What does the CFO’s changing role mean for you?

1. Measure & report on social value (even though it’s hard)

Modern CFOs are fast becoming the champion of all kinds of value, not just financial.

With disclosure requirements and stakeholder pressure intensifying, companies are expected to share more information about a wider range of issues than they ever have before — such as biodiversity, human rights, supply chain ethics, culture, and diversity.

Increasingly, investors (and not just those focused explicitly on ESG) define “value creation” in its broadest sense. And they’re scrutinising non-financial measures just as carefully as financial ones when deciding where to invest, whom to work with, and how well management are delivering on their commitments.

But this shift isn’t just about meeting external requirements. Non-financial metrics are an essential part of the performance picture for boards and leadership teams too. As one CFO put it, it’s no longer about values, it’s about value.

Non-financial metrics also help leaders to develop a deeper understanding of their organisation’s financial health and assess risk. CFOs are factoring these metrics into performance measurement, forecasting, and risk analysis because they help them to do what they’re already doing — only better.

And what gets measured gets managed. So, if your organisation is serious about creating social value, you and your team need to measure it and report on it — or it won’t happen.

2. Make non-financial metrics matter — for everyone

Great CFOs don’t just set the targets and make sure the numbers are accurate. They hold huge sway over how decisions get taken and the data that is used to inform them. They ask how the organisation’s targets will be achieved and what they can do to help. And they use what’s within their control to ensure everyone in the organisation cares about them.

Internal reporting and planning documents, and the discussions and meetings that spring up around them, have always been in the CFO’s toolkit. They help with measuring and managing performance and allocating resources. But, for modern CFOs, they now serve an additional purpose: setting the tone, influencing how a company is run, and signalling what’s important (especially if you need to remind people that what’s important is changing).

For example, CFOs determine the metrics, outcomes, and implications that management must consider when they write business cases and make spending decisions. When CFOs embed relevant non-financial considerations into these processes alongside traditional financial ones, they encourage management to define value in the same way that the board, investors, and leadership team do. Repetition breeds familiarity, and over time these non-financial factors become less of a “new” thing and more of a habit.

CFOs also work with their peers in the C-suite to shape the metrics that are used in incentive schemes and promotion and pay decisions — and where the relevant targets are set. CFOs have told us that they’re already linking significant proportions of discretionary pay to initiatives with social and environmental impact.

3. Flex your spending muscles (for good)

There are many ways that CFOs can use traditional financial levers to deliver non-financial goals, but working in partnership with suppliers is one of the most powerful. This includes prompt payment of invoices, treating suppliers fairly, and the environmental and social standards you hold them to.

For many this is first and foremost about risk management; your business is at risk if key suppliers go bust, and small companies in your supply chain are particularly vulnerable to unpredictable cash flows. Being paid on time or early can be a lifeline. But it’s also about the commercial benefit that comes from having better relationships with suppliers.

Many companies are signatories to the Prompt Payment Code to demonstrate their commitment, and prompt payment is one of the components of the Good Business Charter, which has accredited nearly 1,200 UK-based businesses since 2020.

Procurement is also an opportunity for large companies to use their influence in a positive way — to raise the bar for standards and drive action throughout the supply chain.

By including social value or environment metrics in your procurement process, you can require those tendering for your business to demonstrate that they are delivering a clear benefit to society alongside value for money. This helps to drive change in the ecosystem, encouraging potential partners to articulate and be ambitious with how they deliver value of all kinds. For B2B companies, the same approach can be applied to customers too.

A high social or environmental bar could be difficult for smaller companies to meet. But with a thoughtful approach to procurement, you can create a more level playing field.

What’s more, meeting this high bar is increasingly considered a “must have” rather than a “nice to have” — and part of the cost of doing business, especially if you want to work with large companies or the public sector. Central government must give social value a minimum weighting of 10% in procurement, and all public bodies have to consider how what they buy might improve economic, social, and environmental well-being.

CFOs from companies with close links to their local area tend to lead the charge here, especially when the customer and employee base are based in the local community. These CFOs have been measuring and tracking the impact of their company’s activities on their local community for some time. And they’ve been investing in it too — supporting improvements in infrastructure and education, for example, not just for transportation links and workforce skills but also to ensure they retain their license to operate in the long term.

4. Take a long, hard look at your tax strategy and conduct

Tax policy has always been an important part of the CFO’s remit, but forward-thinking CFOs recognise that their responsibility goes further than paying no more than is necessary and staying on the right side of the tax authorities. They see their role as setting the right tone for the company’s tax conduct — deciding if it is responsible and ethical, and taking action when it falls short.

CFOs are also highlighting tax ethics as an area of reputational risk. Responsible business expectations mean companies are under pressure from the public to be transparent about tax and to pay tax fairly, and accreditations such as B Corp or the Good Business Charter set expectations for fair tax payments.

What’s more, the OECD have introduced global minimum tax levels to discourage multinationals from using low-tax countries to boost profits, and tax authorities are making more requests for detailed tax information which may drive more formal audits in the future. Skating on the edge is becoming increasingly risky, and savvy CFOs are taking steps to avoid straying too close to it.

This isn’t about paying more tax than you should, but about asking the right questions to your team and leadership about your tax strategy. Can you, as the CFO, take ownership of the tax strategy? And are you comfortable that, if you had to explain it to the employee base or your grandchildren, it would stand up to scrutiny?

5. Use your voice to tell a different story

CFOs have a voice that gets heard — internally and externally. And one of their most important responsibilities is to tell the business’s story to employees, investors, lenders, and other stakeholders.

The story you tell about your organisation’s non-financial goals and how they connect to financial success has a significant impact on how seriously those stakeholders take them. It impacts how they evaluate the business case around the investments you need to make and how they assess your performance.

If the CFO can articulate in a clear and compelling way how tackling climate change, investing in a thriving workforce, or delivering social value will contribute positively to performance, people will sit up and listen — and they’re more likely to give the business the time and space it needs to get on with it.

Many savvy CFOs have already clocked on to the “win-win” decisions and factored them into their narrative — for example, cutting electricity use in offices reduces your carbon footprint as well as your costs. But they also acknowledge that some of the investments the business could make in positive social outcomes will come with short-term trade-offs or will require a longer time horizon to deliver value. Here, the CFO’s voice — and the conviction with which they frame these choices — is vital.

CFOs can also add weight to this narrative by investing their time, skills, and energy in projects or initiatives with social value goals. When the CFO gets involved and makes their involvement visible, it sends a powerful signal — not just to employees but those watching from the outside too — about what’s important.

CFOs are often in the role of being served up with ideas or initiatives from other departments that they can greenlight or redlight. But by taking a leadership role on these topics — for example by being the executive sponsor for diversity and inclusion, safety or sustainability — you can establish that it is a business-critical issue and foster the collaboration that’s needed to deliver.