Sustainability Performance Management: How CFOs Can Unlock Value

in association with

Sustainability performance
management:
How CFOs can unlock value

Copyright © 2011 Accenture and Chartered Institute
of Management Accountants. All rights reserved.

Contents

Forewords 2

Recommendations 3

Executive summary 4

Section 1: Sustainability in a business context 6

Section 2: The business opportunity 7

Section 3: Driving business benefits from sustainability 9

Section 4: The role of finance professionals in SPM 15

Conclusion 22

About us 23

Sustainability is vital to the future success of business.
This report highlights how powerful the CFO and finance function
can be in making the case for sustainable behaviour and realising
the value that sustainability can bring to the business.
Jessica Fries, Director, The Prince’s Accounting for Sustainability Project (A4S)

1 Sustainability performance management: How CFOs can unlock value Copyright © 2011 Accenture and Chartered Institute

Forewords

Charles Tilley FCA, Chief Executive, CIMA

Sustainability is firmly on the corporate agenda – although as with many business challenges, committing to a
course of action often proves difficult. Supporters of the traditional capitalist model argue that companies exist
to create value for their owners – and have no duty to make up for the fact that those owners may have a
short-term or self-interested focus. That is the purpose of regulation. Others believe, like Peter Drucker, that the
purpose of a company is to serve society.

Such profound philosophical differences seem hard to reconcile. But there is common ground, which is to focus
on the value that sustainability can add to a business and society – its contribution to the ‘triple bottom line’ of
profit, planet and people.

CIMA asked Accenture to compile this report to provide specific recommendations for CFOs and their finance
functions on how to unlock the value that sustainability can deliver to their businesses.

Accountants are key players in delivering that value – both because their skills bring robustness to sustainability
performance management and because they are well placed to support the integration of sustainability across
the business.

Accountants are very influential. They can encourage the board and senior management to commit to
sustainability, not only by providing reassurance and proof that it can be measured and monitored, but also by
advising that sustainability can be and should be taken into account clearly and consistently in day to day
decision-making.

Andrew Meade FCA, Managing Director, Finance & Performance Management, Accenture

Sustainability has a pragmatic and profound impact on the strategy and operations of companies today. It isn’t
just about being ethically responsible, it is about smart business. Eliminating waste and inefficiencies makes simple
economic sense and produces real bottom line impact. Sustainability initiatives often combine tangible,
short-term gains with longer term benefits to generate new sources of revenue and enhance intangible assets
such as brand and reputation.

As a finance professional, I recognise the important role that we can play across the sustainability agenda. It is up
to us to bring the right skills, knowledge and tools to translate sustainability into real numbers that impact our
financial performance. We have a duty and the responsibility to tackle and embrace how sustainability
performance is managed and reported to ensure alignment with existing business processes. We can assist our
organisations to focus on areas that really do deliver financial value to the company and shareholders, as well as
benefits to society and other stakeholders.

Accenture are very proud to have been asked by CIMA to compile this report. In our interactions with CFOs and
their finance teams, we see an increasing level of interest to further understand sustainability and determine their
role in ensuring that sustainability is appropriately addressed to deliver business value.

I do hope that you enjoy reading this report and find the analysis insightful and actionable.

Copyright © 2011 Accenture and Chartered Institute 2

Recommendations

1. Corporate sustainability contributes directly to business value, whether through revenue generation, cost
control, risk management or long-term value creation. Sustainability should therefore be a strategic issue for
any organisation.

2. Companies are starting to develop sustainability strategies for their business in a clear, structured and rigorous
way. However many are failing to uncover the latent value from sustainability and sustainability should be
linked explicitly to business performance to maximise value creation and preservation.

3. Clear drivers and meaningful outcomes relating to sustainability and the value it creates can be measured by
applying a robust sustainability performance management (SPM) framework. This demands well thought-out
and consistent metrics, systematic processes and appropriate use of technology. Sustainability can then be
incorporated into both internal and external reporting.

4. CFOs and the finance function can give structure to SPM and provide the impetus required to maximise its
business value. They should take the following steps:
i. Make it strategic, not just tactical. Finance has the skills and ability to support the business
to ensure sustainability initiatives are strategic rather than tactical in nature.
ii. Apply a financial mindset – link sustainability to business performance. CFOs and the finance
function have unique skills and knowledge which can help define the business case for sustainability
strategies and initiatives.
iii. Use the right metrics, consistently. Finance professionals can identify value drivers within
a business and ensure focus on the right set of metrics is maintained.
iv. Improve the process of data collection, analysis and reporting. Finance professionals bring the rigour
and discipline used in accounting to the collection, analysis and reporting of sustainability data. They must
however, work closely with sustainability professionals to understand what information needs to be
captured and how it is to be used.
v. Integrate with business planning and reporting. CFOs and the finance function are best placed to
incorporate meaningful sustainability metrics into business planning and reporting processes.

The earlier CFOs and their teams engage with sustainability performance management, the greater the benefit
they can bring.1 As three of the world’s largest accountancy organisations (CIMA, AICPA and CICA) recently put
it, ‘To remain relevant, the accounting profession must take ownership and embrace business sustainability.
Accountants can apply the necessary financial and commercial rigor to develop clear and measurable
sustainability goals, ‘decision-useful’ and reliable sustainability reports and become change agents for a
sustainable future.’2 Plenty of people can advise an organisation on how sustainability performance should be
measured. But few are as convincing as the CFO when it comes to demonstrating not only what should be
measured but also how this creates business value and sustainable organisations.

Pushing sustainability onto the agenda is not simple – but when the finance function makes clear the effect on P&L
performance at every level, the discussions become much easier.
Jan Piet Valk, CFO, Logica Benelux


Executive summary

Sustainability can drive significant business benefits. But in many organisations, its value is not fully realised.
Robust sustainability performance management, driven by finance professionals, can be a key enabler to
unlocking this value.

Sustainability, when embedded throughout an organisation, its strategy and operations, can drive value across a
number of dimensions:

• Revenue generation – from new products, services and markets.
• Cost control – resource efficiency, lower energy consumption and waste minimisation.
• Building trust – enhancing brand value and promoting a positive culture among employees and
other stakeholders.

