Talking Sustainability with Your CFO Shouldn’t Be Scary

6300613159_18384fac42_b

By Jennifer Anderson

We often hear that sustainability professionals need to get better at talking to the CFO. Frankly, this is a scary proposition for many people. That said, experienced sustainability managers will tell you that having a good relationship with the CFO is absolutely essential to their program’s success. So, what exactly does that mean? Do you need to go back to school to get a finance degree? Many people I talk with stress about having to become versed in financial calculations and terminology. I felt it was important to dig a bit deeper into what a good relationship with the CFO really means.

To get a sense of how sustainability managers can best prepare themselves to work with the CFO, I decided to reach out to a sustainability manager I have admired for many years. Bennett Thomas has the fascinating dual role of Vice President of Finance and Sustainability at Hersha Hospitality Trust. Hersha is $2.5 billion publically traded (NYSE: HT) hotel investment firm. The company owns 50 properties in urban gateway markets including New York City, Miami, and Los Angeles, as well as The Rittenhouse hotel in Philadelphia. In addition to his finance role, Bennett founded and leads Hersha’s sustainability platform, EarthViewTM. He also reports directly to the CFO.

In our conversation, Bennett shared with me his very helpful perspective on relationship building with the CFO.

Jennifer: What were some of the early influencers for you that made you think that sustainability could provide financial value?

Bennett: In university, I studied civil and environmental engineering. After obtaining a few years of experience, I went back to school for an MBA. The concept of sustainability was intrinsic within both of those educational perspectives, the first being more environmentally focused, with the latter being more strategy and finance focused. I believe sustainability entails all of these perspectives and it just made a lot of sense to me. Another influence was the culture of Hersha. Hersha is very entrepreneurial and the core values of the company align very well with sustainability. The other factor that influenced it was timing. We were working on a lot of strategy projects when I started. I realized that no one in the industry was differentiating themselves on this point, so it was a good opportunity to do well by doing good.

Jennifer: When you talk with Hersha’s CFO, is it important to try to educate him about sustainability, or is it better to just go right for the bottom line?

Bennett: First, it is important to always know your audience. If a CFO is not already oriented toward sustainability, you may want to start with a macro view of sustainability trends within your industry to help make the business case for why this is important. Regardless of his/her position on sustainability, the project you are pitching should have a good ROI and a clear social or environmental benefit. Once you gain credibility by proving the value proposition, you can begin to weave in some of the broader sustainability concepts you want to get across as you present more opportunities.

Jennifer: Are there specific financial concepts a sustainability manager should have a handle on before talking with the CFO?

Bennett: Yes, absolutely. First off, the sustainability manager should be proficient with Excel. If you cannot navigate Excel, this will be a definite disadvantage. Secondly, if you don’t understand basic financial concepts such as IRR and the company’s cost of capital, work with a member of the finance team to get up to speed. Lastly, it is very important to have some grounding in the financials of the organization. If, for example, you are asking for $1 million for a project, but the Company’s capital budget is only $250,000, you will look as though you are unaware and unprepared.

Jennifer: Does everything have to be quantified? How should someone handle concepts that are harder to put a financial value on, such as brand or license to operate?

Bennett: Yes, you should try to quantify to the best level of effort you can. But be conservative. Initiatives should make financial sense based on easily quantifiable metrics. If it isn’t, then sensitize the less quantifiable metrics to see where you break even on the investment. Work with teams within the organization to see if the assumptions are reasonable.

Jennifer: Where do opportunities to reduce risk fit in? Is that part of the conversation with the CFO?

Bennett: Risk reduction is compelling. For example, when we knew that energy benchmarking would soon be required in many of our markets, we invested the FTEs to source and manage the data. We now use an outside firm to manage that data, but being prepared was a definite advantage and helped us along the way to better understanding our energy consumption, a significant expense. A CFO will understand and appreciate that.

Jennifer: Is there anything in particular that would impress you from a sustainability manager?

