How Do We Create a New Definition of Business Value Which is Supported by the Financial Community?
In October 2014, Coca-Cola Enterprises teamed up with the Financial Times to host the Future for Sustainability Summit. The summit included a panel discussion on redefining business value, which featured Nik Jhangiani, Chief Financial Officer of Coca-Cola Enterprises. Here he explores further how companies can change investor perceptions of sustainability and better communicate its long-term value.
As the Chief Financial Officer of a publicly-listed company, I often find that the worlds of finance and sustainability speak different languages, particularly when it comes to our definitions of ‘value’. Yet we are all aware that our world is changing - as resource issues and social challenges become more pressing, expectations on business are higher than ever before. With the entry of the millennial generation to the workforce, these expectations will continue to grow. Business leaders must find a way to bring the worlds of finance and sustainability closer together and build a common interpretation of value.
At Coca-Cola Enterprises (CCE), we believe that companies have a responsibility to contribute to society and the environment, and that every investment a company makes should return value to the business – these two beliefs don’t have to be at odds. Recently, we hosted the Future for Sustainability Summit in London in partnership with the Financial Times to discusshow business can better combine profit with purpose.
I took part in a panel discussion exploring how we can create a new definition of business value which is supported by the financial community – one which extends beyond shareholder value and into societal and environmental value. For many years, the financial community saw sustainability purely as a compliance issue. From my position as CFO, I see sustainability as a central part of running an efficient and productive business, and that it plays a critical role in managing risk.
We have been embedding sustainability into our core business for about a decade: we launched an ambitious sustainability plan three years ago and sustainability is at the heart of our ‘operating framework’ which expresses our core business purpose to every employee.Sustainability brings us many benefits, helping to capture operational efficiencies, eliminate waste, drive innovation, deliver for our customers, and significantly drive employee engagement.
There is sometimes a perception that ‘investors don’t care’ about sustainability – at least until it becomes a significant issue with negative bottom line impact. In my experience, the financial community expects well-run companies to have a solid management-led response to these issues. At CCE we incorporate sustainability into the vast majority of the presentations we make to the wider financial and investor community. But is the financial community looking beyond pure business performance in how they value a company? Not yet, or at least not consistently.
The financial community will likely continue to evaluate companies on the basis of financial performance. So the challenge will be for forward-thinking businesses to make a clear link between long-term financial performance and their sustainability actions or their social purpose. Business can do more to define and communicate the value gained from investments in sustainability – especially where investments may have longer pay-back periods. At CCE, resource scarcity has driven our sustainable packaging strategy for many years and, as CFO, much of this agenda has also made strong financial sense – eliminating waste, light-weighting our packs, our increased use of recycled materials. Yet, our approach has also required significant investment.
We are starting to see some interesting examples of organisations communicating the value that can be derived from such an approach. Kering’s Environmental Profit and Loss accounting system is an interesting approach – an attempt to value the natural capital they rely on. Last month, the Rockefeller Foundation announced its intention to switch its investments from fossil fuels to clean energy, while many of the world’s largest institutional investors recently made a clear call for carbon pricing – recognising that carbon emissions come at a cost.
There is little doubt that those companies that are embracing and embedding sustainability will be more resilient over time – they just need to clearly define and better communicate the value they are realising in the long-term. Ultimately, it is these stories of success in combining profit and purpose that will help the worlds of finance and sustainability to talk a common language.
Senior Vice President & Chief Financial Officer
Nik Jhangiani became CCE’s Chief Financial Officer (CFO) in November 2013, having joined CCE as Europe Group CFO in September 2012.
He Joined The Coca-Cola Company in Atlanta in September 1998. While there, Nik worked first as International Audit Manager in Atlanta before moving to Vienna, Austria to take up the position of Director of Corporate Audit for the newly formed Coca-Cola Hellenic. In 2002, he moved to Athens, Greece to assume the role of Corporate Controller and was appointed to the role of Chief Financial Officer in 2004. In 2007, he took on the additional responsibility of Director of Strategy. In May 2009 Nik became Group Chief Financial Officer at Bharti Enterprises in New Delhi, India, where he won CFO of the year in 2010.