• Risk management – by complying with regulations or avoiding safety and environmental incidents.
Sustainability and the value it creates must be quantified and linked to business performance if the case
for sustainability is to be made and the benefits are to be realised. A robust sustainability performance
management (SPM) capability provides the information required for decision makers to identify and create
value from the sustainability levers relevant to their business.

The discipline and rigour applied to financial information should be applied to sustainability reporting. In many
companies that process has already begun. Standard Chartered, in the first of our case studies, incorporates
environmental, social and economic dimensions into its performance reviews and the approvals processes for new
loans. Novo Nordisk, the second case study, has not only embedded sustainability throughout the organisation but
is also one of a host of companies that has incorporated sustainability reporting into its annual report, creating an
integrated approach for its management, auditors and investors.

However, for many organisations current efforts to manage sustainability performance tend to be tactical rather
than strategic. These efforts are rarely linked to business performance and the measurement and tracking of
sustainability initiatives is not as rigorous as that of revenue or profitability. In a recent CIMA survey for example,
only 17% of respondents said their organisations have fully integrated environmental considerations into project
appraisal.3 By incorporating sustainability into standard business systems and processes, it becomes part of
planning and reporting – further integrating it with both day to day operations and strategy (see Figure 1).

Figure 1: Creating a virtuous circle for sustainability performance management

Make it strategic, not just tactical

Integrate Apply a
with financial
business mindset
planning and – link sustainability
reporting to business
performance

Improve the
process of data
collection, Use the right
analysis and metrics,
reporting consistently


The chief financial officer (CFO) is ideally placed to drive business value from sustainability. The finance team
has visibility into every part of the enterprise – and understands how it all fits together. CFOs usually fulfil key
compliance and risk management roles; they are the board member most directly responsible for efficiency and
cost control.

As a recent report from three of the world’s largest accountancy bodies observes, ‘Accountants can serve as
leading agents for change by applying their skills and competencies to develop sustainability strategies, facilitate
effective implementation, accurate measurement and credible business reporting.’4

CFOs who nurture the cross-functional skills of both sustainability and finance professionals and find ways for
them to work seamlessly together will see more opportunities to grow value for stakeholders. It is this marriage
– of rigour and reporting on the one hand; and understanding the key attributes of sustainable practices on the
other – that ensures a business is able to deliver shareholder value over the long-term. But making it happen
requires clarity, vision, leadership and a willingness to act.

In this report we:
• Demonstrate the link between sustainability and delivery of business performance.
• Explain why this matters to CFOs.
• Outline how the finance function can integrate sustainability with performance and use it to drive
business value.

Methodology of the report
This report has been prepared by Accenture for the Chartered Institute of Management Accountants (CIMA) and
is based on two surveys. The first is an Accenture survey of 85 decision-makers in the field of sustainability
performance management, including 33 CFOs.5 The second is a CIMA survey of 883 finance and sustainability
professionals, including 44 CFOs, 97 financial directors and 52 chief sustainability directors.6

We have also conducted interviews with senior executives at two companies, Novo Nordisk and Standard
Chartered. These interviews were around their experiences and challenges in valuing sustainability, integrating
sustainability management and reporting and driving business performance through sustainability. Both show
how SPM can drive business improvement and provide an engaging narrative to support the recommendations we
make in this report.

Sustainability: a definition
The way an organisation creates value for its shareholders and society by maximising the positive and
minimising the negative effects of environmental, social and economic issues.


Section 1:
Sustainability in a business context

Introduction
Sustainability in businesses was traditionally an item on the corporate and social responsibility (CSR) agenda.
It was driven largely by moral obligation, reputational risk or regulatory requirements.

That has changed in the past few years. There has been a decisive shift in the balance from risk management to
opportunity.7 Investors still see the risks in companies depleting their resources, failing to nurture talent, harming
the environments in which they operate or neglecting customers – all of which may destroy the present value of
future earnings. But they increasingly expect management to create value from a changing business landscape
and by living up to their long-term fiduciary duties.

Rising commodity prices – which have pushed the cost of energy in particular, to historically high levels – and
an increasingly competitive global marketplace are key factors in this change. In many companies for example,
a desire to do the right thing has been joined by a need to reduce energy consumption simply to protect the
bottom line.

Sustainability will only be embedded in an organisation if it is supported by a robust business case linked to
tangible benefits. Accenture recently surveyed over 1,000 business leaders on this issue for the UN Global
Compact (UNGC). The resulting report concluded that CEOs are convinced that, ‘...good performance on
sustainability amounts to good business overall. The imperative to act has shifted from a moral to a business
case.’ 93% of CEOs surveyed believe sustainability is important to future success.8

Sustainability is seen as a way to unlock new revenue sources, drive out cost, increase efficiency and enhance
brand value. A sustainable approach can deliver competitive advantage, build strong and lasting customer
relationships and create long-term stakeholder value. It is becoming aligned with organisations’ core objectives
and helps deliver business outcomes.

While the business case makes sustainability a compelling agenda item for boards, it brings its own justifications
too. The UN Global Compact-Accenture CEO Study added that CEOs, ‘...believe that we are moving toward an
era in which businesses will no longer focus purely on profit and loss as the primary means of valuation but
rather take into account also the positive and negative impacts on society and the environment.’9

That means there is an additional demand for finance to be involved in SPM and sustainability decision-making –
not just to record and promote the business benefits but also to measure these sustainability metrics. 80% of
respondents to the CIMA survey said finance should be involved in climate change initiatives.10 It is a surprise
therefore, that so few CFOs or their teams have direct responsibility for SPM.11


Section 2:
The business opportunity

Sustainability can boost both top and bottom line performance and strengthen the balance sheet.
These opportunities exist throughout the value chain of any organisation (see Table 1). It is important
to note that while many companies are already seeing explicit gains from sustainable decision-
making in these areas, there continues to be new opportunities emerging for further gains.

• Revenue generation is not just about meeting uncertain consumer demand for ‘green’ products
or identifying new markets with long-term income streams. The roll-out of low-carbon technology
in buildings, transport and energy, driven by targets to reduce CO2, is creating huge opportunities
– believed to worth €2.9 trillion in the EU alone, between 2011 and 2020.12

• Cost control is always on the agenda of the CFO. Saving money by reducing energy and water
consumption, production costs, travel spend and exposure to unnecessary waste and carbon costs
are obvious business benefits – all of which can flow from a well-worked sustainability
programme.13 These will become more important with rising commodity prices and the
increasing cost of compliance driven by increasing regulation.

• Building trust in this context often means brand value.14 According to the Edelman Trust
Barometer, 77% of consumers have refused to buy from a company they do not trust.15 But a
sustainable business also nurtures intangibles other than brand or reputation – such as talent
and intellectual property for long-term value creation.

• Risk management will continue to be a key consideration, with large fines for non-compliance
on waste regulations or carbon emissions schemes, for example. In addition, firms that have
untrustworthy sustainability records are losing out on sales. Failure to embed sustainable thinking
into operations is in itself a major risk.

Business value of sustainability
Case study: Standard Chartered
Sustainability is at the core of Standard Chartered’s business model. The bank is committed to
building a sustainable business, creating long-term value for its shareholders, working in
partnership with its customers and clients and having a positive social and economic impact on
the communities where it operates.

Standard Chartered aims to have a positive impact in three ways: by contributing to the real
economy, by promoting sustainable finance and by leading the way in communities.
Environmental, social and governance assessment is integrated into the bank’s decision making
process for new and existing clients.

Water, food and energy security affect the health and prosperity of millions of people across
Standard Chartered’s footprint in Asia, Africa and the Middle East. By providing finance effectively
and responsibly, the bank believes it can have a positive impact and help to instrument change.
Gill James, Head of Sustainability says, ‘You have to approach sustainability as a core business issue
– and then you see the real benefits.’


Table 1: Business benefits from sustainability

Company value chain Revenue generation Cost control Building trust Risk management
The Co-operative switched Walmart substantially Walmart’s ethical In July 2009, energy drink
Procurement and

• Supply chain its own-label chocolate to exceeded a target of 25% standards programme for manufacturer Red Bull was
• Warehousing Fairtrade suppliers in 2002, improvement in fleet sourcing merchandise is ordered to pay over
logistics

• Equipment resulting in a 50% sales efficiency against 2005 recognised as one of the £270,000 in fines and costs
• Inbound volume uplift in the baseline within one year.17 ‘gold standards’ in the for breaking recycling
logistics following 12 months.16 industry. laws.18

Philips earns 38% of total IKEA saved £1m by GE’s brand value increased Taylerson’s Malmesbury
revenue from ‘green removing plastic bags from by 17% after the launch of Syrup realised that sales of
product’ sales (up from checkouts in the UK in 30 ‘Ecomagination’, a business their products were linked
31% in 2009).19 months.21 Its stores are 9% initiative to meet customer to cold weather and would
more energy efficient demand for more decline within the next 20
• Products M&S’s ‘Plan A’ generated compared to 2005.22 energy-efficient products.24 years as winters become
Operations

• Services £50m profit from new milder. The product range
• Operations products – such as M&S Japanese pharmaceutical was reviewed and they now
• Buildings Energy which provides firm Tanabe Seiyaku hit provide syrups to be used
• Manufacturing insulation and solar panels annual savings of ¥33m with ice creams and cold
for 300,000 customers – with new environmental frappes.25
and reduced costs in only accounting techniques.23
the third year of its
operation in 2009-10.20

Vodafone’s ‘Carbon M&S’s ‘Marks and Start’ 77% of consumers have, in The Co-operative Bank
• Marketing
Connections’ report programme (work the past year, refused to showed the risk associated
• Sales
Marketing, sales

demonstrates a potential experience for buy products/services from with a loss of trust, citing
• CRM
and service

for 113Mt reduction in disadvantaged adults) has companies they do not the ‘flight to trust’ after the
• Retail
CO2e and €43bn in cost lower attrition rates than trust. Trust must be built banking crisis as one of the
• Customer
reductions through 1bn comparable schemes for or sales are put at risk.28 key drivers of a 38%
service
new mobile connections.26 new employees.27 increase in their own
• Outbound
current account sales in
logistics
2009.29
Novo Nordisk bring Fife Council have identified Graduating MBAs from Ribena noticed that local
• Finance
products to market faster additional cost avoidance leading North American weather patterns have been
Support activities

• Technology
by including environmental, opportunities of £75m that and European business changing, affecting their
• R&D
social and economic can be achieved by schools are willing to forgo blackcurrant harvests. They
• HR
impacts in new drug improving its carbon financial benefits have been developing new
• Legal
applications.30 reductions by a further to work for a more varieties of blackcurrants
• Firm
3% per annum between ethical employer.32 that will thrive in a changing
infrastructure
2007 and 2021.31 climate.33


Section 3:
Driving business benefits from sustainability

It is one thing to accept that sustainability can create and protect long-term value for shareholders and other
stakeholders. But uncovering, measuring and maximising that value is an entirely different challenge. It requires
organisations to monitor activities using some kind of SPM approach.

There are five key steps to making that happen (see Figure 2). Together, they create a self-sustaining system that
ensures an organisation is both sustainably managed and is reaping maximum business benefits from its
sustainability efforts.

Sustainability performance management
Accenture defines SPM as the process of:
• Identifying social, environmental and economic drivers that influence the success of an organisation.
• Establishing a system to set sustainability goals, then measuring progress against those goals.
• Aligning sustainability goals with other markers of business performance.

Figure 2: Creating a virtuous circle for sustainability performance management


Integrate Apply a
with financial
business mindset
planning and – link sustainability
reporting to business
performance

Improve the
process of data
collection, Use the right
analysis and metrics,
reporting consistently


1. Make it strategic, not just tactical
A form of sustainability performance management is often adopted as a tactical response to ever-increasing
demands for sustainability data – such as employee diversity or CO2 emissions. But it is rarely made part of the
strategic planning process. As early as 2008, CIMA was warning that taking a piecemeal and reactive approach to
these issues as they emerge creates a major risk that organisations will be wrong-footed by potentially colossal
external change.34 In other words, they could suffer a massive strategic failure.

Many companies are starting to develop a more strategic approach to SPM. They are aligning sustainability
activities with key business drivers and processes. That in turn means sustainability data can truly help
management understand the levers that most influence business performance. The net result of this
fully-fledged SPM is that sustainability becomes an integral part of strategic planning.

