How CFOs Can Use Impact Performance Data to Create Financial Returns

ESG and impact data can completely transform how companies raise capital, attract new revenue streams, build customer loyalty, and create a more sustainable business. In fact, a recent report from Accenture/WEF shows that companies that embed effective environmental, social, and governance (ESG) practices into their operations generate more than 20% higher profitability on average.

Despite this reality, reporting on a company’s ESG and impact performance can be a painful process for CFOs. An often expensive and laborious exercise, there are few finance heads that relish the time of the year when an ESG or impact report must be published, often only to be irrelevant or out of date upon publication.

This is a valid concern. The disjointed way in which ESG and impact reports have been generated by various companies across the globe has not only drained time and money, but has led to a confusing array of manual spreadsheets and pivot tables.

But it doesn’t have to be this way. The Proof platform enables CFOs to easily build a robust yet nimble infrastructure to automate their reporting processes. Through prioritizing ESG and impact reporting, CFO’s can not only generate bottom-line benefits, but improve employee retention, increase investor funding, and set their firms apart as leading changemakers within their industries.

Create Operational Efficiencies to Save Capital

As highlighted above, numerous studies are now showing that impact and ESG reporting – far from being a cost drain – can save companies meaningful amounts of money over time. This can come from a wide range of areas: from pinpointing the cost savings to be had in current operations, to minimizing employee turnover and increasing employee engagement.

Operational efficiencies particularly often yield significant savings. In an evaluation of the impact of reducing emissions from the use of solvents at one auto company, the NYU Stern Center for Sustainable Business found that, over a year, an achievable reduction in solvent use could generate $72 million in savings. This figure rose 25% to $90 million when recycling and substituting solvents for water-based alternatives was factored in.

Effective impact monitoring and reporting on social and governance issues can also significantly improve employee satisfaction and, by extension, retention – potentially saving a firm significant sums on recruiting costs. According to Glassdoor, the average firm in the United States spends $4,000 to hire a new employee, taking up to 24 days to fill a position. This is a big time and cost drain for any company.

By paying attention to factors that matter most to employees – from salaries to shorter or more flexible working hours, to childcare and other benefits like healthcare and wellness – employers stand to enjoy longer tenures and increased productivity from their employees.

In an article for the Harvard Business Review, author of “The Happiness Advantage” Shawn Anchor also reports his findings that happiness in the workplace can lead to a 31% increase in productivity, as well as a 37% boost in sales and a 19% increase in accuracy.

In the same study, Anchor found that just a short training in positive psychology at accounting firm KPMG led to a sustained uptick in job satisfaction for over four months. As research from Southeastern Louisiana University shows, “more satisfied employees and more ‘embedded’ workers [are] less likely to leave,” saving companies thousands or millions of dollars in recruiting costs every year. Research by TalentLMS and BambooHR underscore this trend among the newest members of the job market, with 82% of Gen Z employees seeking mental health days and 77% placing importance on working at a company with robust DEI initiatives.

By implementing ESG & impact monitoring processes and celebrating progress towards accomplishing ESG and impact goals, businesses can catalyze the creation of a corporate culture and company purpose that mirrors its stakeholders and serves as a strong key differentiator, reaping operational benefits.

Building New Revenue Streams

The financial and operational benefits of promoting genuine ESG and impact success aren’t exclusive to internal performance. Externally, businesses can utilize their investment in impact to better align with prospects, current customers, and open doors to new markets based on geographic, regulatory, and psychographic factors.

A recent study published in the Harvard Business Review showed companies with high levels of purpose outperform the market by 5% to 7% per year. These performance metrics are on par with companies with best-in-class governance and innovative capabilities, with these purpose-driven companies growing faster and experiencing higher profitability.

Customers have expressed a strong desire to align idealistically with the brands they purchase from with over 60% seeking to find alignment on purpose as well as definable action toward key issues, according to Accenture’s 2018 Global Consumer Pulse Research.

This impetus doesn’t just stop at the brand level either — it translates directly into buying behaviors. Ad Age discovered that more roughly 70% of consumers would like to not only ideologically align with a business, but would be very likely to purchase from a company that shares their environmental values. Further, approximately 75% of consumers feel that alignment has incremental value deserving of a premium price.

Improve Investor Relations and Cost of Capital

Over the long term, effective impact and ESG reporting can also open up new sources of revenue by attracting impact- and ESG-conscious capital. While today’s investors may be very happy to invest in the newest tech company for the short-term return on investment (ROI), tomorrow’s investors may be less keen.

According to a recent study, while only 22% of the “Baby Boomer” generation express interest in impact investing, Millennials report a massive 71% interest in investing in impact-minded corporations that prioritize ESG. As wealth transfers to the next generation, this environmentally- and socially-focused generation will be asking for proof that the products or services they invest in are making a positive impact on the planet and for its inhabitants.

Perhaps most important over the long term, however, is securing investor funding. The 2020 Annual Impact Investor Survey conducted by the Global Impact Investing Network (GIIN) reveals that 70% of professional investors believe impact investing is more financially attractive than other investment opportunities, with 85% engaging in impact investing due to direct client demand. Not only is there significant social pressure to make impact investing a part of investment strategies, but there are performance incentives already being realized in-market.

As Amit Bouri, Co-Founder and CEO of GINN, commented: “We believe that investors will compare impact performance in much the same way that they compare financial performance right now. Those comparisons will push the industry toward greater accountability and drive even deeper impact—a race to the top with the potential to make real progress on our most pressing global goals before the clock runs out.”

Easy, profitable impact reporting

None of this, however, makes the reporting and change-making process easier for busy CFOs. This is where Proof comes in. We work hand-in-hand with management teams to manage their end-to-end impact reporting processes. From establishing a set of impact metrics that are most important to all stakeholders, to building seamless data management processes, to showcasing performance on a custom digital dashboard, Proof leads management teams in effective impact data collection.

Perhaps most importantly, the Proof platform then maps these results against globally recognized impact and ESG frameworks such as the UN Sustainable Development Goals (SDGs), IRIS, SASB, and many more. In this way, all stakeholders can objectively see how a business compares against similar businesses and what it is doing to resolve the world’s major impact and ESG challenges.

Ultimately, this data can and does drive decision-making processes at an organization, helping CFOs to deliver huge cost-saving benefits while creating outsized financial returns.