As any C-suite executive will tell you, no modern corporate strategy is complete until it has been scrutinised through the lens of sustainability. Not only does embedding sustainability at the heart of operations make good business sense, but it also helps companies comply with the growing raft of global sustainability reporting requirements. These require firms to set clear and measurable environmental goals that hold them accountable to stakeholders.
Tax and finance professionals play a crucial role in helping firms meet these objectives by devising greener business strategies and facilitating the reporting of environmental impact data.
Yet their work depends heavily on board-level support, close cooperation with other departments and effective companywide data management processes. Too often, these areas are lacking, making it harder for organisations to keep up with ESG regulations.
Mauro Cozzi is co-founder and chief executive of Emitwise, a carbon management software platform that helps firms reach net zero. One of the most important roles tax and finance leaders can play is in helping firms ensure that business strategies align with ESG goals, he says.
That might involve reviewing all finance activity against green criteria, promoting sustainable practices across the business’s operations and supply chains, or sourcing funding options for green initiatives.
“For instance, they can allocate budgets for purchasing renewable energy or establish plans to enable procurement teams to pay a premium for greener products and services from sustainable suppliers,” he says.
Tax and finance leaders also play a crucial role in helping the business conduct regular environmental impact assessments to share with regulators.
Under the EU’s Corporate Sustainability Reporting Directive (CSRD) or the UK’s Streamlined Energy and Carbon Reporting (SECR) and Task Force on Climate-Related Financial Disclosures (TCFD) frameworks, every big firm must now publish regular updates on their progress towards meeting their stated environmental goals. Failure to comply can lead to fines and significant reputational damage in an age when consumers expect businesses to behave with integrity.
Finance leaders are uniquely positioned to assist with data collection and governance because they typically manage procurement data, which is essential for accurately calculating supply chain emissions.
“By ensuring precise data collection and governance, finance leaders can facilitate compliance with audit requirements for greenhouse gas disclosures and other ESG disclosure reporting, thus reinforcing the organisation’s commitment to sustainability,” says Cozzi.
However, tax and finance professionals face some significant barriers in their sustainability work, which make it harder to achieve the desired results.
In terms of regulation, for example, there can be confusion over various reporting frameworks, inconsistencies across regions and industries and credibility problems due to the lack of external verification.
Indeed, some 37% of organisations see complying with regulations as the greatest challenge in meeting their ESG obligations, according to the EY Global Integrity Report 2024.
There needs to be clear ownership for data collection and reporting with someone in the C-suite accountable for delivering on this
Firms must also remember that corporate sustainability encompasses a broader remit than just decarbonisation, extending to energy efficiency, waste reduction, water conservation and circular economy principles. This requires firms to collect hundreds of detailed data points from across the whole business and wider supply chain. This data may be of poor quality or might be difficult to access.
“First, there needs to be clear ownership for data collection and reporting with someone in the C-suite accountable for delivering on this, whether that’s the CFO, CEO or CSO,” says Sarah Reay, climate change manager at the Institute of Chartered Accountants in England and Wales (ICAEW).
“As the reporting requirements will involve collaboration across many departments and teams such as finance, sustainability and operations, there must be a clear process, and responsibilities defined for collating the data in the appropriate format.”
Reay believes businesses will struggle to meet those demands without sufficient resources, both in terms of expertise in sustainability and personnel to measure and report on such vast quantities of data. This means sustainability must be prioritised in corporate strategies and embedded in organisational culture and operations.
“That way the organisation will reasonably resource its sustainability efforts and empower staff to directly contribute to the success of the strategy,” she says.
A variety of tools and tactics can support tax and finance leaders in meeting their sustainability objectives. Although it may seem obvious, staying up to date on ESG regulations – which tend to change rapidly – is essential for success.
Leaders must also prioritise improving collaboration with other departments to ensure alignment with governance and disclosures. This is because everyone, from operations and HR through to digital and procurement, will have a role to play in company change programmes.
Increasingly, firms are turning to digital tools to help with ESG data collection, enabling them to manage and report their sustainability data more efficiently. They can also use analytics to unearth trends in the data.
“Organisations can also improve reporting by using established frameworks, engaging stakeholders for feedback and ensuring accurate data collection with third-party verification,” says Jarrah Mohammad Alhindi, a partner at online investment firm XTB. “Clear communication and regular updates could enhance transparency, while ongoing assessments and documenting lessons learned could support continuous improvement.”
Perhaps the most important thing finance leaders can do is to ensure sustainability is a priority at board level, which involves communicating the business benefits. According to Sarwar Khan, sustainability director at BT, some leaders may be tempted to view meeting sustainability targets purely in terms of risk, even though it also offers huge opportunities.
“Embracing sustainability initiatives can boost long-term resilience, as well as help with both managing risks and meeting rising customer demand for sustainable products and services,” says Khan.
Cozzi agrees, stressing that the capital investment necessary for achieving net zero should not be viewed merely as a cost.
“Rather, it has the potential to deliver significant returns through enhanced operational efficiencies and by attracting customers who may otherwise choose greener competitors or those with more stringent and developed ESG profiles.”
