This article is a contributed piece by Anthony Coletta, Chief Financial Officer of SAP North America. The views expressed herein are solely those of the author.

As carbon emissions continue to rise and calls grow for a more robust system to address climate change, sustainability has never been more important to businesses. However, due to a long-standing lack of uniform standards in this field, tracking relevant metrics has been difficult, a situation that has persisted for quite some time.

This is partly why many sustainability initiatives have failed to gain traction over the past decade. For example, in 2012, the Accounting for Sustainability project, which promotes a more sustainable financial system, conducted a survey of CFOs. Respondents described the environmental and social impacts of sustainability as "unclear" and said their relevance was "not yet proven."

Today, a year after a global pandemic, reflections on racial equality, and heightened climate threats, those doubts have been replaced by new questions: What form should sustainability take? Who should drive its realization? And how should it be measured?

This new way of thinking is epitomized by a corporate reform movement known as "Environmental, Social, and Governance" (ESG). A growing number of companies are looking to CFOs to play a pivotal role in this transformation.

In short, sustainability must become an integral part of a company's long-term transformation strategy and be embedded in its overall mission. CFOs should lead by example, particularly in measurement, process integration, and best practices.

The CFO Opportunity

Research by Harvard Business Review earlier this year found that for many companies, non-financial metrics such as carbon emissions and energy output can generate hundreds of millions of dollars in savings or even growth; for large enterprises, this figure could reach billions.

The long-standing dichotomy between financial performance and sustainability has historically obscured this reality. Additionally, other challenges include the difficulty of measuring "intangible" benefits, the challenge of accurately capturing and comparing sustainability performance data, and the perception that the monetary benefits of sustainability activities are insufficient to justify the effort of tracking them.

For CFOs, now is the time to explicitly link finance and sustainability and seize the growing ethical and economic opportunities. We must incorporate climate change into decision-making processes just as we do interest rates or cash flow.

How can CFOs steer their companies onto the right track? Starting points include:

  • Connecting sustainability performance measurement to value creation
  • Improving internal and external reporting
  • Enhancing information quality through internal control oversight
  • Managing risks associated with sustainable business plans
  • Strengthening supply chain or procurement/sourcing oversight

A Green Touch

Almost every day, companies announce new carbon emission and net-zero targets, but how many have set quantifiable metrics? And in the absence of globally recognized sustainability standards, how can we trust the resulting reports?

The road to harmonization and consistency is long, but it is being paved. For example, the World Economic Forum has developed a set of standards based on "Governance, Planet, People, and Prosperity" (recently agreed upon by the Big Four accounting firms), enabling companies to set and understand performance metrics focused primarily on activities within organizational boundaries, such as emissions, diversity, and anti-corruption. For instance, the Big Four standards specify which greenhouse gases should be tracked—carbon dioxide, methane, nitrous oxide, fluorinated gases, etc.—and how to measure their release.

Recently, the U.S. Securities and Exchange Commission announced its intention to issue new rules requiring listed companies to disclose more information about how they address climate change. This could be an important step in understanding specific risks and opportunities, not only at the individual company level but potentially on a global scale.

For CFOs, the path forward may seem chaotic, time-consuming, and ambiguous, but this is a historic moment to address these challenges. Of course, the world will not change overnight, but be clear: the decisions you make today will have far-reaching impacts.

As the primary financial advisor to CEOs, investors, and shareholders, CFOs are well-positioned to develop and present innovative sustainability strategies that can positively impact the company's bottom line. This role is about raising awareness—by hosting sustainability-themed events, reporting clearly, and continuously communicating the benefits.

For example, SAP hosted its first SAP Sustainability Summit in April, showcasing our suite of sustainability solutions that can help organizations move toward becoming sustainable enterprises. Other steps that can be taken include:

  • Setting science-based targets for sustainability goals
  • Developing data-driven goals that support social issues
  • Establishing strong governance structures
  • Designing an executable roadmap of strategic initiatives

By embedding sustainability initiatives into the fabric of the finance function and the entire enterprise, the responsibility for sustainability transformation becomes inescapable, and the path forward becomes feasible.

Four Roles to Play

At SAP, we work year after year to reduce our own footprint. By embracing analytics, reshaping procurement, and introducing integrated reporting, we have topped the Dow Jones Sustainability Index. SAP has maintained its leadership in this ranking for 14 consecutive years and takes its responsibility as a sustainability leader seriously.

While there is still work to be done, it is instructive to consider how an organization like ours, focused on delivering transformative change for our customers, can achieve transformation within itself.

For example, I like to think about the CFO's role in sustainability through the four key roles articulated in a recent Deloitte research report.

1. Catalyst

As Deloitte puts it, CFOs have the ability to drive a timely transition to sustainability, not just within the finance function but across the entire enterprise. By mobilizing all levels and departments, CFOs can ensure the willingness and budget needed to implement the required practices and plans. The catalyst role ultimately shapes the company's future by guiding sustainable financial success.

2. Steward

CFOs must also protect the company's key assets, ensure compliance with all regulations, and effectively communicate value to investors, stakeholders, and the board. No one is better positioned to embrace sustainability initiatives and quantify their impact on long-term performance.

3. Strategist

CFOs must leverage their core skills in resource allocation, reporting systems, and financial analysis to facilitate the transition to a sustainable enterprise. They are already adept at quantifying the financial value created and smoothly integrating new initiatives into the overall corporate strategy. They have the ability to get everyone on the same page and aligned.

4. Operator

Finally, CFOs must ensure their departments operate efficiently, provide reliable sustainability information, and ensure timely improvements in reporting. This means integrating new data sources, data streams, and possibly entirely new systems. Everything must ensure rapid access to and interpretation of all developments.

To be clear, this is just the starting point for today's CFO conversations.

But it is a simple starting point: companies that treat the environment and their employees well have greater potential to become long-term investment choices for all stakeholders. This is all possible because the finance department holds the purse strings. This has become a core mission for a growing number of companies, a growing expectation of employees and customers, and a priority for many investors.

Admittedly, there is still work to be done in building the necessary infrastructure, creating appropriate frameworks, and organizing systematic reporting to capture future trends. But no one is better positioned than today's CFO to answer tomorrow's questions.

Are you ready to lead the way?