Through Rob Israch, Managing Director Europe, Tipalti
A few turbulent years have highlighted the growing importance of business agility and the need to continually assess challenges and priorities. The global pandemic, supply chain issues and the growing threat of cyber attacks are just a few of the challenges facing UK businesses, not to mention the continued and uncharted waters of Brexit. For CFOs and other finance executives, this has created new pressures on top of an already demanding position. In reality, Tipalti’s latest research revealed that almost all (97%) UK CFOs believe their role has become more complex over the past two years, with sustainability being one of the biggest complicating factors for the finance team.
COP26 brought together some of the world’s most powerful people to tackle the greatest threat facing our planet, with leaders now accepting the new Glasgow Climate Pact. Many countries have also pledged to achieve net zero goals, with India committing until 2070 and Nigeria until 2060.
In order to achieve these goals, governments will ask companies not only to have full visibility of their carbon footprint, but also to find solutions quickly enough to start reducing it. As leaders sign pledges and commit to meeting emission reduction targets, attention will quickly turn to companies to keep their promises. The transition to renewable energy sources and sustainable practices are costly processes that will force business leaders to rely on finance teams for support and solutions to navigate these changes. More and more, the leaders of these companies are looking to their colleagues in finance for solutions. In fact, CFOs ranked the integration of environment, social and governance (ESG) and sustainability into the company and its operations as the greatest complicating factor in their role (27%) , even above the global pandemic (22%).
For business leaders, the urgency is twofold. Yes, government goals are set and businesses will have to adapt to meet them, but business growth itself will also be slowed if the issue is not a priority. ESG ratings have become a tool for asset managers and investors to assess and compare current portfolio companies and future investment prospects. The climate agreement also saw new rules on transparency and emissions reporting, dictating that countries follow standardized emissions declarations from 2024, providing the public with regular and more robust information on the status. greenhouse gas emissions. This will make it easier for experts and investors to compare climate progress across countries; those who fail to act will stand out and countries will be held to account. Internal pressures to comply will therefore intensify as stakeholders make companies more accountable. Considering that more than a quarter (28%) of UK business leaders and 23% of their financial counterparts see international growth as a top priority, a less than favorable ESG rating, accessible to all, will quickly see the goals of expansion revised downwards.
While the importance is clear, finding the time to innovate for an already overburdened financial department is no easy task. Frustratingly, nearly a third (29%) of CFOs say they have to handle more manual finance operations, which means that instead of being offloaded with administrative tasks, the department is asked to do more. The time spent by CFOs on manual operations will not only lead to a lack of ESG innovation and potentially lead to missed goals, but will leave the company vulnerable to members of its finance team facing burnout. and, ultimately, an increase in the churn rate.
The number one time-consuming function in finance today is the operation of accounts payable. Automation can ease the burden of managing these manual financial tasks and free up time for important tasks. While the pandemic has triggered the start of digital transformation for many businesses, the journey will by no means be over. Digital transformation must be an ever-evolving process with no clear end. It’s crucial that businesses don’t limit these transformations only to IT and technology teams, but rather benefit from the contribution of all departments, including finance.
After COP26, it is clear that companies will no longer be able to hide behind a curtain of lasting naivety. Green laundering tactics have become predictable and transparent, and companies that don’t measure their carbon output will only be scrutinized until they do. The UN being invited to assess climate plans from year to year, each COP will be a pressure point for nations to commit more, especially if the goal of staying below 2 Â° C seems out of reach. Transparency of progress towards climate goals will also be essential for companies wishing to manage the pressures imposed on them from above.
Today’s CFOs need to focus on more than just financial operations; provided they have the opportunity to take a step back from the day-to-day manual processes that can be managed by AI and automation, and focus on strategic initiatives that help them survive and thrive no matter what. the challenge.