A new report from global consultancy Kearney reveals that a significant majority of Chief Financial Officers are expecting higher returns from sustainability initiatives compared to traditional investments. The report found that 69% of CFOs believe sustainability initiatives will yield greater returns.
Despite the challenges posed by geopolitical uncertainty and increased financial pressure, the report highlights CFOs' confidence in the long-term value and profitability of sustainable investments. In fact, 92% of CFOs surveyed expect their organizations to significantly increase net investment in sustainability this year.
The research, conducted by Kearney in partnership with We Don't Have Time, surveyed 500 CFOs from the United Kingdom, United States, United Arab Emirates, and India. The survey aimed to understand how CFOs are incorporating sustainability into their overall strategies.
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According to the report, 93% of CFOs recognize the business case for sustainability investments. However, the survey also revealed that 61% of CFOs still view these investments through a cost-focused lens, rather than considering the long-term value they may generate.
The report also found that 65% of CFOs are now measuring the cost of inaction, signaling an increasing awareness of the long-term risks posed by climate change and regulatory penalties. This includes the potential for stranded assets and the need to adapt to a low-carbon economy.
In terms of specific investment areas, the report found that CFOs are focusing on sustainability initiatives that offer clear, short-term benefits in reducing emissions. The top three investment areas identified in the report include the use of sustainable materials, driving sustainable innovation and partnerships, and enhancing energy management and waste reduction.
CFOs are also responding to increasing pressure from employees to align their financial strategies with sustainable practices. The report found that 71% of CFOs now consider sustainability when selecting employee retirement funds.
As the awareness of Environmental, Social, and Governance (ESG) factors continues to rise, the report suggests that CFOs are recognizing the value of sustainable investments that benefit both the planet and the bottom line. The survey found that 94% of CFOs now incorporate sustainability considerations into broader investment decisions.
Beth Bovis, Partner at Kearney and Global Sustainability Lead, emphasized the critical role that CFOs play in driving the company's overall sustainability strategy. 'The perspective of CFOs is often overlooked in the corporate sustainability debate, yet their role is crucial. As those in control of financial levers, CFOs are uniquely positioned to have a long-term impact on business strategy. And our study highlights that they're already taking steps in this direction,' said Bovis.
Ingmar Rentzhog, Founder & CEO at We Don't Have Time, highlighted the growing responsibility of CFOs in overseeing the company's sustainability efforts. 'Finance chiefs are increasingly absorbing more of their organization's sustainability efforts, and our research shows that they are more than prepared for this responsibility,' said Rentzhog.
The Kearney report comes as the UK government is set to release its Sustainability Disclosure Standards later this year. These new standards will require organizations to rethink how they measure and communicate their climate initiatives, with CFOs playing a critical role in assessing and disclosing the company's environmental impact.
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