Chief Value Officer: Agenda for Sustainability and Integrated Value Chain
Navigating the BANI World: Leadership, Digital & Sustainability at Inflection Point
Businesses and corporations are fast evolving, in tandem with the BANI1 environment that we live in. In this journey, there are a few major themes that are at their inflection point. In my view, they are: Leadership for the future, Digital, and Sustainability. I am delighted to see that these themes are on top of the agenda of ICAI as they host the World Congress of Accountants for the first time in India.
1. Sustainability: The Global Imperative & Climate Commitments
We live in a world where volatility and uncertainty have become commonplace. The COVID-19 pandemic has shown in sharp contrast the fragility of our ecosystem and its rippling effects across the world – loss of lives, livelihoods, and economic hardships, to name a few. Social inequality is on the rise – an estimated 70 million people globally have been pushed into extreme poverty just in 2020. This is not the first and will not be the last crisis that humanity will experience. Years of abuse and unsustainable consumption have ravaged nature and adversely impacted climate, leading to depletion of biodiversity and a high risk of zoonotic diseases.
Climate change, by far, is the biggest concern looming over humanity and the cost of inaction will exceed the cost of action. The only way to avoid the worst possible climate outcomes is to accelerate our efforts now and stop procrastinating. Since the adoption of the landmark Paris Agreement on climate change in 2015, global momentum to tackle the climate crisis has been building. Individuals, organisations, and governments are making real progress in battling the climate crisis.
Committed to reducing the emission intensity of India’s GDP by 45% compared to 2005 levels by the year 2030.
Prime Minister Narendra Modi pledged at COP26 to achieve complete net-zero greenhouse gas emissions by 2070.
India’s sustainable funding requirements will be in trillions of dollars. This calls for new ways to consider financing and investing in ESG initiatives. This also means that sustainable finance will be the mainstay of business in the future.
2. Not Just Capitalism, But Multi-Stakeholder Capitalism
For any business to survive and thrive, the focus must always be on a multi-stakeholder model. We need to look at these from a different vantage point and over a different horizon. It is rightly said:
“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.”
We must share the blessings of capitalism to take away the miseries of society and collectively win. The world needs growth and so do businesses. And this growth needs to be good for all – consumers, communities, the economy, the planet, and shareholders. Businesses need to create value not just for shareholders but for every stakeholder across its value chain.
“Stakeholder capitalism is about the values of the company, and the way it operates, to reflect the interests of multiple stakeholders all the time.”
In August 2019, more than 180 U.S.-based CEOs as part of the Business Roundtable Statement on the Purpose of a Corporation, stated that while individual companies serve their corporate purpose, they share a fundamental commitment to all stakeholders: deliver value to their customers, invest in employees, deal fairly with suppliers, and support the communities in which they operate.
The Hindustan Unilever Experience: From USLP to ‘Compass’
At Hindustan Unilever, we have always held the belief that being a responsible, sustainable business makes us a stronger, better business. In fact, we believe it is our only way of doing business. The focus on ‘Doing Well by Doing Good’ goes all the way back to our founder William Lever.
Codified sustainability ahead of industry. Over 10 years, purpose-led brands consistently outgrew the portfolio, achieved operational eco-efficiencies, and positioned HUL as the number-one employer of choice for talent.
Purpose: “To Make Sustainable Living Commonplace”. Vision: leader in sustainable business. Drives consistent, competitive, profitable, and responsible growth through time-bound goals for planetary health, personal wellbeing, and social inclusion.
3. Role of Finance Professionals as Value Architect: The Twin Mandate
The evolution of business and taking an integrated approach to business strategy and sustainability is fundamentally altering the role of the CFO and their finance and accounting teams. The CFO is the chief value architect for any organisation and plays a pivotal role in building sustainable businesses. CFOs must help the business recognise the risks and opportunities associated with sustainability and be able to craft a sustainable business model that not only helps achieve better financial returns but also generates positive value for the planet and society.
Ingraining sustainability in core business strategy, orchestrating cross-functional execution, linking quantitative performance KPIs, and driving extended value-chain collaboration.
Mitigating material ESG risks, leading global reporting standardization (BRSR, ISSB, TCFD, GRI, SASB), establishing internal controls over non-financial data, and proactive investor engagement.
A. Creating Value: Unlocking Sustainable Commercial Advantage
- Ensuring sustainability is ingrained in the business strategy: CFOs who champion sustainable business practices and build an integrated strategic approach across the value chain will drive superior financial performance. ESG cannot be run by a central team alone; functions such as supply chain, marketing, and procurement must collaborate, with finance teams orchestrating the organisation-wide roadmap.
- Linking sustainable business performance measurements to value: Finance teams must establish performance management routines and enforce accountability. Like any commercial business plan, finance must set tangible, quantitative performance indicators and hold respective teams accountable for deliverables.
- Collaborating across an integrated value chain: Amplifying impact requires looking beyond enterprise boundaries – forming coalitions with industry peers, advocating regulatory and policy shifts, and structuring innovative supplier/vendor partnerships across the extended value network.
B. Protecting Value: Safeguarding Enterprise Resilience & Trust
ESG has become the focal point for governments, investors, society, and regulators. The accounting and finance profession must be at the forefront of bringing transparency, reliability, and auditability to ESG reporting – achieving the same quality as financial reporting without impeding the ease of doing business.
Climate disruption and social inequity pose material financial and reputational risks. ESG is now an existential strategic risk requiring immediate leadership from the CFO and Enterprise Risk Management (ERM) functions to design robust mitigation protocols.
Harmonizing the reporting landscape across ISSB, GRI, TCFD, and SASB. In India, SEBI’s Business Responsibility and Sustainability Report (BRSR) leads the way. Indian accountants must spearhead global alignment to ensure uniform disclosure methodologies for capital markets.
Evolving auditing standards to enable robust third-party assurance over ESG data. Creating rigorous internal control frameworks over non-financial information to ensure precision, reliability, and audit readiness.
Institutional investors actively integrate ESG parameters into capital allocation. CFOs and Investor Relations (IR) teams must proactively engage with analysts, funds, and ESG rating agencies to clearly articulate sustainability progress and risk governance.
4. Building Organisation-Wide Capabilities & Technology Infrastructure
A. Demystifying the ESG Alphabet Soup:
The myriad ESG acronyms, frameworks, and expanding data requirements can initially feel overwhelming. Finance professionals must first master these guidelines internally and subsequently educate, guide, and upskill the broader enterprise to embrace sustainability.
B. Next-Gen Tech Architecture for Non-Financial Disclosures:
While ERP systems for financial reporting are mature, technology must now evolve to track non-financial metrics – such as Scope 1, 2, and 3 emissions, effluent water discharge, and renewable power consumption. Enterprise tech solutions must create automated audit trails and internal control frameworks to preclude greenwashing and misreporting.
5. Conclusion: India’s Time to Shine & ICAI’s Foundation for the Future
I strongly believe this is India’s time to shine; we have all the elements needed to win in this new era. But we should not forget the old saying: a building is only as strong as its foundation.
We as accountants need to provide a strong foundation to build our sustainability programs and lead the digital revolution. As one of the most eminent professional bodies in this country, the Institute of Chartered Accountants of India (ICAI), with its Sustainability Reporting Standards Board (SRSB), should be the torchbearer in building expertise, capabilities, and setting golden standards for the world to emulate. ■■■
Transforming Food, Feed & Fibre: For a More Sustainable Future
We are a market-leading agri-business, focused on high-growth markets, with a global origination footprint, processing capabilities, and deep understanding of market needs built over 33+ years. Driven by our Purpose and guided by our core values: