient. Reason for The CFO Automation Experience to host a round table on the CFO, ESG and automation.
More and more the CFO has to report on ESG, the same way they report their financial numbers. David Wray, Global Accounting and Reporting Senior Director at Huawei, explains: “The CFO is primarily tasked with managing the data lifecycle within organizations, because ultimately that data leads to what’s disclosed externally and what’s shared with a variety of stakeholders. So financial reporting is now a mature process. There’s a lot of automation in it, although it might still have some room for improvement. But sustainability, or ESG, is nowhere near that level of maturity. So it’s a real struggle from the CFOs perspective around managing data lifecycle, both from the point of creation or inception.”
So the question now is how to manage automation to get the right output that is reported to a variety of bodies. Wray: “In this area there’s a lack of interoperability between the dozens of standards that are out there for sustainability. There’s a lot of confusion, from the CFO perspective, it almost feels like an alphabet soup of data. With automation you can manage this data lifecycle, and bring it into a structured, trusted, discoverable set of information that ultimately benefits all stakeholders.”
Integrated thinking
Liv Watson, Senior Advisor and Digitization Lead at Impact Management, adds: “For the CFO the changing role means you have to start integrated thinking, it isn’t just about the financial numbers anymore. You see many CFOs signing up to drive their organization toward net zero, and actually making public statements that they are going to help drive the organization. But the key thing for the CFO is really you need to have the data to make good decisions. We need accurate, timely, auditable, trustable data, to enable integrated thinking inside the company.”
“We don’t just make decisions on financial information. The CFO needs trusted, auditable data to make decisions and meet compliance needs. And today, not integrating ESG into the company’s strategy has economic impact. Investors are driving sustainability, so asset managers and others will have to assess each investment they make toward sustainability impact. Managing all of these financial data and transactions is going to be a challenge for the CFO. Digitization of data has actually become a topic. If you can’t get to the data, you’re not going to be able to get good decision. So I am happy that digitization and automation of information actually get the attention that it needs.”
Challenges
Lodewijk Lockefeer, CFO at Zeelandia says: “I work in a family company, which makes the discussion a little bit more intuitive because family companies naturally take care of their environment, their stakeholders, and we don’t even write it down. Of course, now we need to be more explicit in what we do. We definitely need to get the information to our stakeholders.”
“But what I would like to add is that I believe a CFO should take up three challenges. Of course there is the reporting challenge. We also have to mobilize our organizations much better. And we should act as leaders to try to get the business value on the table. These three things are connected to each other, and we have to expand our reporting towards non-financial reporting and stakeholder-reporting and impact- reporting. We need to learn and use our experience in financial reporting to get to trustable reporting on ESG.”
Chief Sustainability Officer
Rajesh Garg, Group Chief Financial Officer at Landmark Group, confirms this: “I am not only the Chief Financial Officer, I’m also the Chief Sustainability Officer. We are a retail leader, In India for example we are very big. With 2.200 stores, 30 million square feet of space and 55,000 employees. That is a big carbon footprint. And finance is at the eye of the storm. We are present across the entire value chain through the company: design, sourcing, manufacturing, logistics, selling.”
“This obviously makes us the perfect source for all the data because we are unbiased. Data integrity is going to become extremely important. Finance, again, is the most qualified to do it. And how do you pay for it? It’s an expensive shift, if you have somebody else driving it then the CFO is just continuously pointing to the extra cost instead of finding a solution. So I think the best people to find a solution to the transition are in finance.”
Automation
He thinks there is a clear link to automation. “We have to add an army of people to do the data collection and reporting. This makes it even more challenging and more difficult. Therefore we have got to rely on automation from day one, to make tracking and driving sustainability highly automated.”
Wray: “What’s really interesting in this conversation, and where automation plays a really interesting role, is thinking about understanding cause and effect. When you think about sustainability, you think about the context. This is where Europe is really driving the conversation globally. But what impact is the company having on the environment? And what does that mean for our decisions today? That is where I think some of the augmented analytics are going to be absolutely critical to help the CFOs make that shift.”
Watch the recording of the round table at The CFO Automation Experience
