Sustainability: when you can't see the forest for the reporting.
The report, based on 192 interviews with CFOs of Spanish companies, focuses this year on the role of CFOs in the face of the business challenge of sustainable transformation.
We have looked into the report figures in another article in Bankinter's CFO Forum. We will now find out what the real protagonists had to say during the two roundtables at the presentation of the CFO Frontline Report in Valencia.
ESG regulation: when all roads lead to the Finance area
Only 24% of the CFOs consulted exercise direct leadership in sustainability. But practically everyone feels involved in ESG issues in their daily work, even if it is only because of the regulatory requirements they have to comply with. The first roundtable, moderated by Luis Sáenz de Tejada, head of Sustainability at Bankinter, was precisely about “The ESG requirements for CFOs”.
“When we talk about sustainability, it's hard not to think about the amount of regulation that we are all faced with”, said the also deputy general director of Bankinter. Regulation that is constantly evolving and leads the best positioned companies to better financing, and even to being a true magnet for investors. Furthermore, sustainability is becoming a requirement in public bidding processes.
“Companies, with their ESG reports, get better positions and better competitiveness and even financing”, warned Daniel Ramos, Green Leader of FI Group, the consulting firm that, together with Bankinter, is bringing European funds to the Spanish corporates since 2021.
Regulations that, as Emilio Barberá, senior manager of asset management at Bankinter, pointed out, can be useful even if they are annoying. Companies today have to be close to and rely on the regulator to advance their sustainable transformation.
“Your competitor and your customer push you, and the financing also pushes you. Sustainability risks are integrated into asset management and investment decision-making”, stressed Emilio Barberá. Francisco Benedito, co-founder and CEO of Climate Trade, spoke in the same vein, saying that “regulations help us accelerate decarbonisation”. And this decarbonisation will be increasingly demanding and will force us not only to report, but to change the way we have done things so far.
As the speakers agreed, large corporates are pulling the medium and small businesses in the sustainability race. A driving effect derived from their greater investment capacity and from having been the first to apply European regulations. As Luis Sáenz de Tejada pointed out, it is possible that we are witnessing a process of concentration given the impossibility of some small corporates to keep up.
But it's not all good news: the CFOs spoke about the asymmetry that can occur in the markets. This is very topical given the import of Chinese electric vehicles to Europe, which are more competitive than those manufactured in the continent, and that also harness direct State aid for buyers in Europe.
This asymmetry also extends to the United States, where the Inflation Reduction Act, the Marshall Plan, as Francisco Benedito called it, is injecting public funds into national corporates.
This loss of competitiveness, in the Spanish case, is partially compensated by cheaper access to energy than in neighbouring countries and by the advantage of producing and consuming our own energy (wind, hydraulic and photovoltaic) in a sustainable way. Being a leading country in renewables has a positive impact on the sustainability strategy of the business fabric, as Daniel Ramos said.
ESG and CFOs: organise and prioritise initiatives
“Regulation is beginning to demand a lot of effort in reporting, information and non-financial audits”, remarked Emma Montserrat, director of Corporate Banking and deputy general director of Bankinter, when she moderated the second roundtable: “ESG and CFOs”.
But this demand, which requires so much dedication, should not prevent you from seeing the forest: an unprecedented business transformation reminiscent of what happened with digitalisation.
Far from being a hindrance, the CFOs participating in the conference believe that the transformation process contributes to achieving a stronger company, as Agustín Melchor, CFO of Global Omnium, said, even when at first glance it may seem that the decisions go against the heart of the business, like reducing water consumption in their case (Aguas de Valencia).
For Julio Artillo, corporate chief financial officer of GrupoTec, the key is to associate sustainability with profitability. “In time, we will want to measure all these financial and human resources investments in terms of how many new customers they have brought. Have we had a profit? How to quantify that profit? And we will want to say yes, beyond regulatory compliance, we get a marginal return if we take it a step further”.
CFOs normally associate reporting with more work with little added value, as Agustín Melchor, CFO of Global Omnium says. Hence, the demands for non-financial information have been received as if they were a tsunami, as it becomes clear in the charts found in the CFO Frontline Report.
This reporting is effort intensive and very demanding for the financial area, which ends up centralising the collection and presentation of ESG information. Because this is not just about environmental indicators, but also about measuring the social impact and good governance of the company.
Some large companies, such as Global Omnium, have a company-wide sustainability department, reporting to the CEO, and they even sell consulting services on the matter. In the case of Power Electronics, it has been proposed that sustainable actions respond to a strategic plan and cease to be, as in so many corporates, a sum of initiatives.
“The initiatives were spread throughout the company, everyone wanted to do things, and we lacked a little order and governance”, explained Daniel Soler, CFO of Power Electronics.
“You put in a lot of hours. What we did, he added, was analyse where our partners are, our countries, what initiatives we want to draft, the SDGs we want to achieve, and from there we defined strategic lines. You have to do what you're asked to do, but you have to weave it all together”.
The feeling of having a “trunk of initiatives” that are perhaps not a priority was shared by other CFOs at the table.
Neither GrupoTec nor Power Electronics have a specific ESG area, although they plan to create one in the future: a leader in sustainability with a transversal committee where many areas intervene. “At GrupoTec, Julio Artillo clarified, we centralise reporting in Finance. We are in charge of managing and/or organising how to proceed with this reporting of things that are not strictly accounting. And we have to assess whether our systems today cover these needs”.
Luis Sanz, CIO of Atitian Group, emphasised the dilemma that managers face between what is important and what is urgent: “The CFO as a role has very diverse operational and functional responsibilities, and this generates many priorities and fires to put out”.
“The CFO has a long-term vision of the company, and sustainability is an essential component. Without it, companies will not exist”, stressed Luis Sanz. “It's more of a marathon than a sprint. The important thing is that every day you have to take a step towards that marathon. Focusing on the long term, but without forgetting that if you don't take steps you won't get there”.