Unfortunately, in many organisations there is still a divide between good intentions and execution. Figure 3 shows
the gap between CEOs who agree sustainability should be embedded within their organisation – and those who say
that in their company, it already is – a classic ‘execution gap’.35 Making a commitment to sustainability is one thing
but making SPM a strategic issue – in other words, having hard, relevant data and using it at every level of decision-
making – closes that gap.

Where SPM reveals critical threats or opportunities, they can be addressed within the organisation’s strategy
and endorsed by its leadership. SAB Miller, for example, has ten clear sustainability priorities monitored through
the corporate accountability and risk assurance committee (CARAC) of its board. These include general
commitments to embedding sustainable behaviours. But it also details specific steps, such as discouraging
irresponsible drinking and investing in local suppliers. These are designed to safeguard the company’s ‘ecosystem’
– not its environment necessarily, but its supply chain and credibility with customers and regulators – and ensure
its ‘licence to operate’ is never jeopardised.

But the best strategy in the boardroom means nothing if operational personnel feel disengaged or burdened by
SPM. Woodbine Entertainment Group, a Canadian horse-racing operator, addressed this problem by setting up a
team of managers and front-line staff to identify savings from environmental projects, such as waste reduction, the
use of solar-powered lighting and rebates to fund energy-efficiency systems.36 This empowers both management
and staff, as well as making a contribution to the bottom line. It also shows how strategic commitment to gathering
the right data and to managing outcomes benefits both the business and its sustainability profile.

Figure 3: Perceived execution gap for sustainability performance management

Embedding sustainability throughout subsidiaries Embedding sustainability throughout supply chain
Strategy –> execution Strategy –> execution

32% gap gap
32%
34% gap gap
34%

91% 91% 88% 88%

59% 59% 54% 54%

Sustainability should be be
Sustainability should My company has has
My company Sustainability should be be
Sustainability should My company has has
My company
embedded throughout
embedded throughout embedded sustainability
embedded sustainability embedded throughout
embedded throughout embedded sustainability
embedded sustainability
subsidiaries
subsidiaries throughout subsidiaries
throughout subsidiaries supply chain chain
supply throughout supply chain chain
throughout supply


2. Apply a financial mindset – link sustainability to business performance
The most common barriers to incorporating sustainability into business decision-making are a perceived inability
to quantify the effect of sustainability factors on financial performance and to measure the impact of
sustainability initiatives on shareholder value. This explains the low proportion of executives we interviewed who
believe SPM has driven economic improvements (Figure 4).37

Defining the link between sustainability and business performance becomes more important as investors start
to look at the risks and value of sustainable products, services and behaviours. Although some investors are now
asking hard questions about the long-term availability of essential resources such as water,38 in general they tend
to omit sustainability from their valuation models – 86% of CEOs see ‘accurate valuation by investors of
sustainability in long-term investments,’ as important to reaching a tipping point in sustainability.39 CFOs can
bridge this gap by emphasising that the ability of a business to create and protect long-term value lies at the
heart of any sustainability programme. Strong SPM tools make that link explicit.

Creating this link internally need not be overly complex. For example, Logica Benelux simply altered the way it
reported overheads to business units and office locations. By billing them directly – rather than pooling energy
costs – the company created a clear benefit for local managers to operate more efficiently. CFO Jan Piet Valk
admits that pushing sustainability onto the agenda is not simple; however, when the finance function makes
clear the effect on P&L performance at every level, the discussions become much easier.40

Figure 4: Perceived performance gap

33% gap

51%

18%

SPM has had an effect on SPM has had an effect on
environmental performance economic performance

3. Use the right metrics, consistently
Once a link with performance becomes a priority, it is vital to use the right metrics – data that explains where
and how sustainability is making a difference. Ideally, organisations should use the most important measures to
avoid creating an information burden and to maintain the clarity of the link.

In some organisations, there is no immediate connection between the drivers of sustainability and the outcomes
that are measured. Figure 5 shows that two of the most important drivers for SPM are ‘complying with
regulations’ and ‘responding to customer queries and requirements,’ according to survey respondents. Despite
this, only 29% feel that SPM contributes to compliance and 24% to customer satisfaction and retention.41 It is
perceived as contributing value – but not in the ways expected.


Figure 5: Discrepancy between sustainability performance management drivers and outcomes

Importance of SPM SPM outcomes

Actively improving Increased brand
52% 72%
sustainability performance value
Complying with
44% Reduced risk 53%
sustainability regulations
Responding to customer/ Increased competitive
37% 37%
client requirements advantage
Providing information Reduced operating
33% 36%
to investors costs
Designing new products Confirmation of
33% 29%
and services regulatory compliance
Incorporating sustainability Increased customer
32% 24%
factors into investment decisions satisfaction/retention
Engaging actively Improved employee health
24% 14%
with employees and productivity
Driving cost Improved returns
20% 12%
reduction to shareholders
Reporting to other
20% Increased revenues 8%
stakeholders

One solution would be commonly accepted metrics and methodologies for reporting on sustainability both
internally and externally. One in five respondents to the Accenture survey does not know on what basis they
report sustainability data. There are many competing frameworks – such as the Global Reporting Initiative,
DEFRA’s Environmental Reporting Guidelines, or the Global Environmental Management Initiative – all with
different metrics. Organisations such as The Prince’s Accounting for Sustainability Project,42 the World Business
Council for Sustainable Development and the Carbon Disclosure Project are also working on ways to make
sustainability data and reporting more consistent.

Even when a business is armed with accurate and relevant data, there is rarely a framework in place to ensure it
is used to make better decisions. In some cases, the problem is one of too much information. As Chen Ying of the
Beijing Rong Zhi Institute of Corporate Social Responsibility explains, ‘Measuring these outcomes is difficult. You
either are too broad or too narrow in what you measure. Striking the balance is the challenge.’43

Finance functions are used to prioritising information to help effective decision-making and they understand the
difference between ‘must-have’ data (on regulatory compliance, for example), ‘want-to-have’ information that
will drive better performance and extraneous material that serves no real business purpose. So they are well
placed to select and explain the right metrics to show performance over time.

