Uniting IT, Finance, and Sustainability Through the Integrated Profit and Loss

Economies across the world are making slow recoveries from the COVID-19 setbacks, but are at risk from geopolitical conflict and tensions, trade protectionism, and high debt levels. At the same time, populist politics, nationalism, and sovereigntist movements are gaining traction in countries and regions. These factors make it more challenging for companies to pursue environmental, social and governance (ESG) sustainability programs and invest in the necessary transformation. Even internally, C-suites may not see eye-to-eye, with sustainability, compliance, and HR officers often at odds with finance and procurement, and IT typically on the sidelines or caught in the middle. If only there was a way to show everyone which sustainability investments made sound business.  

Turns out, there is. First deployed in the early 2010s, the integrated profit and loss (IP&L) statement can bring transparency and clarity to the business impact of sustainability investment. The IP&L is a holistic approach to financial reporting that accounts not only for traditional financial metrics but also for sustainability factors and impacts. The standard P&L focuses on revenues, expenses, and profit; the IP&L adds the company’s impact on broader aspects such as natural resources, carbon footprint, social contributions, and governance practices.  

Related:Purpose Versus Profit: Should Tech Companies Have Both?

By quantifying the economic, environmental, and social impacts of business activities, companies can make more informed strategic decisions that integrate profitability with sustainability goals. For instance, an IP&L might reflect the costs associated with carbon emissions or the benefits of social programs, together with the financial reliance on a healthy environment that supports agricultural productivity. This allows business leaders to see how these factors influence the company’s overall financial health. It also makes clearer the investments and initiatives that deliver both financial returns and sustainability gains.  

Food multinational Danone released its first IP&L in 2010. Other companies with public IP&L reports include global health technology company Philips and paint and coatings manufacturer AkzoNobel. Brazilian cosmetics company Natura & Co. adopted the IP&L in 2021 to measure and manage its sustainability impacts. It revealed a net positive societal value primarily driven by social and human capital investment. For every $1 of sales, Natura generated $1.50 in net societal value.  

Despite these benefits, the IP&L is not widely used, largely due to a deficiency of standardized data. It’s this deficiency, in part, that offers the IT organization an opportunity to join finance and sustainability at the strategic table. An IP&L relies on sophisticated data integration and analytics, which places the IT office at the heart of its implementation. IT can develop or adapt systems to collect, process, and analyze data from various sources -- such as energy consumption and emissions, supply chain, employee welfare, and governance compliance. This may involve integrating IoT sensors, harnessing big data and activity-based carbon accounting systems and databases, and applying AI algorithms to monitor sustainability metrics in real-time. IT would also contribute to ensuring data validity and auditability.  

Related:Why CIOs Must Lead the Charge on Sustainable Technology

With a more complete and reliable sustainability data set, the finance office would be able to make data-driven decisions on ESG-related capital allocation, budget forecasting, and performance measurement. Finance and investor relations could also leverage the IP&L to communicate financial and non-financial value creation to investors and other stakeholders, contributing to transparency and trust and reducing risk of greenwashing accusations. 

For sustainability officers, the IP&L may be the most potent professional tool at their disposal. With it, they can quantify and track the impact of their initiatives on not only sustainability metrics but financial performance. They can identify and promote the programs that contribute most to the company’s overall goals and justify sustainability transformation investments based on clear financial and non-financial impacts. It is also a great mechanism to communicate and validate the sustainability team’s impact to other departments and the executive suite. 

Related:Reducing the Environmental Impact of Artificial Intelligence

Indeed, the IP&L may be the best baton for the sustainability relay race, bringing CFOs and CIOs out on the track to join their CSO colleagues. Together, this trio can effectively assure stakeholders that sustainability investment is a fully vetted, carefully calculated component of business strategy.  

But their unified impact goes well beyond investment justification. New research is underway that documents opportunities, best practices and impacts of collaboration between finance, IT and the sustainability office, conducted by the Sustainability Value Creation partnership. The five organizations comprising the partnership bring expertise in finance, IT and sustainability to research initiative:  Accounting for Sustainability, SustainableIT.org, the ERM Sustainability Institute, software company Salesforce, and global insights and advisory firm GlobeScan. The partnership's goal is to illuminate how companies can best create long-term value by integrating sustainability across their corporate functions. Leaders in IT, finance, and sustainability are invited to take part in a 10-minute online survey.  It is open until December 23, with results expected in February 2025.