"New Article: Falling Short on Carbon Reduction? Establish Fresh Objectives for Future Climate Actions"
In today's business landscape, Chief Financial Officers (CFOs) are playing an increasingly vital role in shaping sustainability investments and strategies. According to recent trends, CFOs are now expected to assess sustainability investments, establish realistic Return on Investment (ROI) timelines, analyse and prioritise regulatory, reputational, and transition risks, and embed sustainability into company strategy and financial goals. Moreover, they are tasked with ensuring executive-level oversight of sustainability reporting, governance, and disclosure compliance.
The evolution of climate targets, often referred to as Version 2.0, is a significant aspect of this shift. These updated targets should clearly articulate the connections between an organisation's climate progress and its ability to improve business performance. They should be defined as specific, financially grounded targets, serving as strategic tools that drive broader organisational priorities and unlock long-term value, rather than mere environmental commitments.
This transformation is being echoed in regions such as California and the EU, which are retooling their reporting obligations to be more streamlined. However, this evolution is not without its challenges. Regulatory uncertainty, macroeconomic instability, geopolitical tensions, rising costs, and shifting investor priorities have compounded these issues.
To navigate these complexities, the right cross-functional governance and accountability teams and processes should be in place. Companies like Unilever, Siemens, and Shell have led the way in this regard, increasingly integrating the CFO role into their climate strategy in recent years.
The financial nature of climate transition planning necessitates a more prominent role for CFOs. As climate change becomes a mainstream business risk, CFO involvement is expected to intensify. To achieve the set targets, integration of various teams, systems, and processes is necessary, and companies should ensure they have the right data infrastructure and technologies in place to forecast and model multiple scenarios and track each goal's progress.
It's also crucial to assess whether there are expertise or talent gaps that need to be filled within the team. A 2025 Nature Climate Change study found that almost 40% of companies missed their 2020 climate targets or stopped reporting entirely, underscoring the importance of having the right people in the right places.
However, the journey towards sustainable business practices is not without its obstacles. Many organisations have struggled with the complexity of Scope 3 emissions, slower-than-expected technological progress, and economic pressures. The U.S., for instance, has seen a growing wave of anti-ESG legislation in states like Texas and Florida, adding another layer of complexity to the equation.
Despite these challenges, meaningfully involving the Office of the CFO in setting sustainability targets has emerged as a clear best practice. By aligning sustainability goals with financial goals, companies can ensure a more sustainable and resilient future, benefiting both their bottom line and the planet.
