FP&A’s Role in ESG Planning and Reporting

Now more than ever, environmental, social, and governance (ESG) practices have become a key component of an organization’s identity, allowing companies to publicly align themselves with certain values that affect brand perception. AsForbesputs it, “ESG reporting is quickly becoming the new annual report—an essential management tool that helps companies identify and mitigate risk, address operational inefficiencies, attract and retain talent, and strengthen their brands.”

At the same time, corporate sustainability and climate change efforts are fast transitioning from voluntary to mandatory in countries around the globe. For example, the European Commission’s Corporate Sustainability Reporting Directive (CSRD) now requires certain large companies to disclose information on the way they operate and manage social and environmental challenges. Meanwhile, the U.S. Securities and Exchange Commission (SEC) is moving toward defining clear disclosure guidelines for public companies.

Against this backdrop, CFOs are under pressure to develop robust sustainability and ESG strategies with transparent reporting to stakeholders. For many finance leaders, this is no easy task. They’ll need help from their financial planning and analysis (FP&A) teams to not only meet ESG goals but also to report on them, as well as help their accounting counterparts disclose reliable and accurate SEC filings.

FP&A’s Value-Add to the CFO

FP&A’s role in ESG reporting is a natural fit. Finance practitioners have an intimate understanding of profit, loss, and operating performance. With this knowledge, they can offer expert guidance to the CFO on how ESG planning and objectives align with business performance.

What’s more, FP&A is ideally positioned to track the information needed for ESG reporting. At its fingertips is data on sales, supply chain, and customers—key information to help assess ESG performance. Finance also works companywide, making it easier to report on progress.

Yet as requirements for sustainability and transparency increase, so does the need for robust, automated data-capture abilities and accurate reporting. Error-prone spreadsheets and disjointed systems simply won’t cut it in the world of ESG. For FP&A teams to develop consistent ESG reports that align with their company’s brand strategies, they’ll need a modern planning solution.

For example, finance must be able to integrate large amounts of data, often from multiple systems. That includes data on carbon emissions, environmental impacts of company operations, tax provisions, and strategic workforce planning, to name a few. This presents a challenge without advanced processes for data gathering.

EnterWorkday Adaptive Planning. With our cloud planning platform, organizations can automatically connect to data from any enterprise resource planning, human capital management, customer relationship management, or other transactional system via a built-in integration framework. This eliminates the need for any third-party tools, as well as labor-intensive manual processes.

Companywide Collaboration

Collaboration with users outside of finance is another area where legacy planning processes fall short. FP&A will need to distribute ESG metrics—a company’s carbon footprint, the risk climate change poses to the supply chain, etc.—to stakeholders companywide. At the same time, these business units must be able to input their own ESG targets and goals. Emailing single-user spreadsheets around the office is not the answer.

Workday Adaptive Planning also helps by housing ESG and financial metrics in a single platform. So, for example, when a business scales, leaders can use real-time performance insights to track ESG progress with integrated data from finance, operations, and other lines of business—all in one unified data pool. Doing so allows organizations to immediately visualize the impact of changes across the business and make adjustments when obstacles arise.

Ease of use is another important consideration. Robust financial analytics and dashboards make it easy for users to analyze their ESG data and track performance, as well as fulfill multipleESG regulatory requirements. To that end, Workday Adaptive Planning has preconfigured ESG solutions, allowing organizations to:

• Establish an emissions baseline and assurance-ready greenhouse gas (GHG) inventory.
• Set a science-based emissions target.
• Identify and establish the marginal abatement cost of emissions abatement options.
• Adopt an emissions abatement strategy, comprising the most cost- and emissions-efficient combination of abatement options.
• Deploy strategy and actively manage emissions budgets through to the target year.

Ultimately, everyone in the C-suite and the board of directors has a role to play in defining a business’s purpose and turning that purpose into action. With stakeholder needs and expectations on the rise, FP&A must demonstrate that a company’s purpose is not just words but actions that benefit the entire organization.