CFOs Poised to Lead Tech-ESG Innovation

While continuing to implement new business models and drive technological innovations to fight climate change will be important in bringing about the new decarbonisation economy, businesses will need solutions that go beyond incremental steps to stay under the Paris Agreement’s 1.5c warming target. With COP28 occurring this month and the looming pressures of meeting international goals, companies are considering the following question: Which of their executives is best positioned to lead the ESG implementation and reporting process in the age of technological innovation?

The answer is clear. This is the time for CFOs to make bold decisions and commit to targeted investments in sustainable tech. Projections are driving many companies to accelerate plans to better quantify, integrate, and elevate their ESG agendas. Bloomberg Intelligence predicts that global ESG assets under management are on track to exceed $53 trillion by 2025. Similarly, PwC investor surveys found that 79% of respondents said that ESG reporting was an important factor in their investment decision-making, and 49% said they were willing to divest from companies not taking significant ESG action. From the business leadership standpoint, Accenture research shows that 68% of executives believe that the ultimate ownership of ESG should lie within the office of the CFO.

By investing in Fourth Industrial Revolution (4IR) advanced technologies, progressive companies will better be able to manage ESG targets and address major global challenges such as poverty, climate change, nature loss, and inequality. Currently, business only taps into a fraction of this potential of the tech-ESG intersection. While leveraging sustainable impact at scale and at the same time seizing exciting market mechanisms, CFOs have an unprecedented opportunity to employ technology as a positive force for good. This is the enormous promise of Tech for Good. With a purpose-driven approach to the way technologies are deployed, businesses will undoubtedly play a crucial role in perpetuating worldwide progress. While fostering a shared value business model and building trust in technological breakthroughs, CFOs will guide businesses in gaining a competitive advantage.

COP28 presents a prime opportunity to consider how investment in 4IR breakthrough technologies can drive ESG success. The Conference had dedicated thematic days covering areas with cross cutting themes that underpin effective and interconnected delivery of “technology and innovation.” Themes included Climate Finance/Trade/Gender Equality/Accountability (Dec 4), Energy/Industry/Just Transition (Dec 5), Multilevel Action, Urbanisation and Built Environment/Transport (Dec 6).

Most notably for CFOs, these areas will focus on solutions to address challenges in sustainable finance using innovative technology. Core tech solutions that that have been at the forefront of these discussions regarding ESG business integration are AI, Blockchain, and IoT technologies.

New sources of data and AI-driven models can be applied across companies’ product developments, supply chains, and sales lifecycles to steer growth trends. Due to increased market disruption and advances in technology, enhanced digitised supply chain finance systems will become increasingly relevant. Blockchain-driven innovations in the supply chain will have a considerable impact on the potential to deliver business value by increasing supply chain transparency, reducing risk, and improving efficiency and overall supply chain management. CFOs have therefore become responsible for overseeing the building of blockchain-based business trade and supply chain finance products. These are targeted toward the over $18 trillion global trade finance market that involves numerous entities including buyers, sellers, logistics providers, and banks.

With this increasing level of tech-ESG management, it is not surprising that an important concept of the COP28 agenda for CFOs will be allocating company investment for IoT integration. COP28 will undoubtedly address IoT as one of the most important tech components of the 21st century, as it plays a significant role in 33% of top tech business applications. By way of low-cost computing, the Cloud, Big Data, analytics, and mobile technologies, IoT applications and devices share and collect data with minimal human intervention. Azure FarmBeats, for example, is a Microsoft product for agri-businesses that uses IoT connectivity to manage low-cost sensors, drones, satellites and image-based machine learning algorithms that increase the productivity and profitability of farmers. Cloud-based AI models provide a precise, instant picture of the conditions on the farm, down to the square meter that enables farmers to make targeted decisions about crop management. Microsoft’s CFO verifies how this type of IoT-enabled next generation AI business will be the “fastest growing $10 billion business in our history.”

Mobilising tech-ESG investment is imperative to meeting our collective Global Goals for a sustainable economy. COP28 must serve as a convening platform for spurring further capital reallocation to decarbonisation, which includes CFOs making strong commitments to sustainable business and taking decisive actions. As the role of executives continues to evolve, today’s CFOs find themselves responsible for everything from digital transformation to climate mitigation efforts. Increasingly, that list includes helping companies prepare for a future of continuous management and accurate reporting of ESG issues. With unprecedented access to a wide range of advanced technologies that will create real value for business and the world, CFOs will help accelerate sustainable progress and drive the COP28 agenda.

Marga Hoek is a global thought leader on sustainable business and capital. Recognised by Thinkers50 for her global management thinking, Marga Hoek coined the slogan "Business for Good" in 2014 to emphasize her mission "to make Business for Good the norm, rather than the exception." She continues to champion this mission with this exciting book on Tech for Good: Solving the World’s Greatest Challenges.