Why the Finance Office needs to adapt to the future

Joe Fitzgerald is Senior Vice President, Rental Management Strategy Visual rental.

Over the past three years, ESG adoption has become more widespread, sweeping across industries. ESG policies It proves beneficial for businessassistance in recruiting talent, Fundraising improvement And Increase revenue and investment returns. Indeed, according to Data from EY, last year More than a quarter of investors chose not to partner with fund managers who lack an adequate ESG strategy.

The reality is that implementing an ESG strategy is difficult. Companies must accurately track metrics and transparently report progress. Cross-functional teams must implement procedures to measure and understand the implications of financial reporting. However, many financial teams are not prepared, with 27% of financial managers By saying that the ESG reporting guidelines were among the biggest challenges they faced in the first half of the year.

Let’s take a closer look at the relationship between ESG accreditation and accounting practices, and how the finance office needs to evolve to master appropriate measurement guidelines.

Accounting teams take over

Over the past decade, corporate finance departments have played a greater role in driving business initiatives and making strategic decisions that affect the company’s core goals. ESG reporting is the next step in this evolution for the Office of Finance because it has implications for financial reporting and even revenue.

For example, Found on S&P Global That in 2021, 53% of the revenues of the 500 largest US companies and 49% of the revenues of the 1,200 largest global companies are generated in business activities that support the SDGs.

According to the Financial Accounting Standards Board, financial reporting can influence ESG strategy, including how relevant amounts are disclosed in the financial statements, risks associated with the environment, and how sales are affected by a company’s ESG efforts and resulting reputation. Accounting teams are now tasked with managing, tracking and recording all relevant information in support of corporate goals, placing them at the forefront of this important initiative.

Adopting ESG is easier said than done

Unfortunately, financial professionals will find little guidance on how to proceed. Recently, the International Sustainability Standards Council revealed: The first global standard for reporting on environmental, social and corporate governanceany bloomberg The notes will “pave the way for companies across jurisdictions to disclose standardized information about climate and sustainability,” and the SEC is expected to follow suit. In addition, the government frequently changes greenhouse gas mandates.

Research by the Visual Lease Data Institute found this to be amazing 94% of companies It has not fully developed its ESG policies. Isolated data is one of the biggest challenges companies face in establishing appropriate reporting standards. For example, less than half of the senior real estate executives surveyed indicated that they participated in reporting the environmental impact of their organization’s commercial real estate leases.

Companies should encourage cooperation between departments and improve communication with the financial department. By clearly defining responsibilities, finance departments will know exactly where to collect key ESG data and create standardized reporting guidelines across the organization.

Investments to support ESG

Dedicated technology is a must to provide finance teams with confidence in the accuracy and timeliness of their data collection. The technology can effectively track ESG metrics, which include a wide range of data points, from sustainability and carbon consumption to corporate diversity and broader social impact. Tracking such metrics gives companies a clear understanding of the goals of the ESG program and the progress made toward them over time.

Organizations may also consider partnerships. Those with the appropriate expertise to guide the organization through these unrestricted areas will be equipped with best practices and recommendations on processes and tools to support those best practices.

Tips for choosing an ESG technique

We live in a technological revolution with no shortage of options – but there are some key characteristics that reflect the quality of our ESG reporting technology.

Most importantly, the solution must be able to accommodate relevant data across departments. To achieve this, all stakeholders must be able to enter and access data. Solutions with this functionality facilitate cross-departmental collaboration among key stakeholders involved in ESG implementation, including sustainability, finance, real estate, and operations teams.

A technology investment must also automate simple tasks to allow the organization to focus on strategy and other critical core business functions. It is important that the technology is able to integrate with other solutions within the enterprise technology landscape to enable critical data flows between systems. This capability will provide companies with greater insight into how their ESG program is performing and where they need to make changes to achieve stronger results.

ESG reporting is not a trend; It’s the new standard business practice. The new ISSB standards are just the beginning and will pave the way for other governing bodies as they consider their own regulations. So while government environmental regulations are being negotiated, there is no time to lose. The Finance Office must urgently establish a measurement and reporting framework to ensure long-term success. Their organization’s relationship with potential employees, investors, and customers depends on it.

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