Finance is embedded into each of our operations – product development, marketing and sales, purchasing
and manufacturing, administration and so on. This gives us a strong cross-functional stance and corporate
viewpoint that ensures finance is not only welcomed but invited into the core of our project teams.
Richard Shore, Controller of Global Marketing and Sales, Jaguar Land Rover


4. Develop robust systems and processes for sustainability performance management
Even with the right metrics – showing an explicit link to business performance, in line with a holistic strategic
plan – SPM still demands meticulous organisation. At the moment, the process of collating SPM information in
many companies is manual, inefficient and prone to data quality issues.

Two-thirds of respondents to Accenture’s survey use Microsoft Excel to collect sustainability data, with 57%
using it for data analysis.44 Excel can be a powerful tool but it does not have the same level of robustness as the
commonly used financial reporting systems. Companies such as SAP,45 Oracle,46 Enablon, IHS and SAS are selling
dedicated SPM functionality – exploiting the fact that ERP systems automatically gather and share data across
the enterprise.

It is also essential that the process of collecting SPM data be as invisible as possible to front-line users. If it is
dependent on discrete systems or multiple additional procedures, there is a risk the data will simply not be
collected. Equally, internal SPM reporting should be part of the standard business systems to ensure the data is
used consistently as part of decision-making, not simply tacked-on as an afterthought.

One common and often very successful approach is to incorporate sustainability metrics into the management
dashboards used to monitor real-time performance or support day to day decision-making. At Punch Taverns for
example, monitoring more than 6,700 pubs’ sustainability performance would be incredibly difficult without a
systematic approach to the data. In this case, it is presented in an easy to understand format on a management
dashboard (see Figure 6), which also makes it simpler to spot exceptions and problem areas so they can be
addressed quickly.

Figure 6: Punch Taverns’s dashboard system allows decision-makers to quickly drill down
into complex data for individual operating units.

Electricity Gas Reporting Alarm Profile Users
AMR > Summary > C0015

House No. C0015 t.
Pub Name Plough Inn e.

Data View
Level: 0D BDM Individual 00015 - Plough Inn
View: Cost (£)
Variance: Target Baseline Budget

Last 3 Weeks FYTD

Week No. 44 Week No. 45 Week No. 46
Actual £197 Actual £197 Actual £147 Actual £8,343
Budget £211 Budget £211 Budget £211 Budget £9,220
Saving £ £14 Saving £ £14 Saving £ £14 Saving £ £877
Saving % 6.48% Saving % 6.48% Saving % 6.48% Saving % 9.51%

240
Trend Analysis 15,000

220
14,000
200
13,000
180


5. Integrate SPM with business planning and reporting
Applying robust systems and methodology to SPM data leads naturally to the final step: complete integration
with business planning and reporting. That means bringing two disciplines closer together. At the moment, finance
professionals say a lack of relevant data is a significant barrier to SPM. Meanwhile sustainability professionals
cite inadequate resources, such as expertise, money or people.47

If sustainability data and analysis has to meet the same collating, analysis and auditing standards as financial
data, the external investor community might also begin to factor it into valuations.

At the same time, finance professionals tend to lag behind sustainability experts in their understanding of the
opportunities in this field.48 SPM is a major help in allowing them to evaluate sustainability initiatives with the
same diligence as other financial investments and to demonstrate their effect on the top and bottom lines.
This also generates the insights that can guide future sustainability investment decisions.49 With SPM,
management can focus on the right activities and explain to stakeholders why they make sense.

This is a clear opportunity for the CFO. Collating and discussing rigorously assessed sustainability performance
alongside other business metrics, especially when quarterly and annual results are communicated to the market,
raises their profile and credibility. By working SPM insights into the planning and budgeting rounds, CFOs and
their teams can embed sustainability much more meaningfully into an organisation than simply calling for
business units or departments to follow, for example, a code of conduct.

Investor communications

Case study: Novo Nordisk
Since 2003 Novo Nordisk has introduced an explicit discussion of sustainability at investor
meetings and road-shows. This has been a key to aligning its sustainability and financial reporting.

‘We have done a lot in terms of investor education,’ says Susanne Stormer, Vice President, Global
Triple Bottom Line (TBL) Management. ‘We have investor meetings where our mainstream analysts
sit next to external environment, social and governance analysts. Cross-cutting conversations mean
that the mainstream investors build understanding about what the ESG investors are looking for and
ESG investors sharpen their way of thinking and learn about nailing sustainability down into
something that can go into their analysis.’


Section 4:
The role of finance professionals in SPM

In a recent CIMA survey, the top three sustainability roles for the finance function were investment analysis,
tracking KPIs and reporting metrics to meet business and customer needs (Figure 7).50 Interestingly, other
reporting activities remain somewhat lower down the list. In each case, the CFO is helping fulfil the three main
business drivers for sustainability – efficiency, compliance and supporting revenue generation.

As we have seen in section 3, these are all important aspects of a functioning SPM programme. SPM cannot work
effectively unless finance’s role is made broader and more defined than the results of the two surveys suggest.

Interestingly, The Prince’s Accounting for Sustainability Project (A4S) lists ten elements for embedding
sustainability within organisations (see callout box). The CFO, as a leader and key strategic decision maker; and
the finance function, as a central department, have roles to play in all of them.51 However, there are three critical
areas for the CFO and finance function that are under their direct control. They are entirely consistent with our
own findings about successfully delivering value from sustainability:

• Integration with business planning to support targets and objectives (element 5) – to embed sustainability
within the core decision-making fora of the organisation.

• Improving the process of data collection, analysis and reporting (element 10) – making the value from
sustainability explicit.

• Linking sustainability to business performance systems (element 6) – to drive better decisions and then applying
financial expertise to ensure they create more value.

Figure 7: Finance function involvement in sustainability projects

Importance of SPM Importance of SPM

Business case/analysis
Business case/analysis 35% 21%

Tracking sustainability-related performance measures (KPIs)
Tracking sustainability-related performance measures (KPIs) 25% 8%

Reporting toto satisfy businesscustomer requirements
Reporting satisfy business customer requirements 23% 5%

Integration of of financial and sustainability informationsystems
Integration financial and sustainability information systems 18% 7%

Internal controls over sustainability reportinginformation
Internal controls over sustainability reporting information 18% 6%
Key
Environmental reporting
Environmental reporting 19% 3% Assisted
External sustainabilityreporting
External sustainability reporting 15% 3% Led


The Prince’s Accounting for Sustainability Project (A4S): 10 steps to embed
sustainability within an organisation

Strategy and oversight
1. Demonstrate board and senior management commitment.
2. Understand and analyse key drivers for the organisation.
3. Integrate the key sustainability drivers into strategy.

