Covid-19 has shown us that homing in exclusively on financial information will not be sustainable in the long term: Companies cannot continue to focus only on financial capital in a world where resources are running out. Thinking around this longer-term and creating value for multiple beneficiaries will challenge leaders' thinking.
The level playing field for sustainable businesses
Financial information and financial returns, as the primary measure of success, are yardsticks of the old paradigm, in which short-termism plagued the capital markets’ mindset. The world is shifting to multi-capital value creation accounting whereby an organisation has to incorporate other forms of capital such as people and the environment into its thinking. In this new context, boards’ mindsets will need to change, and CFOs will play a critical role in bringing about the necessary shift inside organisations.
Sustainable development accounting is rapidly becoming essential to companies' overall strategy. This concept is about focusing on sustainable value creation while taking into account the environmental ceiling and social foundations. The multiplicity of formats in which multi-capital value creation is being captured today, in both financial and non-financial terms, remains a challenge. Capitals need to be tracked and connected, requiring a multi-disciplinary mindset to understand that performance does not come in a ready-to-use, purely monetary format.
Considering all capitals on an equal basis is our firm guarantee and utterly non-negotiable in order to ensure the planet’s survival. Respecting planetary boundaries - thanks to multi-capital accounting - is an indisputable mission in today’s challenging world. Smart organisations are shifting their sustainability responsibilities toward the finance function. In this new context, CFOs will play a critical role in ushering in this necessary shift inside organisations and investors will increasingly request their expertise to evaluate climatic, social and environmental risks.
A new mindset for players
The shift towards multi-capital CFOs is a good thing for responsible businesses; it gives them the data to do the right things and make wise management decisions. It also builds the conversation internally and helps to inform the board of risks and opportunities. The real need is for transformative accounting that does not look at the past, but tries to predict the future and outlines business model changes and new types of products. This new accounting requires communication and deep knowledge of their own organisations for CFO’s, but also of stakeholders’ expectations, whether internal or external. These insights will inform analysis of business models, dependencies and impacts, risks, and opportunities. The CFO’s mindset will need to shift to one of comprehensive value creation and protection. Looking at performance through multi-capital lenses will provide a 360-degree view of the organisation.
These leaders need to have new competencies, including developing natural capital profit and loss accounts, identifying the cost of key externalities, and understanding the value created through intangibles. They will connect the business model to all relevant capitals and identify key value drivers within the organisation. They will incorporate capital into controlling (planning, forecasting), risk management, and wider decision-making processes. Indeed, they will need to use a mixture of measures and indicators that are financial, non-financial, and pre-financial. Consequently, tools that are currently being designed - such as new scorecards, capital expenditure tools, and internal carbon markets - are rapidly becoming multi-dimensional and include various types of metrics, which themselves need to be put into the context of external trends, business models, sectoral shifts and stakeholders’ demands. This multiplicity of formats is a challenge. All those values need to be tracked and connected, which requires a multidisciplinary mindset.
In this context, finance professionals are game-changers: hence the need to redefine the role of CFOs as Chief Value Officers. Audencia created the Executive MBA Chief Value Officer to support organisations of all sizes and the finance professionals in this transition. This program’s objective is to shift how management thinks as well as the way the finance function works: from measuring a single capital to multiple capitals.
The programme aims to enhance financial specialists’ ability to measure, and then communicate, the value creation of their company. They will develop technical as well as management skills, making them visionary experts in sustainability and change-makers. They will acquire a strategic way of thinking to become an actor in multi-capital accounting, practising responsible leadership through the following four learning perspectives:
- Being a sustainable development expert and a business partner: to understand and integrate environmental limits and sustainable development targets;
- Acquiring strategic thinking and a forward-looking outlook: to understand and master the effects of technology on multi-capital accountancy and have an international, strategic, and political vision of multi-capital accountancy methods;
- Being a key contributor to business strategy: value, control, report, and audit of strategic capital;
- Being an architect of, and force for, change: to accompany the ecological and social transition of business models.
As a business partner and an expert in sustainable accounting, the Chief Value Officer (CVO) integrates all value creation of the company with a multi-capital vision. He plays a key role in the strategic success of all organisations by adopting a long-term perspective. More than ever, they need to drive business models to respond to, and get ahead of, the Covid-19 crisis.
Becoming Chief Value Officer is a real choice for the future. It will be the missing link between companies and ecological and social transition.