Chris Maclean, CEO, True powered by Open Energy Market
More than ever, CFOs and finance teams are being called to drive decision-making and action for corporate sustainability strategies. This can be seen in the increasing focus within businesses, as organisations battle for competitive advantage; in investment strategies, as sustainable funds outperform traditional funds; amongst regulators, as more stringent ESG compliance becomes the new norm; and on the world stage, with a lack of finance leaders at COP29 being called into question.
The fresh challenge for CFOs, is to ensure their organisation’s sustainability and energy procurement plans not only pass muster with key stakeholders, but that they also offer a clear opportunity to deliver strong financial returns in a commercially viable way.
Driving competitive sustainability strategies
Undoubtedly, CFOs play an integral role in establishing a sustainable energy mix with a firm view of commercial impact. In fact, a recent survey conducted by True, powered by Open Energy Market, uncovered a complex landscape of decision-making authority over sustainable energy strategies. Interestingly, CFOs slightly edge out Heads of Sustainability as the final sign-off authority (28 percent versus 24 percent).
This may be partially attributed to their core skillset being easily adapted to accurately project the cost and return on investment of sustainability projects, determine the feasibility of renewable technologies, factor sustainability into broader financial scenario mapping and reporting and ensure project investments ladder up to long-term strategic goals.
We cannot ignore what CFOs recognise as standard with every business case that crosses their desk: implementing sustainable initiatives is not simply a moral obligation but also holds strategic commercial advantages. By allocating budget towards investing in sustainable practices, businesses can futureproof their operations, enhance their reputation, and capitalise on emerging market opportunities.
Building a strong track record
There is a difference in blindly putting funding towards the latest sustainability trends and understanding which energy procurement and sustainability strategies are best suited to each business’s unique energy mix, level of available investment, and capability to see a sustainability project through.
The key to unlock this opportunity effectively lies partly in data-driven modelling and analysis of energy consumption data over time. Unfortunately, research further shows that only one fifth (20 percent) of UK organisations track and analyse this data, and similarly few are reviewing compliance with environmental regulations (20 percent) or identifying cost savings using technology (19 percent). This could expose businesses to risk if left unaddressed. Where CFOs can channel their focus are the gains, both strategic and financial, to be made by closing those gaps.
On the other side of the coin, the very real cost of not applying CFO-grade critique and rigour to current and future sustainability strategies must be a core consideration. Tender processes halt when ESG progress isn’t up to par. Supply chain costs are at risk of ballooning due to energy market volatility. Further, customers are increasingly vocal about sustainability concerns and not shy about taking their purchasing power elsewhere.
Barriers and bridging gaps to sustainability ROI
The onus must not solely rely on the specialist knowledge of an organisation’s finance team. There are various solutions available to support internal teams with ensuring their energy procurement processes and renewable investments are grounded in their specific business’s situation.
For example, we’ve identified that the introduction of new technology to accurately forecast, monitor and improve energy usage is a prominent strategy adopted by 51 percent of hospitality businesses and 43 percent of data centre organisations.
Others are more inclined to engage specialist consultants or procurement specialists to optimise their business energy mix. In fact, almost half (48 percent) of manufacturers are taking this step, over double that of the national average (23 percent).
For a sizeable portion of those in the food and drink industry (39 percent), creating project teams to address inefficiencies in energy usage is a frequently used approach.
Regardless of the route, effective energy procurement is essential for financial stability and operational resilience across industries. Support from strategic energy management experts who can help finance and sustainability leaders to anticipate market trends, assess risks, and optimise costs, combined with net zero analytics that can reinforce and inform the path forward, offers a strategic route to balancing environmental impact with financial growth.
CFOs dismantling the sustainable energy paradox
Ultimately, businesses can no longer think of sustainability as drain on finances; rather, we must recognise that sustainability can drive commercial benefits when done right. Businesses need to shift their perspective to see sustainability as a pathway to commercial gain, or they risk losing competitive advantage and tenders, and lagging behind in a fast-evolving market where sustainability is increasingly tied to business success.