Execution and alignment
4. Ensure sustainability is the responsibility of everyone in the organisation, not just one team.
5. Break down overall sustainability objectives into meaningful targets for individual divisions and
departments.
6. Ensure sustainability is taken into account consistently in day to day decision-making within
routine business performance systems.
7. Provide sustainability training.

Performance and reporting
8. Include sustainability targets and objectives in performance appraisal.
9. Use champions to promote sustainability and celebrate success.
10. Monitor sustainability performance; integrate it into the existing data collection, analysis and
reporting processes; and apply the rigour used in financial reporting for sustainability data and
information.


How finance’s role in SPM is evolving
Figure 8 shows that 66% of CFOs expect to play a leading or substantial role in SPM over the next three years.52
Heads of sustainable development expect to maintain and even grow their own role in sustainability
performance management too.

At present, finance plays a formal role in developing, implementing, monitoring and/or reporting on climate
change in around only one third of global organisations.53 Their most common role is in whole-life costing and
they appear to be less involved in newly emerging areas such as tracking carbon footprints or climate change
KPIs.

That will change. For example, accountants have a key role in assessing the financial impact of CO2 reduction
schemes, such as the UK’s Carbon Reduction Commitment Energy Efficiency Scheme and carbon trading.54 A
recent study by CIMA showed that over half of companies do not estimate the carbon pricing implications of
business decisions. ‘We do a return on investment analysis with any capital project,’ says a sustainability
manager at a global consumer goods company. ‘The cost of carbon does not get factored in, except maybe in a
few ad hoc cases.’55 As it becomes increasingly material to investment performance, companies like this will have
to do so.

Working with finance

Case study: Standard Chartered

Standard Chartered has stringent environmental and social (E&S) policies for all its lending, debt,
capital markets activities, project finance and advisory work. Frontline employees are provided
with specific guidelines to identify E&S risks and are supported by the bank’s Sustainable Finance
team, who provide technical advice and assistance to ensure compliance.

‘It’s about bringing the rigour of running a business to running sustainability,’ says Gill James, Head
of Sustainability.

Standard Chartered’s financing decisions are guided by a set of position statements, covering key
sensitive issues and business sectors. The aim of the bank’s sustainability risk management
approach is to ensure that E&S assessment is part and parcel of the financial transaction process.


Figure 8: Role that CFOs are expected to play in sustainability performance management
over next three years
Accountability for SPM today Role in SPM i
Accountability for SPM today

Sustainability/CSR/CR 55%

Comms and corporate affairs 22% Heads of sustaina
developm
Operations 16%

CFO and finance 15%

External affairs 7% Chief financial off

Other 24%

Role in SPM in three years in three years time
Role in SPM time

2%
55%
Heads of sustainable
12% 44% 42%
Heads of development
sustainable
development

6%

Chief financial officer
Chief financial officer 28% 44% 22%

Key
Little or no role
Supporting role
Substantial role
Leading role


Deploying the most appropriate skills
The absence of finance professionals from significant business decisions in areas such as carbon trading and
compliance with new climate change regulations could result in higher costs, lost opportunities and reduced
competitiveness.56 Just as SPM can fail if it is not treated strategically and sustainability projects become
expendable without a well articulated business case, failure to use the full range of skills within the finance
function can damage an organisation’s ability to uncover the real value of sustainability.

CIMA has identified eight core areas where management accountants can add the most value, bringing these
concepts into their ‘business as usual’ accounting practices:57

• Investment appraisal for climate change initiatives
• Whole-life costing
• Sustainability reporting
• Monitoring compliance with climate change policy and regulation
• Carbon accounting and budgeting
• Performance management of environmental and social KPIs
• Systems integration and information flow between financial and environmental management systems
• Carbon footprint calculations.
A host of other management accounting skills are central to the integration of SPM with overall business
performance management – such as cost-benefit analysis; environmental cost accounting; use of the balanced
scorecard and activity based costing techniques; and transfer pricing.58

Finance robustness applied to sustainability

Sustainability reporting at Novo Nordisk became more rigorous as a result of a close partnership
between the finance and sustainability teams.

‘We had to learn the dominant grammar of financial reporting and to speak more precisely, to be
clearer in our definitions and to identify the sustainability drivers,’ says Susanne Stormer, Vice
President, Global TBL Management. ‘We need to boil down these drivers to those of growth, return
on investment, management quality and risk management. We are then speaking a language any
CFO would understand.’

The sustainability team has learnt how to apply concepts of materiality to its reporting – a vital
step. ‘One of the big challenges is that non-financial metrics are missing the common
denominators and we have therefore had to develop ways of collecting them which are more
robust,’ says Stormer.

‘What we include in the financial report has to be material to investors. It’s a way of weeding out
some of the sustainability narratives, stories and examples. Your sustainability reporting has to be
comprehensive, which is part of the robustness; and it has to cover the whole organisation.’


Blending financial and sustainability expertise
Even where the finance function is deploying these new skills – properly accounting for sustainability initiatives,
modelling the risks and designing new techniques that account for real long-term value creation – it cannot
successfully deploy SPM on its own. That demands a shared mindset and dialogue between sustainability
and finance professionals.

Finance professionals need to develop a strong working knowledge of sustainability, its drivers and benefits.
Sustainability professionals must learn to use the rigour of financial management to make their contributions
to creating business value more obvious and credible (see Figure 9). There are a number of ways this
can be achieved:

• Advise or lead on how to structure and integrate sustainability measurement and management to deliver
results.

• Train heads of sustainability with appropriate financial skills.
• Build knowledge, skills and attitudes of finance professionals in sustainability and approaches to linking
sustainability to business value.

• Assign finance professionals to sustainability, building a cross-functional SPM team.
• Integrate sustainability and financial reporting with the support of external advisers.
• Strengthen finance’s business partnership role with heads of sustainability.
Why is combining finance and sustainability so important? Our research brings up a good reason. Half of the
organisations we surveyed do not yet factor in carbon prices into business decision-making – although nearly
two-thirds of finance and sustainability professionals believe that doing so would have an impact on key decisions.
The problem is that 45% of finance professionals are unaware of how the price would affect their scenario analysis.
So they need the expertise of sustainability professionals with their more informed understanding about the price
of carbon.59 Dialogue is essential.

