Guest Post – Budget Season: The Partnership Between CSOs and CFOs

By: Renee Lenore, Senior Business Development – Strategy Consultant, Wolters Kluwer EHS & ESG

It is CFO budget season, which has traditionally been a significant moment for finance teams in the corporate calendar. However, with rising importance of ESG data, this is also now a critical moment for CSOs and ESG data teams to demonstrate the value they are adding to business strategy and financial forecasting.

Integrating ESG into business strategy and future direction is now considered fundamental to business performance and shareholder value. Vital to this integration is the ability to collect meaningful ESG data and produce high quality, decision useful insights to share and report to C-suite partners. We are seeing the integration of ESG and sustainable performance management into strategic decision making and capital allocation, linking enterprise and financial value to sustainability strategies.

Traditional discussions of performance and accounting are often backward-looking. But strategic leaders must also look forward – and, of course, this is most pertinent during the annual budget and financial forecasting cycle. Finance leaders must be able to identify the metrics that will have the most material impact on a company’s strategy and financial outcomes for the coming year and how they align with stakeholders’ expectations. That means having access to both financial and, notably, non-financial and ESG data to answer key questions when looking at acquisition targets, future capital positions or significant investments. Key questions may cover a company’s carbon intensity outlook; emerging climate, carbon and ESG regulations or taxes; sustainability commitments required by shareholders or geolocation-focused physical risk metrics. CSOs play an essential role through partnering with CFOs to provide these insights, data and advanced analytics to inform business strategy and financial forecasting.

Through ensuring accurate reporting and delivering decision-useful analysis, CSOs can be a key partner in business transformation. This is both a strategic opportunity and significant responsibility for CSOs and owners of corporate ESG data. As new regulations outlining ESG reporting come in force, just 22% of CFOs say they are prepared to report on risks and opportunities related to sustainability, according to a report from Accenture. And if we focus on carbon reporting and compliance, a recent McKinsey report notes that implications can extend to include carbon taxation, expenses under emissions- trading frameworks or carbon border adjustment mechanisms, and carbon credits.

In this context, the legacy patchwork of excel spreadsheets used to collate disparate sustainability metrics turns from an annoyance to a critical business risk. It is vital that CSOs have access to high quality technologies enabling them to streamline reporting and develop advanced analytics. Ensuring the accuracy, consistency, and dependability of collected data remains a significant challenge that can be addressed through harnessing new technologies. Smart ESG reporting platforms can demonstrate a clear audit trail that permits for the monitoring of changes made across the reporting process, enhancing organizational transparency and accountability.

The partnership between the CSO and CFO really comes to life during the annual budgeting cycle – collaboration is key as is credibility. The ability to provide non-financial data that stands up to the same rigor and scrutiny as financial data is now a non-negotiable need. ESG data is no longer a bystander in the budgeting process, but a star player.