Climate change and the war in the Ukraine are currently top of mind for the CFO, after we’ve just recovered from a global pandemic. Some companies have the urge to go back to basics, but during the recent CFO Executive Dialogue, it was evident that financials lose interest pretty quickly if the basics fill most of their day. Therefore, some companies take it upon themselves to automate repetitive, simpler tasks.
The first concern of the CFO nowadays is obviously the war in the Ukraine. How does this change the economy? How does it change our costs and expenditures? And will it disrupt our workplace as the pandemic has done? During the CFO Executive Dialogue, participants and speakers expressed their concerns, but also stipulated that things are still undetermined and unclear. And even beyond the war, CFOs have enough on their plates as it is.
Back to basics
For example, we are dealing with the aftermath of the pandemic, which halted digitalization projects for some companies. Michael Clark, VP Finance Strategy and Transformation at Coca-Cola European Partners, shared that their workforce went back to the basics. ‘It has been an interesting journey. We started with full presence in the office, and we did what most companies did and look at: what do we need to do to keep the company safe?’
But after two years just doing the basics, people lost interest in their role, Clark says. ‘Now we’re working on various transformation projects. The team is more ambitious now that we’re going live with next generation accountancy.’ Transformation projects mean putting technology in place and letting that do the repetitive tasks. ‘However, it does mean that people need different skills: much more people and analytical skills.’
Vineta Bajaj, Group Finance Director at Ocado Group, never paused their innovation project. ‘We were just starting to implement global processes and a tech lab business. And although we thought we couldn’t work remotely, overnight we did. However, we did experience that our work got amplified by bumping into each other in the office. We slowly lost our business culture by working from home. That’s a challenge.’
Automating repetitive, simpler tasks helped Brian Montgomery, Finance Director at Workday, a lot to keep colleagues committed and involved: ‘We’ve seen a lot of change by automating those repetitive tasks. For example, we’re automating calculations, seek stock-based compensation, and we’re working towards a zero-day close. Especially the zero-day close is real interesting stuff, it gets the team excited, because it gives huge benefits.’
Apart from the typical financial projects, CFOs can play a much larger role in environmental, social and governance (ESG) initiatives. The biggest issue with these initiatives, however, is that the frameworks of accreditation are fragmented. Unclear is what data should be collected from who and against what metrics. But also balancing benefits and proper ROIs for the long term, is a challenge CFOs are facing.
According to Andrea Marmolejo, ESG, Impact & Sustainability Advisor at Blue Topaz Advisors, the CFO can play a central role in any ESG initiatives. The financial department is the center of strategic planning, she says. They already have all the skills to collect, organize and use data for financial metrics. With ESG, these metrics are complemented with new metrics. However, since the frameworks of accreditation are fragmented, what data should be collected and what metrics should be used?
You decide what metrics are important
‘There are 150 to 400 variables or data points in E, S or G. And there is no standard or balance sheet to take as a starting point. The taxonomy is not fully defined. So, you must decide what metrics are important, use them consistently and show progress for investors and customers’, says Marmolejo. But it’s important to not just choose your metrics, you must have your story ready about why you chose these metrics in the first place.
The reason why a narrative is so important, is that rating agencies will make their own stories, comparing you to cruising companies while you are in logistics. You both have a boat, but that is how far the comparison should go. Or they use little datapoints without informing you which datapoints are used in the first place to assess your ESG efforts. ‘You need to be ahead of the story agencies give and tell your own story.’
What you can’t avoid talking about for Net Zero
Deciding which data to collect is simpler when companies are striving for Net Zero. ‘With ESG you can pick your battles, but in case of net zero, there’s not discussion about it. You can’t avoid talking about carbon footprint, coal, electricity, fossil fuels. And not just in your own operations, but in the supply chain as well. And you need to calculate risks of climate change, for example: do you need to move locations because it’s too vulnerable due to flooding, wildfires, or draughts?’
A lot of data needs to be collected to get an entire view of where you stand and what you need to change. Not just internal data, but also external resources need to be tapped into. However, financials shouldn’t be burdened with manually collecting, combining, and reporting on collected data. If only because, as mentioned earlier, basic tasks make the workforce lose interest in it.
A much more exciting role for financials
Robotic Process Automation (RPA) could make a difference there. RPA helps employees to configure software or a robot to capture and interpret existing applications for processing a transaction, manipulating data, triggering responses, and communicating with other digital systems. In other words: collecting and combining data for the use of ESG metrics could be automated, ensuring financials a much more exciting role.
The CFO Executive Dialogue is designed by and for the senior finance community. This is a learning environment that focuses on finance leaders sharing their day-to-day strategies on how to adapt to continued economic uncertainty.