Collection of accurate quantitative data is at the core of the integration process between financial and
sustainability reporting. As well as the availability of more sophisticated software tools, as discussed above,
organisations such as The Prince’s Accounting for Sustainability Project are helping drive the standardisation of
data that stakeholders such as investors can use.

Integrated financial and sustainability management systems

Novo Nordisk has integrated sustainability information into its annual report by appointing a joint
editorial team – with representatives from finance, investor relations, legal and operations – which
has a common understanding of triple bottom line reporting. However, as Susanne Stormer, Vice
President, Global TBL Management says, ‘This is not the end result for us. The end is an integrated
management system to develop this common understanding and framework. This applies not only to
internal sustainability and finance professionals but also to the independent external verifiers.’

Given the current lack of internationally recognised standards in sustainability reporting, Novo
Nordisk has worked with the external audit and assurance teams to explore how to develop a
meaningful and value-adding assurance for its non-financial reporting. ‘They have tried to stretch
the boundaries for what is included in audit and assurance, which is necessary given the lack of
sustainability reporting standards.’


Figure 9: Finance’s contribution to the key steps around SPM

Create a holistic
view of
performance
Show how risks
are managed,
value created Demonstrate
value of
sustainability


Gain buy-in
internally and
externally Integrate with
business planning New valuation
and reporting and risk models

Apply a financial
mindset – link
sustainability
to business
performance
Make it easy to
use SPM data for
targets Work with
Improve the
sustainability
process of data
experts to
collection, analysis
determine key
and reporting
drivers
Use the right metrics,
consistently

Use knowledge
of systems and
Find and use valid,
processes
consisent
measures
Show financial
impact of
decisions


Conclusion

The UN Global Compact-Accenture CEO study shows the vast majority of CEOs are convinced that good
performance on sustainability is good for business overall.

But as this report shows, obstacles remain which prevent sustainability initiatives from fully realising their potential
benefits. There are dedicated software solutions to ensure data collection, analysis and reporting is easier and more
effective than labour intensive manual or spreadsheet efforts. However, few companies have integrated
sustainability into normal business systems and processes. It therefore does not routinely become part of business
planning and reporting, which in turn makes it harder to demonstrate the business benefits to executives.

Although SPM is still at an early stage, we can illustrate the impact on the top and bottom lines through the
results of some sustainability initiatives (Table 1) and the experiences of some early adopters that have been
undertaking SPM long enough to provide useful case studies (Novo Nordisk and Standard Chartered).

The trend towards integrated reporting and the work of The Prince’s Accounting for Sustainability Project, will help
to accelerate the embedding of sustainability into organisations by providing a necessary and overarching reporting
framework, as well as practical ‘how to’ tools and guidance.60

By employing integrated reporting and robust, practical tools and following the steps suggested in this report,
finance professionals can play a pivotal role in ensuring that sustainability is routinely included in business
decision-making and that the value it adds is identified and reported.

The finance team brings the right rigour to ensure that we are not just doing it because it feels like the right thing
to do. It means we can’t get carried away by a wave of populism or the latest trends. These guys can ground us:
is it actually delivering what we think it’s meant to be delivering?
Dominic Burch, Head of Corporate Communications, Asda


About us

About CIMA
The Chartered Institute of Management Accountants, founded in 1919, is the world’s leading and largest
professional body of management accountants, with 183,000 members and students operating in 168 countries,
working at the heart of business. CIMA members and students work in industry, commerce, the public sector and
not-for-profit organisations. CIMA works closely with employers and sponsors leading edge research, constantly
updating its qualification, professional experience requirements and continuing professional development to
ensure it remains the employer’s choice when recruiting financially-qualified business leaders.

www.cimaglobal.com/sustainability

About Accenture Sustainability Services
Accenture Sustainability Services helps organisations and governments achieve substantial improvements in
performance and value while striving for a positive economic, environmental and social impact. We work with
clients across industries and geographies to integrate sustainability approaches into their business strategies,
operating models and critical processes. Our holistic approach encompasses strategy, design and execution to
increase revenues, reduce costs, manage risks and enhance brand reputation and intangible assets.

About Accenture
Accenture is a global management consulting, technology services and outsourcing company, with
approximately 204,000 people serving clients in more than 120 countries. Combining unparalleled experience,
comprehensive capabilities across all industries and business functions and extensive research on the world’s
most successful companies, Accenture collaborates with clients to help them become high-performance businesses
and governments. The company generated net revenues of US$21.6 billion for the fiscal year ended 31 August
2010.

www.accenture.com

About Novo Nordisk
Headquartered in Denmark, Novo Nordisk is a global healthcare company with 87 years of innovation and
leadership in diabetes care. The company also has leading positions within haemophilia care, growth hormone
therapy and hormone replacement therapy.

www.novonordisk.com

About Standard Chartered
Standard Chartered is a leading international banking group. It has operated for over 150 years in some of the
world’s most dynamic markets and earns more than 90% of its income and profits in Asia, Africa and the Middle
East. Standard Chartered PLC is listed on the London and Hong Kong stock exchanges as well as the Bombay and
National Stock Exchanges in India. With 1,700 offices in 70 markets, the Group offers exciting and challenging
international career opportunities for around 85,000 staff. Standard Chartered’s heritage and values are
expressed in its brand promise, ‘Here for good’.

www.standardchartered.com


Authors
Sandra Rapacioli, CIMA Sonia Thimmiah, Accenture
Dr Jeremy Osborn ACMA, CIMA Shaun Richardson, Accenture

Supporting authors
Chris Kimmett, Accenture
Ravindra Roberts, Accenture
Louise Ross, CIMA

Acknowledgements
The authors would like to thank the following people for their insights and assistance.
Accenture: Peter Lacy, Andrew Meade, Ilana Lever
Novo Nordisk: Susanne Stormer, Ole Nielsen
Standard Chartered: Gill James, Paul Lampey

Accenture, its logo, and High Performance Delivered are trademarks of Accenture. This document makes
reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion
of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an
association between Accenture and the lawful owners of such trademarks.


