John Worth is Group CFO at Hastings Direct, and an Honorary Member of Council at the NSPCC. He has also worked as CFO at MS Amlin, the Co-operative Bank Plc, Hiscox, and Aspen Insurance Holdings. Here, he makes the argument for placing prime responsibility for ESG outside of the CFO’s remit whilst the finance function measures and reports on its progress. This interview was conducted as part of our research inquiry into the role CFOs play in creating a fairer future.
How has the role of CFO changed in recent years?
I think we’ve seen something of a shift in emphasis from the CFO being there to oversee making money to being there to oversee making money responsibly. I expect this to continue to shift towards an increasingly greater role for the CFO in terms of measuring progress on ESG. In many ways, the CFO plays a similar role as regards to the financials.
By this, I don’t mean that the entirety of ESG should come under the CFO’s remit as it does in some companies today. I don’t find that to be a particularly convincing or mature model; I think that, whilst finance should own the metrics and act as the keeper of the targets, operations – both customer-facing and infrastructure – is a much more natural home for ESG. If operations are responsible for making progress on ESG commitments, then you should see a greater impact as they’re in a better position to drive change.
Has access to data changed the conversation and impacted decision-making?
I don’t think that the implications of failing to meet ESG targets are particularly difficult currently. This may change in future as the publicity given to this agenda increases and the targets themselves become more robust and comparable. There is, however, a great deal of upward pressure to act and make progress on ESG. Like many companies, we have an employee forum and the central importance of the environment to our employees comes through very strongly there.
Contrast this with the issue of safeguarding data, however, and you soon see the shape of a risk that is life-threatening to any business. Should you preside over a data breach, the implications are severe and could quite easily result in business failure. Therefore, you do everything possible to mitigate this risk. ESG, with its lower risk profile, is consequently less of a priority currently.
“Should you preside over a data breach, the implications are severe and could quite easily result in business failure.”
What are the greatest challenges facing CFOs today?
Alongside the usual list of ensuring access to sufficient capital and talent whilst being able to respond and adapt to regulation, there are a few ESG-related problems that come to mind. One challenge at the moment is that comparing ESG between companies is difficult due to the lack of common definitions. Arriving at an agreed definition is vital to ensure that we can have confidence when looking to compare ESG metrics between organisations, and will also help companies in their due diligence by ensuring that their reporting is accurate. This would also be beneficial both for consumers and investors looking to engage with companies that are able to demonstrate that they live up to shared values.
I think that accounting can serve as something of a proof here. The creation of international accounting principles has made it much easier to compare organisations working in different geographies and jurisdictions. The expertise that the big accounting firms have built up here over the last couple of decades will be vital in forming this common understanding when it comes to ESG. I think that, within a generation, chartered accountants will have to sit a paper on measuring ESG, just as they have to sit a paper tax or audit today.
“Within a generation, chartered accountants will have to sit a paper on measuring ESG, just as they have to sit a paper tax or audit today.”
What are the social or economic issues that keep you awake at night?
Through my work with the NSPCC, I’ve become increasingly concerned about the extent to which children and young people are today subject to forms of abuse via the internet that simply didn’t exist in the past. With access to incredibly harmful information, we need to recognise that the situation today is a changed one from ten years ago and the potential for digital abuse and harm.
In order to address this, we will need to see government working along with the technology companies responsible for these platforms. The legislation currently working its way through Parliament is, I think, a step in the right direction by making tech firms and their executives responsible for harmful content on their sites. Although there are concerns about the potential impact of this new regulatory framework, including potential criminal sanctions, we absolutely must take action to ensure that those responsible for harmful content face consequences.
If you could issue one challenge to peers, what would it be?
I urge my peers to spend as much time as they can developing others. Anyone’s career doesn’t last for a very long time in the grand scheme of things. The best legacy that anyone can leave is to pass on your experiences and knowledge to upcoming generations by investing time in helping them unlock their potential.
“The best legacy that anyone can leave is to pass on your experiences and knowledge to upcoming generations.”
This interview was conducted by Dr Scarlett Brown, Director of the Board Intelligence Think Tank. If you’d like to nominate a CFO leader to be part of our interview series, get in touch.