Bennett: The sustainability manager has to be the “one stop shop.” You must cover all your bases. Look at it from the perspective of a business owner who takes into account all aspects of the business from accounting to operations to strategy, etc. What would you want to know if you were running the company and were approached by a sustainability manager? If you don’t have the comprehensive expertise, consider how you can become the one who can understand how your proposed initiative will impact different areas of the business.

Jennifer: Any suggestions on what you should NOT do?

Bennett: Don’t forget about the triple bottom line. In every project you pitch, think about how it has the potential to impact the social, environmental, and economic bottom line. If you are not assessing and communicating all three areas of impact, you are doing a disservice to the company.

Jennifer: Thanks, Bennett. Are there any other final tips you would share with our readers?

Bennett: Probably one that can’t be overstated. Strong communication and relationship skills are critical. Once you get approval for a project, don’t disappear for months. Ask people to climb on board for the whole trip and keep them informed – of both positive and negative developments. Senior executives also don’t like surprises, especially if they have endorsed a project. This builds a long-term relationship and enhances your ability to bring an idea from concept to plan to reality.

Image Credit: Hector Parayuelos, Flickr

Jennifer Anderson is a principal and co-founder of Sustrana, focused on working with clients on the development and implementation of corporate sustainability strategies and programs. Jennifer combines broad sustainability knowledge with a background and substantial hands-on experience in both private and social sector business management in the US and abroad to help companies integrate sustainability into management practices.  

3p Contributor

TriplePundit has published articles from over 1000 contributors. If you'd like to be a guest author, please get in touch!

4 responses

  1. This article is behind the times. Talking to the CFO in the language of ROI was a challenge years ago when sustainability was starting to go mainstream. Today we know that the “business case” approach is only leading corporations to be less unsustainable. Most companies are using sustainability policies to conserve energy, reduce waste and do less harm. But, as John Ehrenfeld has argued, doing less harm is not the same thing as being sustainable. We need to supplement the business case approach with real leadership vision for prosperity: for creating a better world, not just the world we get by in. A word of caution to CFOs: focusing only on easy financial wins to reduce harm may look good in the annual report but in actuality it may be just postponing the radical innovations needed for future generations to thrive, and not just to survive in a bleak environmentally damaged, non-inclusive world. In a word, we need the shift to flourishing. That will take vision, values, and a different way of being, not just talking to the CFO.

    1. Thanks, Chris. I completely agree with you that we “need to supplement the
      business case approach with real leadership vision for prosperity”. And,
      you are absolutely correct that we need to get to major transformational
      change. The reality is that 95% of the businesses, especially in the US,
      just aren’t there yet. They haven’t even begun to make the business case
      for less harm, let alone for true sustainability. Once you dip below the
      large enterprise echelon, you are dealing with a whole new world – one in
      which most business leaders don’t know how to explain sustainability, let alone
      value it in a business context. In order to attain the kind of change we
      seek, we need to get mainstream mid and smaller size businesses on board.
      For them (as it was for the larger enterprises) it is a process. And, at
      pretty much each stage of sustainability maturity, some form of business case
      is required. Regardless of whether you are talking about a lighting
      retrofit or a revolutionary product innovation, you still have to be able to
      speak to the financial value to internal stakeholders.

      1. Youre both right ;)

        Many cfo’s still live in the dark ages, by situation or by choice.

        Flourishing can provide inspiratin for innovation. Chris, your ifeas are usually 5 or more years ahead of time.

        Jen, your leadership in bridging this gap and ambassador to the future is what is needed, and can help accelerate progress on path to our next generation of leaders takes over.

        Hopefully, Earth and 7 billion neighbors will grant us the time!

    2. While we would certainly like to think we are beyond making the business case for sustainability, reality tells us we are not in most businesses. It’s misleading to promote the concept that we are. While some organizations certainly are there and are using sustainability to drive innovation, the bulk of the business world today has a long way to go. To call the approach here “behind the times” is damaging because there are a lot of great people out there, like Bennett, working hard every day to create a “Flourishing Enterprise.” Such comments set idealists up for disappointment when they are ill prepared to do the very things that are discussed in this post.

Leave a Reply