Adrian Lewis is Group CFO at Inchcape plc. Here, he explains how changing your approach to investment decisions gets every part of the business thinking about a broader agenda, and the role Inchcape plays in the mobility transition.
This interview was conducted as part of research by the Board Intelligence think tank, in partnership with ICAEW, Accounting for Sustainability, and Odgers Berndtson, into the CFO’s role in creating a fairer future. To see more CFO insights click here.
How has the CFO role changed?
Over my career, I’ve seen the role change substantially in a few ways. First, there’s the fairly well-understood transition from “scorekeeper” to business partner. Thinking back to, say, a decade ago, CFOs would only really talk about financial performance. They would turn up with a slide deck and give a great articulation of business performance, but not in a broad sense. But I’ve noticed a really big shift over recent years to CFOs now talking about the financial performance of the business as well as the broader agenda: especially social responsibility and environmental impacts.
To what extent does that also extend to the wider finance function?
If there’s one thing the finance function must excel at, it’s data and insight. Fundamentally, the function’s role is all around understanding information and converting it into actionable insights, enabling business leaders to make great decisions. When it’s led by a CFO looking at a broader agenda or picture of success, there’s a real opportunity for the finance function to create a reporting framework to give decision-makers access to high-quality non-financial information. To the CFO this means a more comprehensive remit and to be the conscience of the investor, customer, and other key stakeholders: making sure we’ve got the right risk management, right corporate governance structures, and a broader mindset.
Creating information is one thing; getting people to take it seriously can be another altogether. To do this, we as a finance function not only need to collaborate effectively with other functions, but the CFO must demonstrate leadership. You need to get non-financial elements onto the agenda and explain why they’re important. Simply telling people that it’s a regulatory requirement isn’t enough on its own. You need to provide a better, more convincing “Why?” for people to be inspired and take it as seriously as they should. That’s exactly the journey we’ve been on at Inchcape, where the integration of sustainability metrics into our own core business objectives underpins the role we play in helping the world’s biggest automotive brands to drive the mobility transition.
How do you go about embedding non-financial metrics so they matter?
One example of how we do this is through our investment decisions. In setting up our investment governance framework we’ve worked to create an inclusive, supportive environment that empowers people from around the world to own their investment decision-making. Inchcape is a global business, operating in around 40 markets, with an entrepreneurial culture at our core. So local business leaders attend (virtually) to present their investment cases. When we’re assessing capital allocation decisions, we’re looking at the fundamentals but, crucially, also on the broader agenda and how their project contributes to it. It means you’re asking questions like “What is this investment’s contribution to our responsible business agenda?” or “What’s the sustainability strategy when establishing new distribution capabilities down in Melbourne?”, for example.
This broader agenda is something that, of course, we must define ourselves; it’s also something you can leverage to drive change and promote projects that fulfil your ESG objectives and criteria.
“By delegating power, initiative, and opportunity for investment to local teams we’re extending the reach of our broader responsible business agenda throughout the business.”
In practice, this lends itself to a conversation where you can move seamlessly from talking about returns to how the project fits in with ESG priorities. By delegating the power, initiative, and opportunity to these local teams we’re extending the reach of our broader agenda throughout the business. This empowers our teams to think through all the implications of their proposal and also to own that broader agenda, in a way that helps to embed it much more solidly than it would if it was just a few of us sitting in a London office talking about it.
While I don’t think the CFO is alone in incorporating the broader agenda into their decision-making process — it’s not an autocratic role! — I do think they are uniquely well-placed to facilitate it. As the holder of the purse strings, the CFO can use their voice to set the tone of these discussions.
How do you handle the non-financial reporting side?
I’m really proud of the work that the team have been doing here to establish a robust reporting infrastructure for non-financial metrics. Our value proposition to partners is built on the core foundations of bringing exceptional standards and a responsible business approach to everything we do.
Having a system in place that means I can see — on a page — what our scope 1 and 2 emissions are, our gender and ethnicity mix at every level, functionality, and management, is hugely valuable. Whether it be the finance function in Peru, the logistics function in Colombia or the marketing team in Indonesia.
The challenge is breadth of data and getting it back with consistency. We’re in geographically diverse places and markets and that means different capabilities on the ground for data. You have to invest time in coaching and inspiring the teams as to why they should spend time and resources gathering the information.
What keeps you awake at night?
The Electric Vehicle (EV) shift is happening, but the pace of change is uneven and we have an important role to play in helping our OEM partners manage the transition. We know this is the right thing to do, not just because governments say it’s the right thing to do or because our job is to respond to the consumer’s demands.
However, that transition is slower than we perhaps thought five years ago. The opportunity we have as an organisation is to help those markets we typically operate in to transition. So for example in Chile, 1–1.5% of all cars sold are Battery Electric Vehicles, compared with over 70% in Hong Kong. And the adoption rate is likely to be slower until we get to price parity (between Internal Combustion Engine and BEV) and the right local infrastructure is in place. So how we get there, and how can we play our role in delivering an inclusive mobility transition in the countries where it is more complicated and going to be slower, is key for Inchcape.
Ultimately, the answer is that you need the right products in the market, supported by local infrastructure. We need to get New Energy Vehicles into countries like Indonesia, Panama, and Colombia. And by having global capabilities and the local expertise, it also means we can work with governments to understand how they can accelerate the adoption of New Energy Vehicles without costs being prohibitively high.
If you could issue a challenge to your peers, what would it be?
As is often the case, the most pressing challenges come hand-in-hand with the greatest opportunities. There are always short-term pressures bearing down on you, and the old adage that you’re only as good as your last set of results certainly doesn’t help CFOs feel like they can lift their head above the parapet and look towards the long term. But the challenges we collectively face are immense and these challenges require a more balanced approach to business than more traditional CFOs may be used to. I think it’s incumbent on CFOs to reflect on the way they’re doing things and reach out to their peers; I think there’s a huge amount we can learn from each other that’s to everyone’s benefit.
“If you are putting in place new reporting infrastructure and non-financial KPIs because of new regulation alone, you’re doing it for the wrong reasons.”
When you’re starting off thinking with this broader agenda in mind, it can seem rather overwhelming and strange. But this doesn’t last and you’ll soon see its potential — provided you put the proper infrastructure in place; otherwise, you’re building and making decisions on nothing more than quicksand. And if you are putting in place new reporting infrastructure and non-financial KPIs because of new regulation alone, you’re doing it for the wrong reasons.
This interview was conducted by our Director of Think Tank, Scarlett Brown. Interested in furthering the conversation about the changing role of the CFO? Take part in the second phase of our research here.
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