Finance: The unsung hero in sustainability reporting

March 25, 2024 | 3 minute read
Wayne Heather
EPM Product Marketing Director, Oracle
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In the rapidly evolving landscape of corporate responsibility, Environmental, Social, and Governance (ESG) reporting has emerged as a crucial element. However, the key to unlocking its full potential might lie in an unexpected place – the finance department.

Finance is positioned to be the leader in sustainability reporting due to several key factors. CFOs are moving to take the lead in ESG initiatives, not only sharing their organization's ESG achievements but also developing ESG strategies around stakeholder interests.

Not following ESG standards can result in reputational risks, financial impacts, and loss of market share as consumers expect sustainable practices. Furthermore, younger generations value purpose over pay, highlighting the need for ESG alignment for hiring and keeping talent. The 2023 Global Finance Trends Survey Report underscores that ESG metrics are now a main concern for CFOs worldwide, with a noticeable increase in reporting frequency and attention to ESG issues[1].

Finance professionals have a vital role in improving governance and controls over ESG data, matching with financial reporting rigor to guide strategy and ensure correct external disclosures. By incorporating ESG aspects into financial reporting and using their skills in governance and risk management, finance leaders are advancing ESG reporting within organizations.

Traditionally adept at handling complex data and reporting, finance teams are uniquely positioned to lead the ESG narrative. Finance has been navigating the minefield of complex financial regulations for years, be they specific to different geographies, different jurisdictions, or even industry. This skillset combined with knowledge of the reporting processes, deadlines, and cycle management, enables them to provide the requisite skills to manage ESG reporting processes.

When addressed in stages, the processes of achieving ESG reporting very closely mimic those of achieving financial regulatory compliance and reporting.

Here’s how the world of finance aligns well with sustainability teams to provide robust, reliable, and repeatable ESG reporting:

  • Data Collection and Aggregation: Just as finance departments meticulously track every cent, unit, measure and beyond, ESG reporting requires gathering diverse data points on a company’s environmental impact, social initiatives, and governance practices.
  • Transformation and Analysis: Financial professionals excel at transforming raw data into actionable insights. They have a clear understanding of performing currency conversions, and complex allocations that are required to convert different ESG metrics to certain standards. This expertise is invaluable for interpreting, transforming and standardizing ESG data, which often requires a nuanced understanding of sustainability metrics.
  • Modeling and Planning for Sustainability Goals: Beyond analysis, finance skills are crucial for modeling and planning for sustainability goals. Finance teams can apply their skills in budgeting and forecasting to model the impacts of various sustainability initiatives. This is particularly key to plan and prioritize ESG investments that are achievable from a financial and operational perspective, and finance is a key business partner in this process. In addition, tracking performance to targets and understanding where and why variances occur can help to ensure continuing measurement of goals and adjustment to strategy where required.
  • Auditing and Assurance: In finance, data integrity is paramount. This commitment to accuracy and reliability is equally critical in ESG reporting where stakeholders demand transparency and accountability. The ability to provide verifiable, reconcilable, and reliable information is the bedrock of financial reporting; this commitment can also help ensure that ESG is treated with the same diligence both internally and externally.
  • Reporting and Communication: Finally, just as financial reports are key communication tools for stakeholders, ESG reports play a similar role, informing investors, customers, and the public about a company's sustainability journey. The financial and ESG reporting requirements will converge, with organizations discussing not just their financial performance but also their sustainable performance and commitments.

As companies navigate the complexities of sustainability reporting, the CFO is well poised for leading the charge. Finance departments are looking at integrating ESG into their financial reporting making their role increasingly crucial in the ESG reporting process. By leveraging their expertise in data management, modeling, and strategic analysis, finance professionals are not just supporting ESG initiatives, but are becoming central to their success. In the realm of corporate sustainability, finance might just be the unsung hero we need.

In the next blog we will talk about how Oracle Cloud EPM for Sustainability facilitates the fusion of ESG and finance.


Wayne Heather

EPM Product Marketing Director, Oracle

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