The new normal for CFOs and supply chain sustainability goals

In anticipation of the incoming Trump administration, many organizations are (rightly) concerned about the future of ESG efforts in the US.

Now, companies “have to be really thoughtful about how they are balancing costs and sustainability,” Lindsay Azim, director analyst with Gartner’s talent and sustainability team, told CFO Brew. “This is really hard, and it involves the CFO in a way that I don’t think the CFO has been brought into the fold in years past.”

All the while, the risk of not prioritizing ESG investments, including in your supply chain, is too great to ignore, she argues.

“[That] risk is not going away, no matter if it’s a Democrat or Republican in the presidency in the US. Sustainability and ESG regulation is never going away,” she stressed. “If you are a global organization with a sprawling supply chain, you can’t back off, and we aren’t seeing companies back off.”

For CFOs, communication about sustainability efforts with chief supply chain officers is going to be a key part of navigating the next four years, regardless of what happens to ESG and climate regulations.

Difficult conversations. “One of the bigger headwinds for sustainability” efforts in supply chains right now is one that CFOs can address, Azim said: aligning chief supply chain officers’ and CFOs’ (only seemingly) different goals.

Traditionally, Azim notes that those in the supply chain and sustainability space haven’t been “winning over the CFO, and we need to learn how to do that.” It’s ultimately storytelling challenge, in her mind.

“It can be really an uncomfortable conversation for supply chain professionals to have with CFOs, because it’s hard to quantify sustainability value in some ways,” she added. Moving forward, they’ll need to learn to “speak the language of the CFO” to better “draw the connection between business outcomes and sustainability outcomes.”

Often, Azim explained, CSCOs are simply “handed a sustainability goal, and then they’re expected to act on it, and a lot of times, they’re handed a goal where the investments required were not quantified, the feasibility was not quantified.”

That sets up an awkward conversation down the line, she said. “As a CSCO, we have to go back to the CFO and say, ‘Hey, this is our business goal that I was handed, but it’s going to require a million dollars of investments,’” she noted. “[It’s] a really uncomfortable conversation.”

Pyramid of priorities. Making those conversations less uncomfortable can happen simply by understanding how to align everyone’s priorities, Azim noted. Creating a sort of mental pyramid can help. 

The number one priority for both CFOs and supply chain leaders should be the same: “How are we creating a direct line from a sustainability initiative to the goals of the organization, whether it’s growth or cost savings?” she explained.

But after that, sustainability leaders in the supply chain space can also emphasize their personal passion for sustainability in conversations with CFOs, and how that passion can align with those organizational goals.

“Part of growth and cost savings as an organizational goal is, for example, how are we engaging our talent?” Azim said, adding that even just in the supply chain field, there are often lots of employees who “really care about sustainability, but they don’t have a voice.

“There’s a lot of ways that we can engage [those employees], and that has to be part of the conversation,” she added. “And we know that CFOs and leaders care about turnover and the cost of talent, and the talent shortage today.”

Change of plans. You and your CSCO may also have to deal with some awkward renegotiating. In some cases, your CSCO or other members of supply chain leadership might come to you with revised goals, as benchmarks for interim 2030 targets approach, Azim noted.

“It’s okay to take a hard look and say ‘We didn’t do this right,’ as long as [supply chain leaders] are transparent about it and how we are potentially recalibrating goals that will really determine if we have lost stakeholder trust or not,” Azim said.

“We in supply chain potentially have to go to a CFO and say, ‘I presented this business case, but after some research, we realized it’s actually this business case.’ So, being just transparent about where those adjustments need to be is going to be important,” she added.

While the path forward might not be entirely clear right now, given the potential need to adjust goals because of the economic climate, the political landscape, or simply because goals were never feasible in the first place, it’s crucial to keep those conversations going, Azim noted. “We’re all on this journey together,” she stressed.

“My main message is: Keep going. If we want to future-proof our supply chain and our organizations, we have to keep going,” she said. “Climate change is not going away, no matter the political view of it.”