While the COVID-19 pandemic has turned our personal and business lives upside down, we cannot ignore the silver linings that have emerged – perhaps none greater than a renewed sense of collective responsibility and urgency in taking on climate change.
Big and small companies are creating meaningful financial sustainability incentives with most of them adopting strategies to measure their progress on that front. To meet our ultimate climate change needs, however, change must be led by the CEO – in partnership with the finance department.
Over recent years, there has been a steep change in Kenya’s sustainability landscape. Company leaders are increasingly recognizing the competitive edge to take action. The Landscape report found that we are now strongly influenced by sustainability when setting the business growth strategy.
According to a 2020 report by Bloomberg New Energy Finance (BNEF), the sustainable finance market has surpassed $1 trillion globally, and Kenya is not doing so badly. Consumers have also increasingly become conscious of their consumption patterns and are less likely to buy from companies that perform poorly on environmental issues.
There is no one-size-fits-all solution for sustainable transformation, but it is clear that to achieve the best results it needs to be embedded across every corner of the company. Commitment from the CEO, of course, is critical, but the finance team has a major role to play. With the finance’s department roles in forecasting and planning to ensure growth, risk management, capital planning, investor relations and budgeting, it has an upper hand in ensuring a successful outcome of the company’s sustainability plans.
To chart an effective sustainability strategy, the finance team can support the CEO by;
Aligning company funds with sustainability objectives
As sustainability financing grows, more opportunities for finance professionals to align their company’s funding with its sustainability objectives grow. Whether the company follows the Green Bond Principles or sets loan terms based upon sustainability performance targets, sustainable finance instruments can provide a very visible means of holding the business accountable for its progress on sustainable development. It is important for the finance team to closely track and validate the organization’s sustainability progress.
Tracking and measuring to maintain momentum
As the adage goes: “What gets measured gets done.” One of the strengths of finance professionals is that they like to measure organizational performance quantitatively – a valuable attribute in the context of sustainable development. A company’s sustainability strategy may encompass wide-ranging objectives which require customized performance indicators to see what is and is not working.
Communicating the sustainability story
Setting your green objectives publicly helps reinforce a company’s sustainable transition. By externalizing this vision, the company maintains inward pressure to make the operational changes happen. Communicating your sustainability narrative attracts a broader base of investors and customers. The finance team should engage the communications teams to communicate a defined set of green objectives and performance metrics, and a clear vision for the company to attract long-term capital.
Competing against this backdrop means accelerating organizational transformation. To do so effectively will require both the CEO and the finance function to commit fully to a sustainable vision for the business. Only then, will other business teams be empowered to unlock the full extent of sustainable opportunities for the organization.