Deploying sustainability strategies is a real challenge for the CFO. The need of the hour is that both – the government and the private sector – act with urgency. The former must realise that the time for incentives and nudges are over, and strict regulations need to be issued and enforced; and the latter to be onboard and prepared to incorporate sustainability solutions into its long-term strategies.
Currently, there is no ESG legislation for the private sector in the UAE, but it could be on its way. The Capital Club Dubai hosted a roundtable discussion on the topic, moderated by Pedro Pereira, to bring together the diverse thoughts of business leaders, especially the CFOs, who bear the primary weight of this responsibility. They shared some main challenges and call to action.
Challenges
- With limited funds, it is challenging for CFOs to resolve the conflict between investment and ROI, and very difficult to convince the CEO, Board and shareholders to strategise for the long term.
- we are able to link ‘bad behaviours’, like carbon emissions, with tariffs and consequences, we will be left with good intentions and no real change. Compliance is urgently needed.
- It is challenging to properly evaluate what solutions are fully sustainable long term – there are many shades of green.
- Financial markets reward short to medium term vision and can be a distraction from doing the right thing. There is an interesting saying, “markets have the ability to remain irrational, longer than human beings can remain sane”.
- You cannot improve what you cannot measure, but in the new paradigm, most companies’ systems are not designed to track ESG data.
- The relationship between sustainable investments and profits is a curve-linear relationship, with the initial phase not showing high financial results, but over a period of time, the financial results are better and more stable.
- The CFO and the company could create a false sense of contribution if the metrics are just aspirational. The danger of a placebo affect with no real change or meaningful impact is real and the CFO needs to watch against this.
Call to Action
- Define metrics around proper goals and establish how they can be percolated to all levels of the organisation, with reporting on a universal standardised framework.
- Champion companies that succeed in aligning the sustainability agenda with shareholders and the board through strong corporate governance and can be strong role models.
- Walk the talk. Just execute. Strategise what you can do and start the work that matters.
- Communicate effectively to multiply impact and educate.
- Employ the carrot & stick method. The carrot is linking sustainability results to CEO bonus; and the stick is regulations and compliance.
Sustainability is no longer an option but a business imperative, and an existential crisis. The hope is that the government and private sector will join hands to find solutions. The conversation to be continued.