How the CFO drives stakeholder alignment and value in a sustainability-driven world

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With a greater focus on investors and regulatory scrutiny of sustainable business practices, CFOs must now think about how they create value for stakeholders including customers, employees, communities and society. CFOs need to translate this multi-stakeholder approach into concrete strategies and long-term business plans. I recently spoke with Devina Rankin, the CFO of a company, Waste Management (WM), who is deeply immersed in an industry where sustainability is crucial. Devina explained how stakeholder alignment and value creation drive what WM does, as well as how sustainability reporting and disclosure, combined with cross-functional business partnerships, enables a holistic approach to environmental goals, Social and Governance (ESG) as WM charts a sustainable path forward.

Jeff Thompson: Many companies around the world have made sustainability and ESG a strategic priority, but the underlying goals often ‘clash’ in a multi-stakeholder environment. As the CFO of Waste Management, how do you balance these goals such as information that supports investor decisions, building “greener and cleaner” supply chains within corporate social responsibility business, and increasing profitability by reducing printing costs and using alternative uses of energy?

Guessed Rankin: It is certainly optimal when the initiatives benefit several stakeholders. At WM, we make investments that benefit our team members, our customers, the communities we serve, the environment and shareholders. A good example is our investment in the largest fleet of heavy-duty natural gas vehicles in North America. These trucks are quieter, which our drivers and customers appreciate, they are more economical and they produce far fewer emissions, improving air quality.

However, many decisions require us to consider trade-offs. These trade-offs can relate to priority goals (team members, customers, communities, government agencies, shareholders, or the environment) and the time period over which success should be measured (quarterly or annual goals versus long-term priorities).

As CFO, people often expect my top priority to be maximizing profits in the service of shareholder return. While I am certainly responsible for creating shareholder value, I see this responsibility as inextricably linked to our commitment to be an employer of choice, a differentiated service provider leading the way for our customers, a leading innovator in resource recovery and a motivated investor. in environmentally friendly products, services and technologies.

By prioritizing purpose, we don’t sacrifice profit, but rather tailor the formula to drive profitable growth and strong long-term returns. One example has been our leadership in using our purchasing power to increase demand for recycled plastics. We now buy trolleys for our customers and uniforms for our employees made from recycled plastic. Although these products cost more than other alternatives, the use of recycled content has allowed us to accept different types of materials in our facilities, creating broader business opportunities. Most importantly, it is a strong demonstration of our commitment to recovering resources from the waste stream to help conserve our planet’s natural resources.

Thompson: Voluntary external reporting on ESG is moving towards more formal standardization and regulations, as demonstrated by the SEC with its proposals for climate regulations, the proposals for standards issued by the IFRS/ISSB and the voluminous proposals for standards by EU/EFRAG. From a business perspective, how would you describe the potential challenges as external reporting moves from voluntary to mandatory?

Rankins: I would like to start by commenting on the benefits of setting standards and a more rigorous regulatory framework for climate and sustainability reporting. Transparency, consistency, accountability and relevance will increase as these efforts progress. It is often said that “knowledge is power” and there is tremendous value – much of which is currently untapped – that can be realized when we have more complete and consistent information on environmental priorities and impacts. , social and governance (ESG) of companies. .

At WM, we have a long history of climate and sustainability reporting. These efforts are grounded in our commitment to environmental leadership, which includes responsible management of our customers’ waste and investment in technologies and processes that maximize waste as a resource. As sustainability standards emerge and become universally applied, we expect our investments in sustainability solutions to be even better understood by stakeholders.

That said, there are certainly challenges to both the pace and scope of regulatory frameworks being developed. The most significant challenge is that companies are all at different stages in their journey and some of the proposed regulatory frameworks create disincentives for those earlier in their journey, creating a challenge to effectively measure progress.

Then come time and resource constraints. Many of the proposed regulatory developments have short implementation times and they significantly raise the bar for the level of assurance required for ESG information. Companies have good intentions in providing voluntary sustainability disclosures, but the framework for these processes is different from the rigor that exists in financial reporting, for example. To comply with this radical change, companies must invest in tools, technologies and talents. At WM, we grow with purpose, but to do it right, we too will need time to grow.

Thompson: Waste Management has a long history of exploring potential environmental risks and turning them into innovative, profitable initiatives that utilize its unique business model. Could you share some of your success stories on how your company did this? Was there a need for cross-functional collaboration including the expertise of your management control teams? Do you view the CFO team as the natural leader in the business for ESG reporting, forecasting and strategy, leveraging your team’s skills in data governance, internal controls, business risk and business optimization?

Rankins: The best example is our focus on collecting and processing gas naturally generated in our landfills and converting that gas into renewable energy – either electricity or pipeline-grade natural gas. WM has been the leader in converting landfill gas to energy for decades, and today we see an opportunity to extend that leadership by building additional facilities in our landfill systems focused on natural gas production. renewable. The successful evaluation of this next generation of investments depended on collaboration across multiple functions – operations, engineering, finance, accounting, legal, marketing, government affairs and communications. Operations and engineering expertise is central to the strategic direction, but the other functions are necessary to bring this strategy to life.

WM’s finance office is certainly where many important skills are held, including enterprise risk management, internal controls, and data governance. Our approach to bringing this expertise to all of our strategic priorities is what we call “Commercial Partnership”. The CFO and the rest of the finance team are directly aligned with the sustainability and business leaders who drive ESG strategy, investment decisions and measure performance against objectives. For us, this alignment creates the right balance between taking ownership of key priorities and soundly, fairly and objectively questioning investment decisions and measuring results against plans.

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