Footnotes

1
‘Optimizing Sustainability Performance Management’, Accenture (2009); ‘A word from the president’,
Financial Management, January/February 2011
2
‘Evolution of corporate sustainability practices: Perspectives from the UK, US and Canada’, AICPA, CICA and CIMA (2010)
3
‘Climate change: the role of the finance professional’, CIMA-The Prince’s Accounting for Sustainability Project (2009)
4
5
‘Optimizing Sustainability Performance Management’, Accenture (2009)
6
‘Climate change: the role of the finance professional’, CIMA-The Prince’s Accounting for Sustainability Project (2009)
7
74% of finance professionals and 71% of sustainability professionals agree with the statement that, ‘Actively engaging in tackling climate
change offers significant business opportunities’. ‘Accounting for climate change: How management accountants can help organisations
mitigate and adapt to climate change’, CIMA (2010)
8
‘A New Era of Sustainability – UN Global Compact–Accenture CEO Study 2010’, UNGC-Accenture (2010) See https://microsite.accenture.
com/sustainability/research_and_insights/Pages/A-New-Era-of-Sustainability.aspx
9
Ibid
10
‘Accounting for climate change: How management accountants can help organisations mitigate and adapt to climate change’, CIMA (2010)
11
‘Optimizing Sustainability Performance Management’, Accenture (2009); ‘Accounting for climate change: How management accountants can
help organisations mitigate and adapt to climate change’, CIMA (2010)
12
‘Carbon Capital: Financing the low carbon economy’, Accenture and Barclays (2011)
13
Energy efficiency and transport optimisation / logistics’ efficiency were highlighted as the two most significant actions taken by an
organisation to align cost reduction and sustainability. ‘Optimizing Sustainability Performance Management’, Accenture (2009)
14
‘Trust: Managing the Scarcest Commodity of all for High Performance’, Accenture (2011)
15
Edelman Trust Barometer, Edelman (2009), www.edelman.com/trust/2009/docs/trust_barometer_executive_summary_final.pdf
16
‘300th Fairtrade chocolate product is certified… sales grow by 24%’, Fairtrade press release, 13 October 2008
17
www.environmentalleader.com/2010/05/13/wal-mart-makes-progress-on-sustainability-goals/ 22 March 2011
18
‘Environment Agency clips Red Bull’s wings’, Environment Agency press release (July 2009)
19
Philips Electronics’ Annual Report (2010)
20
FT.com, 1 March 2010; see also http://plana.marksandspencer.com/
21
www.carbon-innovation.com/discussion/viewtopic.php?p=652. 22 March 2011
22
‘The Never Ending Job: Sustainability Report ‘09’, IKEA (2009)
23
‘Environmental Sustainability: Tools and Techniques’, CMA-AICPA-CIMA (2010)
24
http://www.interbrand.com/en/our-work/GE-ECOMAGINATION.aspx. Website reference 22 March 2011
25
See www.oursouthwest.com/climate/registry/adaptation-business-case-studies2007-08.pdf
26
‘Carbon Connections: Quantifying mobile’s role in tackling climate change’, Accenture and Vodafone (2009)
27
‘How We Do Business Report 2009’, M&S (2009)
28
Edelman, op. cit.
29
‘Competition and choice in the banking sector: Written evidence submitted by the Co-operative Financial Services’, Treasury Select Committee
(Session 2010-11). Web reference: http://www.publications.parliament.uk/pa/cm201011/cmselect/cmtreasy/writev/banking/m21.htm
30
Novo Nordisk in conversation with Accenture, 9 December 2010
31
‘Fife Council Case Studies: The role of the finance team in climate change projects’, CIMA (2009); ‘Carbon Emissions Reduction Plan’, Fife
Council (2009)
32
‘MBA Graduates Want to Work for Caring and Ethical Employers’, Stanford Graduate School (2004)
33
New varieties Ben Vane and Ben Klibreck have been engineered in association with Scottish Crop Research Institute, see www.ribena.co.uk/
recycling-what-is-ribena-doing.aspx
34
Gregory P. Hackett and John Evans, ‘Why Companies Fail: And the Information Imperatives to Help Ensure Survivability’, Kalido White Paper
(2007), cited in ‘Climate change calls for strategic change’, CIMA (2010) www.cimaglobal.com/en-gb/Thought-leadership/Research-topics/
Sustainability/Climate-change-calls-for-strategic-change1/


35
‘A New Era of Sustainability: UN Global Compact–Accenture CEO Study 2010’, UNGC-Accenture (2010)
36
37
38
For example, investors looking at long-term availability of water for ongoing operations, www.guardian.co.uk/sustainable-business/
corporate-water-disclosure-response-disappointing-details
39
40
‘Sustainability from a CFO’s perspective’, Jan Piet Valk, CFO Logica Benelux, paper presented at FDs’ Forum 10 June 2011
41
42
CIMA is a founding member of The Prince of Wales’ Accounting for Sustainability (A4S) project that brings leading organisations together to
develop tools to enable environmental and social performance to be better connected with strategy and financial performance
43
44
45
See http://www.sap.com/solutions/executiveview/sustainability/reporting-and-analytics/index.epx
46
See http://blogs.oracle.com/epm/entry/sustainability_and_performance_management
47
‘Optimizing Sustainability Performance Management’, Accenture (2009). These same points are also borne out by CIMA’s survey in,
48
49
50
51
See www.accountingforsustainability.org; also ‘Evolution of corporate sustainability practices - Perspectives from the UK, US and Canada’,
AICPA, CICA and CIMA (2010)
52
53
54
http://www.carbontrust.co.uk/policy-legislation/business-public-sector/pages/carbon-reduction-commitment.aspx
55
56
Ibid
57
Ibid
58
Ibid
59
Ibid
60
see http://www.theiirc.org


ISBN: 978-1-85971-704-2 (Hard copy)

Chartered Institute of
Management Accountants
26 Chapter Street
London SW1P 4NP
United Kingdom
T. +44 (0)20 7663 5441
F. +44 (0)20 7663 5442
E. research@cimaglobal.com
www.cimaglobal.com/thought-leadership
© October 2011 Accenture and Chartered Institute of Management Accountants. All rights reserved.

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