ESG’s impact on the finance department

In 2025, the first group of Dutch companies will report on their environmental and social impact. This measure, called the Corporate Sustainability Reporting Directive (CSRD), is a major step forward towards achieving climate goals and creating fairer and more social rules. Although it requires a lot from, among others, the finance department, it also creates opportunities for companies that handle this smartly.

These are the words of Bart Jan Thole, business unit manager at ConQuaestor Interim Finance and has obtained a master’s degree in corporate social responsibility at Erasmus University. He talks with great enthusiasm about the cause, the consequences and the possibilities for a more sustainable and social (financial) policy.

What is ESG and how does it relate to funding?

“ESG stands for Environmental, Social and Governance. Sustainability in a broader perspective. Awareness of the environment, social relations, health, safety and good governance. For a long time, there was little talk of sustainability in the financial world. Sustainability was associated with additional costs and investments, whereas the finance department focused on returns and profits. But the tide is turning, that is, at a rapid pace. Not only because more and more companies are starting to see the benefits of sustainability, but also because a large group of companies need to start reporting on ESG. That task ends up pretty much with the finance department. They are preparing an ESG report there. “

What does an ESG report mean?

“An ESG report is about management and long-term vision for the organization and therefore also about future security. Where one usually talks about sustainability and climate neutrality, the financial world goes a step further. They look not only at the consequences of entrepreneurship or politics for the environment, but also of the consequences it has on the social sphere, on well-being, health and safety for employees and people nearby. In addition, there is more and more attention to good governance. Factors such as fair tax payment, openness, integrity and accountability play an important role in this. Conditions that previously did not play a role in the economic years. Areas where many organizations, both for-profit and non-profit, still have a lot to gain. Especially when it comes to reporting. ”

When is an ESG report required?

“In general, we see that reporting on sustainability has been part of the basis for financial reporting for a long time in larger organizations. This is in part still optional, but with the introduction of the Corporate Sustainability Reporting Directive, CSRD, this will gradually become a requirement for a large group from 2024. They are required to include non-financial (sustainability) information in their annual reporting. Information to be audited by an auditor. “

Does that mean an extra cost item for those companies?

“You can see it as a cost item. But if you do it right, you can also make money with sustainability. In general, one talks about profit, people and the planet. In the profit section, we talk about revenue, profits, but also factors such as continuity, efficiency, reduction of expenses and avoidance of fines come into play. By taking into account humans and the planet, more and better environmentally and human-friendly alternatives are being considered. The rise of wind farms, solar panels and electric cars are clear examples of this. We also work hard on the development of various sustainable or socially responsible products. But there are opportunities for many more organizations. And for each organization in specific areas. Get more benefits from employees, save money by making offices more sustainable, drive fewer miles through online consultation, less damage to reputation through transparency. All this makes companies even more interesting for investors. ”

What does all this mean for the role of finance professional?

“This development has definitely influenced the work of the finance departments and the finance men and women. We see that the focus of the work shifts with the development. Where previously the focus was primarily on proper financial reporting, the focus is now largely on determining the feasibility of ESG-friendly alternatives. What alternatives are there? What effect do these alternatives have on the three ESG pillars and on the operating result? And all this intended for the short and long term. The financial professional must look for a balance between profit, people and the planet, without losing the mutual balance. And it is precisely this balance that leads to better results for both organizations and society, from both risk reduction and value creation. As a result, the role of the financial professional not only changes, it also becomes more effective. The finance professional as a sparring partner. No longer the results achieved as a spearhead, but the future results. ”

How can you prepare financial professionals for ESG and CSRD?

“As mentioned, the work with an ESG report and CSRD means an adjustment of the report’s author’s duties as well as in the auditor’s tasks. It’s not something you just do next door. It requires extra knowledge and expertise. ”

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