Sustainability maturing in corporate strategy
Sustainability maturing in corporate strategy
BDO in the USA recently published its latest ESG Risk & ROI Survey, this year titled Entering a New Age of Sustainability. Forming part of the 2024 CFO Outlook Survey series, 600 middle-market CFOs across six industries shared their ESG strategies, priorities, and perceived risks, informing the insights shared in this report.
Here, we share some key insights into the market’s expectations for driving long-term value. We encourage you to download and explore the report for a deeper look at how CFOs are approaching their sustainability initiatives, and help to inform your own sustainability journey.
Maturing sustainability programs
In 2024, there was a significant shift in the percentage of CFOs who believed their ESG Program had matured. 53 per cent of CFOs say they've embedded ESG principles into their core business strategy or are actively working on it, proving a big increase from the 33 per cent who believed their ESG program was mature in 2023.
With compliance requirements for climate-related and other sustainability disclosures continuing to increase in jurisdictions around the world, awareness of sustainability is intensifying. In fact, 61 per cent of responding CFOs say sustainability and ESG risks pose the same or greater business risk this year than one year ago. No matter where your business operates, be it the US, Europe or beyond, expectations of sustainability reporting are on the rise and CFOs must be across the relevant requirements.
As sustainability programs mature, so does the use of supporting financial strategies, such as tax credits in the US. In Australia, for example, organisations using innovation to embrace sustainability might consider R&D tax incentives when applicable.
ESG for improved reputation
Based on the findings of this report, it would seem 2023 was about working on the strategy, while 2024 is focused on embedding the strategy.
In 2023, the main reasons CFOs cited as their primary goals of a sustainability program revolved around strategy, risk, compliance, investment criteria, and ratings. This has shifted significantly in 2024, with the top three reasons now being reputational—that is, improved brand reputation, talent attraction and retention, and employee engagement. Access to sustainable finance and improved ESG ratings complete the overall top five.
Finance leaders are vital to sustainability success
With the role of the Chief Sustainability Officer on the rise, many have asked whether the CFO still has a role to play in sustainability and ESG strategy. And the answer is a resounding yes. Organisations are finding finance leaders are more vital than ever to their sustainability efforts.
According to the findings of BDO’s ESG Risk & ROI Survey, three-quarters of CFOs expect their involvement in strategic ESG conversations to stay the same or increase in the next 12 months, while only three per cent of CFOs say they're not involved in ESG discussions at all.
In Australia, we believe this trend will follow suit. With the Australian Government looking to introduce mandatory reporting by way of the annual report expanding to include a sustainability report as the fourth component, the role of the CFO will only increase. It will be critical for finance teams to upskill to ensure they understand, can account for, and report on sustainability performance while also identifying and communicating the associated risks.
With 61 per cent of responding CFOs saying sustainability risks pose the same or greater business risk this year, don't wait to prepare for sustainability disclosure mandates. Be proactive in establishing the systems and processes to support the incoming regulatory requirements, and develop robust risk monitoring and enforcement mechanisms.
Top three recommendations
- Evaluate and prioritise your sustainability opportunities, while ensuring they link to your overall strategy and transform from vague values to tangible action.
- Focus on the material issues identified as important to your organisation. As you will have uncovered in your materiality assessment, these issues reflect the needs and expectations of your stakeholders.
- Create shared ownership across the organisation, driven by the finance and sustainability functions together with other core departments like tax, internal audit, human resources, and enterprise risk management. A whole-of-business approach can create a collaborative, unified strategy with measurable goals—for real success.
Here to help
We encourage you to download the report to learn more about sustainability risks and the potential for return on investment through the eyes of the CFO—including views on regenerative AI.
If your organisation is looking to develop its sustainability strategy, our national team of experts can help. Contact us today.