With myriad global challenges and wealth inequities at the forefront, a new market logic is emerging—one that demands organizations recalibrate how they define, measure, and create value across a wider array of stakeholders. Investors, consumers, employees, regulators, and others are calling for greater action and reporting with regards to environmental and societal contributions and better financial inclusion. These pressures are shifting the calculus of maintaining “business as usual” and prompting a shift in how companies are rethinking value, and thus innovation.
“Purpose and profit go together, reinforcing each other.” – Arvind Krishna, CEO of IBM
CFOs play a critical role in driving the organization’s value transformation because of their unique role in helping connect innovation with generating long-term value for stakeholders. In addition to accountability for business financials, they can help integrate environmental and broader societal considerations into their decision-making processes, risk assessments, partnership criteria, and financial reporting. What have historically been deemed “externalities” must be viewed as opportunities for operationalizing purpose and driving product innovation.
Transformation of Finance Requires Re-thinking Value
This broader transformation in value and metrics is impacting the Finance function as much as any technological disruption– indeed data and technology are unlocking new ways of measuring new relationships. As CFOs grapple with disruptions in technology, workforce, and generational expectations, there is a simultaneous imperative to define and optimize new value constructs.
CFOs should consider the potential risks and opportunities associated with social, environmental, partner, and internal organizational issues when conducting risk assessments. This includes assessing the financial impact of climate change, including related energy resilience threats, supply chain disruptions, social unrest, cybersecurity, regulatory changes, corporate mismanagement, and other risks that could undermine business and stakeholders’ abilities to function. Incorporating these risks into metrics and reporting also increases transparency and builds trust with stakeholders.
CFOs have historically been required to focus primarily on shareholder investors as the principal audience. But the recognition that businesses exist in a systemic context– with a wide range of stakeholders that have an interest in both their success and failure– requires leaders to expand the aperture across a broader set of stakeholders. This is about identifying the value exchanges (both tensions and business model opportunities!) inherent in any businesses’ ecosystem:
- Partners & Suppliers
- Environment (natural resources, animals, local ecologies)
While every business ecosystem is unique, all offer new ways of identifying and tracking flows of value. This lens may be associated with environmental, social, and corporate governance (ESG), but it is essential CFOs understand this framework for its innovation potential, not merely as a reporting exercise.
Re-think Finance Innovation
Shifting the lens for value creation and multi-stakeholder engagement requires CFOs work across teams to identify and prioritize initiatives that align with the company’s strategic objectives, and incorporate them into financial reporting. This helps investors and other stakeholders understand how short-term reporting drives long-term value and resilience.
For example, more efficient order fulfillment and delivery route optimization can also reduce emissions. Disruptions or vulnerabilities in the supply chain can also spell new business opportunities, such as partnerships, circularity, or as-a-service models. Evaluating risks and stakeholder needs is a lens for new value creation. CFOs also play a role in championing and allocating capital to these initiatives to drive progress and ensure they are financially viable.
How does your order-to-cash solution drive new forms of stakeholder value and risk mitigation?
By redefining value to include a broader set of impacts, stakeholders, and value flows, companies can mitigate financial risks and drive innovative new revenue and service opportunities. Digitization has made more metrics easier to track and learn from than ever, improving visibility and accountability. This holistic view allows leaders to optimize every dollar made and spent.