Corporate sustainability is no longer just a box-ticking exercise. Increasingly, CFOs are making the link between measuring the environmental, social and cultural impact of their activities and long-term business value.

Author: Craig Mellow

“If we were to write a check to nature to cover the cost of our business activities, what would its value be?” The person posing this question is not a utopian Greenpeace activist. He is Michael Beutler, a onetime Ford Motor Company financial wonk who is now sustainability operations director at French luxury goods company Kering. Based in Paris, Kering controls two-dozen clothing and accessory brands, mostly luxury icons such as Gucci and Yves Saint Laurent. Revenues for Kering in 2015 were €11.6 billion ($13.2 billion).

Beutler is on a quest to quantify the real long-term costs, in terms of water and air pollution and greenhouse gas emissions, of producing his company’s fashion wares. The project has taken him to the far reaches of the world. “We have to map all our business processes back to the raw materials,” he says. “A pair of shoes goes back to the ranch where the cow came from.”

Sarni, Deloitte Consulting: We have moved to pointing out the business value of sustainability.

His efforts have yielded a new tool—an environmental profit and loss, or EP&L, statement—that Beutler hopes will touch the hearts and minds of fellow finance professionals. “The idea is to create operational metrics that make these impacts a lot more real,” he explains. “It’s easier to relate to $50 than to 150 grams of greenhouse gas.”

“An EP&L measures and values the costs and benefits generated by a company’s environmental impact, both within its own operations and across all of its supply chains,” Kering states in its 2014 EP&L report. Kering’s different business activities (warehouses, stores and offices, assembly, manufacturing, raw material processing and production) are looked at in terms of their environmental impact, which is broken down into air emissions, greenhouse gas emissions, land use, waste produced, water consumption and water pollution.

Kering’s 2014 EP&L estimates the company’s environmental impact to be €793 million, a 2.2% increase compared to 2013. In the same period revenues grew by 4.5%. The biggest impacts came from greenhouse gas emissions at €289 million, followed by land use at €224 million. CFOs need not panic just yet. Only 8% of environmental costs came from Kering’s direct operations. It attributed half of the impact to its raw materials providers, with the rest scattered around the supply chain.  

So far, Kering is the only company to have published an EP&L statement along with its conventional financial accounts. But silos between hard-nosed financial directors and sustainability advocates are crumbling across the corporate world. 


In the 1970s, numbers people learned to account for pollution-related impacts and risks driven by new environmental laws in the US and Europe. Today they are struggling to expand that calculus to factors like climate change and water scarcity, and to enforcement actions by motivated citizens as well as governments.

“Anyone with a social media account can withdraw your social license to operate and leave your company with stranded assets,” says William Sarni, global leader of enterprise water strategy with Deloitte Consulting, referring to private activists’ ability to damage a company’s reputation or even shut down an operation with negative publicity. “That’s something that’s absolutely relevant to a CFO.” 

Deloitte research dating back to 2012 found that half of 250 CFOs interviewed globally found a “strong link between sustainability performance and financial performance.” Two-thirds reported they were always or frequently involved in sustainability strategy.

Since then, the finance-sustainability link has only become clearer. Beutler reports that some 60 multinational corporations cooperated last year on a “deep dive” into so-called natural capital accounting. They hashed out how to quantify companies’ expenditures or contributions to the “$72 trillion worth of free goods and services” that Mother Nature gifts to the human economy, a figure that is based on United Nations Environment Programme (UNEP) estimates.

Leading global insurers, led by Swiss Re, have teamed up with UNEP to formulate recommendations for “harnessing insurance for sustainable development,” which promises that fuzzy earth-use metrics may soon translate into concrete dollars. 


In 2013, Prince Charles organized the A4S CFO Leadership Network, which brings together CFOs from large businesses. The network is co-chaired by John Rogers, CFO of iconic British grocery chain J Sainsbury. The group is pushing for integrated management reporting, which it defines as “embedding environmental and social considerations into management reporting to enhance business decision-making.”

Beneath these amorphous generalities, real-life CFOs are immersing themselves in the topics of energy and water use and planning. Energy is by now traditional terrain for finance officers to cover by driving efficiencies that burnish their firms’ reputations and
bottom lines.

An early hero of energy management was Kurt Kuehn, former CFO of US-based courier and logistics giant UPS. He pushed for the creation of a sustainability steering committee whose most visible achievement was UPS’s introducing alternative-fuel vehicles, which had logged 500 million miles worldwide as of 2015.

“As UPS expands across the globe into emerging markets, that’s where some of our sustainability efforts migrate into being a positive force in the societies that we invest in,” Kuehn told a symposium at Duke University before stepping down last year.

Water is the up-and-coming issue where financial and sustainability planning meet, and it may present still more complexity and risk than energy and traditional commodities. In most parts of the world, water supplies are more likely to be under stress than are fuel or power supplies. Water is priced locally and is influenced by political more than economic logic, making long-term cost predictions challenging. Perceptions that an investor is polluting or overusing water supplies can rile its neighbors more explosively than vague revelations about a global carbon footprint. 

“Water is a very personal issue,” Deloitte’s Sarni observes. Coca-Cola remains under fire for tapping India’s increasingly scarce clean water. It mothballed another plant there earlier this year after a long public wrangle, although the company says the plant was shut as a result of a lack of demand.

Offering guidance through the maze of water-use planning is Daniel Schmechel, CFO at Ecolab, a $13.5 billion, Minnesota-based company that designs water, energy and sanitary systems for clients from food processors to textile manufacturers and hospitals. “All CFOs are concerned about volatility in the cost structure, and we’ve seen a real explosion in concern about water volatility over the past five to seven years,” he says.

Schmechel boasts that Ecolab saved its customers 127 billion gallons of water in 2015. It also designed an algorithm of sorts for the future called the Water Risk Monetizer, which it offers for free online. It calculates the clean water available in a given area against likely competition for it and the consequent likelihood of sharp price hikes or shortages. “This is a story that plays out over decades,” Schmechel comments. “But decades is the right perspective for business planning.”  

Now projections for water stress, greenhouse gas output and the damage they can cause to corporate reputations are becoming part of standard due diligence when determining sites for new facilities, taking on new suppliers and acquiring new subsidiaries, practitioners say. “People used to take the position that sustainability was the right thing to do,” Deloitte’s Sarni says. “Now we have moved to pointing out the business value—top-line growth, reducing operating risk and costs—just like any other way to create value.” That is language any CFO should understand.


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