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When it comes to sustainability, CFOs hold the keys
According to IBM’s Institute for Business Value’s (IBV) 2022 CEO Study on sustainability, “Own Your Impact,” more than 80% of CEOs say sustainability investments will drive better business results in the next five years. Yet more than half of the 3,000 CEOs surveyed ranked “unclear economic benefits” as the biggest blocker to achieving their objectives.
For CFOs, bridging this “intention-action gap,” or the space between an organization’s sustainability vision and realworld initiatives, is a colossal challenge given how divided C-suite leaders can be on priorities. “An organization can say it cares about air quality and oceans, but the hard step is operationalizing the idea of sustainability at scale across an enterprise,” says Karl Haller, a retail industry expert for IBM Consulting.
With mounting pressure to demonstrate sustainability progress—from board members, investors and regulators alike—the key to converting ambition into action is figuring out how to balance a range of sustainability priorities with organization wide financial benchmarks and performance. According to Haller, that comes down to “generating a sense of personal ownership and organizational responsibility for sustainability at every level.”
Sustainability needs to be a team effort, and CFOs are uniquely positioned to clear a path for the C-suite to prioritize investments and allocate resources in ways that align with business goals. In doing so, CFOs can become trailblazers for their peers, delivering on sustainability metrics and demonstrating ROI. “When you combine sustainability performance with financial outcome and operational improvement… that’s when you switch the mindset,” says Jane Cheung, an IBM global research leader specializing in consumer industries.
Before you can “switch the mindset,” however, an organization needs to understand where it is on its journey. The “Own Your Impact” study provides a “mindset model” that CFOs can use to start conversations with peers, as well as real-world insights and advice about the most cutting-edge and useful technologies. In essence, CFOs should be evaluating their organizations’ sustainability efforts across three categories.
Every sustainability roadmap begins with having a clear view of an organization’s current state. This requires data—a lot of data—and technology that can collect, clean, aggregate and analyze it. This data will serve as a baseline for evaluating opportunities and, later, measuring ROI. Beyond meeting industry ESG standards, the goal is to be able to identify win-win scenarios: business areas where CFOs can leverage ESG investments as either a core business differentiator (such as offering more transparency to end customers) or as a cost mitigator (such as reducing energy consumption).
For CFOs at organizations whose ESG performance is already compliant with industry and regulatory standards, the goal is to focus on operational improvements. “Start to isolate the smaller initiatives,” says Karen Butner, a global research leader at IBV who focuses on supply chains, virtual enterprises and intelligent workflow automation. “You may have many initiatives, but in terms of the showing ROI perspective, you need to focus on something that can turn it around quickly. This is the opportunity. Pick a dedicated initiative: In the next 60 days, you’re going to conserve water or energy or whatever it may be—and then prove it. Show the return on that, and then move on to the next initiative. The key is you’re not trying to boil the ocean here.” Technologies like hybrid cloud and AI are helpful at this stage, as they strengthen an organization’s technical foundation, enhance scalability, optimize agility and accelerate data-driven insights. Meanwhile, the orchestration and automation of apps, workloads, resources and infrastructure across platforms makes organizations more efficient. Any one of these metrics can be used to contextualize ROI.
Sustainability as a profit driver? That’s the goal of sustainability investments that work to reshape major aspects of the business, from how it develops products to the types of services it provides. For CFOs, this isn’t hyperbole: The “Own Your Impact” study shows that CEOs who implement “transformational” sustainability strategies also achieve higher profit margins than those who don’t, up to 8% more. Another IBV survey, called “Sustainability as a transformation catalyst,” shows that sustainability trailblazers “outperform on innovation compared to all others surveyed.” And IBV research shows that purpose-driven consumers are willing to pay a premium for sustainable products, up to 70% more. In conversations about ROI, those numbers are nothing short of inspiring.