Chartered Institute of Management Accountants
The Chartered Institute of Management Accountants (CIMA), in an essential new report titled ‘Sustainability performance management: How CFOs can unlock value’, offers specific recommendations for Chief Financial Officers (CFOs) and senior finance professionals in the Middle East.
The report highlights how finance professionals have the potential to become key players in corporate sustainability.
The study, compiled by Accenture on behalf of CIMA, is based on two surveys; one an Accenture survey of 85 decision-makers in the field of sustainability performance management (SPM), the second a CIMA survey of over 800 finance and sustainability professionals. It also includes interviews with senior executives at global healthcare giant, Novo Nordisk, and leading international bank, Standard Chartered, which focus on challenges in valuing sustainability, integrating sustainability management and reporting, and driving business performance through sustainability.
Sustainability, and the value it creates, must be quantified and linked to business performance if the considerable benefits are to be realised. A robust SPM capability provides the information required for decision-makers to identify and create value from the sustainability levers relevant to their business. This demands well thought-out and consistent metrics and appropriate use of technology.
Geetu Ahuja, Regional Manager, Middle East at CIMA, said: “Sustainability is an often talked about, but much less implemented concept in the Middle East. Companies are developing sustainability strategies in a clear, structured and rigorous way. But many are failing to uncover the latent value it can bring, or link it explicitly to business performance.”
“This report underlines just how powerful the CFO and finance function can be in making the case for sustainable behaviour, and realising the value that sustainability can bring to the business. 80% of respondents to the CIMA survey said that finance should be involved in climate change initiatives. It is a surprise that so few CFOs and their teams have direct responsibility for SPM.”
In the Middle East, CFOs were unanimous on their views on sustainability and its potential to drive business value. They felt that a sustainable approach delivered competitive advantages, built strong and lasting customer relationships, and created long-term stakeholder value.
Imran M. Ahmed, CFO, Al Koot Insurance & Reinsurance Co. Qatar, said “We believe that sustainability performance has a positive correlation to economic and environmental performance. Organisations should have a strategic long-term vision in place to optimize SPM across all levels. A positive knock-on-effect of this will be improved financial performance over the long-term, including increased CFO responsibilities, with a lead role in an organisation’s decision-making process.”
Finance professionals have the power to encourage the board and senior management to commit to sustainability by providing reassurance, and proof, that it can be measured and monitored and taken into account in day-to-day decision making.
Explaining this subject further, Tumuluru Sri Ramchander, CFO, Strategic Food International, UAE, said “Sustainability as a concept is comparatively new in this region and hence there is a strong need for training and education across all levels. To support sustainability, there has to be a cultural and a social change, initiated by government and private sectors, with institutional support offered on building awareness on business opportunities.”
“As an organisation we have moved to more environment friendly and cost effective solutions to eliminate waste and bring a real impact on the bottom line. Our finance team is the score keeper and develops metrics that records effective cost reduction programmes in the annual budgets. In this regard, CIMA trained staff are best equipped to keep track, highlight and give pointers on SPM, a positive value add in an arena where cost push will drive out traditional accounting roles into low cost geographies.”
“In the near future, CFOs will take a leading role in driving sustainability as organisations see new ways of cost leadership, increased emphasis on brand and corporate image and the genuine need of business entities playing a role in CSR , transparency and governance.”
With the right support, finance professionals, and chartered management accountants in particular, can become the builders of sustainable organisations and guardians of the public interest as they will be equipped with the right tools in terms of enterprise governance, cost leadership, business partnering and, above all, an understanding of the importance of accountability.
Ammar Aqeel, CFO, BMMI concluded “Sustainability should reside at the centre of what organisations do, to ensure that their vision and strategic objectives are robustly defined and managed. That said, sustainability is everyone’s business and its execution should also involve an organisation’s subsidiaries and supply chain. Contrary to common belief that such an initiative adds cost and bureaucracy, organizations properly implementing SPM should see an increase in value and long term shareholder wealth. This will also ensure that CFOs will play a substantial role in business growth. I believe that sustainability will further grow in importance in the region in the next 5-10 years.”
The report suggests the earlier CFOs and their teams engage with sustainable practices, the greater the benefit they can bring. Many roles can advise an organisation on how sustainability performance should be measured, but few are as convincing as the CFO when it comes to demonstrating not only what should be measured, but also how this creates business value and sustainable organisations.