CFO Outlook Survey - Thriving companies see sustainability as an opportunity

BDO in the USA recently published its annual CFO Outlook Survey report. In 2024, the report centres around the middle market’s prioritisation of stability, a key concern for Chief Financial Officers (CFOs) following a few volatile years.

Here, we share some sustainability-related insights into the market’s expectations from Australia and the USA in the coming year. We encourage you to download and read the full report to also understand revenue and profitability expectations in 2024, the embrace of generative AI, and more.

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What keeps CFOs awake at night

When asked about the most significant risks to their businesses in 2024, 37 per cent of respondents identified environmental, social and governance (ESG) risks as one of the greatest risks, after a series of external metrics in economic volatility, generative AI, data privacy breach and supply chain disruption. Not surprisingly, in response, ESG strategies are gaining momentum, with 53 per cent of CFOs saying they have, or are in the midst of, embedding ESG principles into their core business strategy.

The number one area of ‘anticipated CFO involvement in 2024’ was ESG strategy and execution, with 75 per cent declaring they would maintain or increase their involvement.

In recent years in Australia, we’ve witnessed a shift in the conversation; previously this has been held predominantly with sustainability professionals but has now shifted to also include CFOs, and risk and audit committee members. With the incoming regulatory requirements placing responsibility on finance teams - and audit requirements likely to be attached also - their interest has undoubtedly been growing. Positively, their focus appears to be more than simple compliance, acknowledging the risk of not completing an adequate carbon footprint calculation and the opportunity to advance and capitalise on the benefits of sustainability.

CFOs within global organisations might consider sustainability a higher priority again, with sustainability reporting expectations further advanced in parts of the world like Europe, New Zealand or Singapore.

Integration of sustainability into corporate reporting

A secondary survey from BDO in USA, Spring 2023 Board Pulse Survey, explores the view of board members. In it, 18 per cent of respondents note the integration of sustainability and corporate reporting as an area with the potential for boards to be more impactful in their management oversight.

With Australia on the precipice of mandatory sustainability reporting, sustainability is quickly being promoted to be equal to the financial report in the revised requirements of the annual report. This enhances the integration of sustainability and its impact on overall economic performance, as reflected alongside the financial report. So, we’re seeing the regulatory landscape in Australia elevating the importance integrated sustainability with corporate reporting at a more rapid pace.

The benefits of a sustainability program

Sustainability can take both an opportunity and risk management approach, and the 2024 BDO CFO Outlook Survey certainly supports this - finding thriving companies view sustainability issues as an opportunity, not a constraint.

Fast adopters have long recognised that sustainability can support better access to markets, capital, and people. In 2024, CFOs in the USA noted their primary objectives for undertaking sustainability initiatives, which include brand reputation, employee attraction and retention, employee engagement, and access to finance ahead of improved ESG ratings.

The 2023 Board Pulse Survey also noted the collective top five benefits organisations have experienced from the introduction of ESG initiatives include:

• Reduced supply chain risk
• New or innovative revenue streams
• Reduced costs
• Reduced energy transition risk
• Improved customer retention/attraction
• Improved ESG rating.

These results should motivate organisational leaders to understand the current state of sustainability within their organisation and identify the broader opportunity costs of ignoring them. But first, to ensure a sustainability strategy can succeed, it must be aligned with the organisation’s overall strategy, stakeholder expectations and purpose.

Three key takeaways

• Leaders, especially in thriving companies, are increasingly recognising the opportunity sustainability initiatives bring to their organisations. From boards to CFOs and board-reporting committees, a broader cohort of organisational leaders are taking an interest and creating action in sustainability.
• Mandatory sustainability reporting is coming. Compliance-driven activities can be essential in gaining an organisational baseline or current state assessment from which to launch.
• A sustainability strategy must be embedded with the company’s overall strategy and purpose to ensure it meets stakeholder expectations and can capitalise on the available benefits of a sustainability program.

BDO is here to help

No matter where you are on your sustainability journey, our national team of sustainability experts can help with:

• Understanding the sustainability landscape
• Carbon accounting
• Mandatory and voluntary sustainability reporting
• Sustainability and decarbonisation strategy
• Sustainability assurance.

Please download the 2024 BDO CFO Outlook Survey to read more of the insights and results.