Being a responsible investor means looking at more than just financial impacts
The Accounting for Sustainability (A4S) Chief Financial Officer Leadership Network was set up in December 2013 to bring together a group of CFOs from large European businesses seeking to embed the management of environmental and social issues into business strategy.
The group has published a series of guides that are designed to help the finance and accounting community address the practical issues of integrating sustainability into their business processes and decisions.
I have been particularly involved in the development of the guide for embedding sustainability into the decision making process for capital investment. As a responsible investor, SSE is seeking to ensure that our investment decisions continue to provide benefits to our customers and our shareholders but also protect the well-being of current and future generations.
Operational and investment decisions within organisations typically focus on measuring traditional business risks and financial impacts to ensure they result in the successful selection of projects. These financial models may have brought success in the past, but it is becoming increasingly apparent that to make effective investment decisions, which are sustainable over the long term, a wider set of measures covering societal and environmental impacts should be considered alongside the economic and financial ones.
SSE invests around £1.5billion in essential energy infrastructure every year. Effective capital investment decisions are therefore fundamental to our long term success. There is a lot of work underway within SSE to understand the wider impacts we have and to develop ways of establishing a value for them, so they can be fully integrated into our investment decision making.
In our experience, it helps to stop thinking about sustainability as an optional add-on and recognise the commercial value it delivers in capital projects. Challenging project teams to be more efficient in their use of resources can drive significant cost savings and drive innovation. Supporting the creation of an effective local supply chain can improve the efficiency of future projects. Demonstrating wider sustainability benefits can improve the access to and cost of capital. The consideration of social and environmental impacts and not just financial, may ultimately provide the additional clarity required to progress or reject an investment decision.
Finance professionals have a critical role in leading the sustainability agenda within business. I hope the four guides published today by the A4S CFO Leadership Network will provide a catalyst for finance professionals to move towards greater sustainability thinking in business decision making and as a result, create more sustainable and resilient businesses in the future.