When the money people become the green money people

The finance team and the sustainability team have long been like horses in a race. They’re running on the same track but in parallel lanes, sometimes wearing blinders that can limit what they see of each other.

They both collect large amounts of data to understand the progress of the company. They both have targets they have to hit. And they both have to report those numbers—though one has historically been voluntary while the other is mandatory.

But that’s changing. The path forward has gotten murky after the SEC dropped its climate rule, but mandatory and standardized regulations are still coming globally, including in California, Australia, and in the EU, although it’s slashed some of its requirements. Finance teams are increasingly sneaking a peek at the sustainability team’s reports. This is causing what Brad Sparks, executive director of the Accounting for Sustainability Foundation in the US, calls a “confusion of ownership.”

But his company has been working on this intersection of finance and sustainability for 20 years, so it has some best practices to pass along. Sparks spoke with CFO Brew about what he sees as finance professionals’ take on sustainability responsibilities.

This interview has been edited for length and clarity.

What is the role of the finance department in sustainability goals?

What we think is so critical for CFOs and finance teams is they sit at the heart of the organization. They control the flow of money. They help influence decisions. They’re able to articulate and communicate to key decision-makers within the organization the activities that the organization should be looking toward and how to plan and prepare for those. Most importantly, they’re stewards of value creation. Sustainability is connected and needs the support of those areas to be able to advance within the organization, most importantly, probably that linkage to sustainable value creation. So that’s why we think they're really critical.

What are finance professionals not doing when it comes to sustainability?

One thing that they’re starting to do in a few companies, but still a lot of work to be done, is to really understand how they can integrate sustainability through finance and accounting functions, but also integrate across the organization.

What are some of the struggles or barriers to this integration?

One thing we hear quite a bit is that the sustainability team may have one set of words and language that they use when they’re talking about sustainability initiatives that may not resonate with the finance and accounting teams. So there’s an issue of different cultures, different language. How do you start to clarify and break down those barriers so that then the finance and accounting team really understand the specific role that they can play connected to sustainability goals?

When you think about decision-making, you need timely information that is of high quality, robust, and is consistent across the organization. And so when we think about the sustainability data that companies are using today, a lot of it is backward-looking. It may not be available for multiple months after a period close. There needs to be opportunities to improve that data, one, for future external reporting requirements, but more importantly is for management to utilize that information in decision-making.

What are some of the best practices for managing all that sustainability data coming in?

For many years, companies were collecting sustainability information outside of the traditional control environment of the organization. So that data was not subject to internal controls. It wasn’t incorporated within the IT systems. So the first step is, how do you bring that under the control environment that you have today, and make sure that becomes a standard process?

That includes having the right levels of governance. So what are the quality checks of the information, who has oversight and responsibility and accountability for data itself, and how does that look like within the organization? How is that shared for a global entity around the world?...As you bring it into the control environment, bringing in your internal audit team to really help look at it.

What are some of the most common mistakes you see companies making?

One of the biggest mistakes we see repeatedly is not a clear governance and accountability structure…A key thing that [finance teams have] asked over and over to talk about are organizational roles, responsibilities, and the organizational structure for sustainability data information. And they keep asking because we find that companies are changing that on a yearly basis, and it doesn’t seem like there’s a lot of clarity on what is the ideal way to have governance and roles and responsibilities aligned to sustainability information.

What is one thing you wish you could tell all CFOs?

Really get started and understand the role, responsibility, and opportunity you have around sustainability within the finance function.