30 CFOs at global companies weigh in on how they are leading the climate charge toward net zero

In the U.S., public companies can expect the Securities and Exchange Commission’s climate change disclosure final rule this fall. And calls for climate risk management are increasing globally. Many companies have committed to greenhouse gas emission reduction goals of net zero by 2050 or before. 

So, how can CFOs take a leadership role in their company’s low-carbon transition? 

A new report from the UN Global Compact and the Climate Bonds Initiative provides some insight. It’s based on interviews with more than 30 CFOs representing global companies with a combined market capitalization of $930 billion, such as Anheuser-Busch InBev, AstraZeneca, Schneider Electric, Verizon, Workiva, and Cemex.

“CFOs play a key role in integrating sustainability into the overall business strategy, ensuring that those sustainability efforts are both financially and operationally viable,” Joshua Dickinson, SVP and CFO at Schneider Electric North America, tells me. 

Scope 3 is the next frontier

The report surveyed CFOs at different levels of their sustainability journeys. Here are three key observations:

—CFOs in more carbon-intensive sectors were generally more confident when talking decarbonization strategies. For example, companies in the cement industries had an advanced approach to integrating carbon emissions in their overall strategy, such as the use of an internal carbon price.

—The less directly carbon-intensive industries (in terms of scope 1 and 2 emissions) often had the challenge of dealing with scope 3 emissions in their supply chain. This was the case in the financial services, oil and gas, and agriculture sectors where scope 3 often represents over 90% of the emissions, the research found. (Scope 3 emissions aren’t produced directly from the reporting company but from the activities of its value chain.)

Scope 3 emissions and the consideration of nature are regarded as the next frontier, according to the report. But just 22% of firms that have issued sustainability-linked bonds (SLBs) included scope 3 emissions in their targets, Climate Bonds found.

An example of a company using SLBs: At Autostrade Per L’Italia, (ASPI) the chief sustainability officer reports directly to the CFO, the report explains. In 2023, ASPI priced a $816 million SLB maturing in 2031. The coupon repayments were tied to environmental KPIs (these include for example scope 1, 2, and 3 upstream emissions), providing a natural incentive for the CFO to ensure that the targets would be achieved by the business. 

—Leadership was very important in setting and implementing ambitious net-zero targets. In 60% of cases that impulse stemmed from the leadership of the CEO or CFO. 

But regardless of who is spearheading the transition internally, “the CFO will lead its execution, validate the feasibility, create the financing plan, construct the narrative, raise the capital, and supervise the reporting on the plan and its progress,” according to the report.

Recommendations from CFOs interviewed by the Climate Bonds Initiative: 

— Start the decarbonization journey early to gain a competitive edge—operational expertise, clarity over supply chain risks and opportunities, and technological and product mix innovation.

—Make a business case around a decarbonization plan. Short, medium, and long-term scenarios that highlight both the cost of action and inaction need to be presented.

—Get internal and external stakeholder buy-in. CFOs should leverage their high-profile platform as a key decision-maker in resource allocation. They can use investor calls to present low-carbon strategies, especially in capital-intensive businesses, according to Climate Bonds.

“Given the new scope of responsibilities attributed to the CFO, it would be fair to say that this role should be renamed chief value officer,” Laura Palmeiro, sustainable finance director at Danone, said in the report.

Sheryl Estrada
[email protected]

Leaderboard

Ana Schrank was named CFO at Invitae (NYSE: NVTA), a medical genetics company, effective Oct. 2. Robert Dickey, who has been the interim CFO, will transition to a consulting role for the company. Schrank has more than 25 years of experience in finance. Most recently, she served as CFO for Truepill, Inc. Before that, Schrank was CFO at Collective Health. Earlier in her career, she spent more than 20 years at McKesson Corporation in financial leadership roles. 

Joshua B. Warren was named CFO at Envestnet, Inc. (NYSE: ENV), a provider of integrated technology, data and wealth solutions, on Nov. 15. Warren will succeed Peter H. D'Arrigo, who has served as CFO since 2008. Warren most recently served as managing director and global head of business strategy for iShares and Index Investments for BlackRock. Before that, he served as a managing director in BlackRock's Corporate Strategy and Development team. 

Big deal

The 2023 Deloitte Connected Consumer survey provides insight into consumer sentiment about digital devices and technology and explores how consumers are optimizing usage. And it captures how consumers are increasingly reliant on technology for remote work.

A key finding of the report is that hybrid work is increasing in preference, with 56% of workers preferring remote options for their future work—a 6-point increase from 2022. The main benefits of hybrid work cited by respondents include better relationships with family and coworkers and improved health and well-being.

The findings are based on a study of over 2,000 U.S. Consumers.

Going deeper

Seramount, a professional services and research firm, has released its 2023 list of the Top Companies for Executive Women. L'Oréal USA earned the No. 1 spot. The list celebrates companies that champion women’s advancement, with a focus on succession planning, profit-and-loss roles, gender pay parity, support programs, and flexibility programs, according to Seramount. Ninety-one percent of companies on the list hold managers accountable for hiring and advancing women, and 87% offer formal sponsorship, according to the report. 

Overheard

"If there is not an effective fiscal policy response to try to offset those pressures...then the likelihood of that having an increasingly negative impact on the credit profile will be there. And that could lead to a negative outlook, potentially a downgrade at some point, if those pressures aren't addressed."

—Moody's analyst William Foster told Reuters that a U.S. Government shutdown would harm the country's credit. If Congress fails to provide funding for the fiscal year starting Oct. 1, government services would be disrupted.