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Treasury’s strategic role continues to grow within many organizations. As more businesses prioritize environmental, social and governance (ESG) factors, treasury can contribute by aligning its own goals and operations with overarching ESG strategy.

When treasury takes this active role, it can return value to the business—and do good at the same time. The key to this lies in driving ESG strategy with a focus on its purview, everything from deployment of capital to cross-functional relationships.

The importance of ESG to treasury is clear, so let’s more closely examine the real-world opportunities for wielding this influence.

Creating a treasury ESG action plan

Treasury has a broad set of responsibilities and wide organizational reach; these are both useful levers to drive ESG performance while fulfilling core duties. This starts by:

  1. Aligning treasury programs with industry best practices and overarching ESG guidelines.
  2. Spearheading collaboration across business units.
  3. Educating the business on ESG’s impact to the financial bottom line.
  4. Setting short-term and long-term goals that align with company ESG objectives.
  5. Identifying existing external metrics for measuring success while also developing internal ones.
  6. Tracking progress and related data.
  7. Reporting to internal and external stakeholders.

This framework can help treasury advance the organizational ESG agenda through its own actions. However, it’s important to retain flexibility as expectations and the operating environment evolve, whether that means updating goals, adding new stakeholders or reassessing metrics.

3 ways treasury can lead through ESG 

Treasury has a unique ability to set the ESG tone for the business. Taking the initiative to assist on organizational strategy can allow it to lead by example and show how such commitments can benefit the whole. 

While every company will have its own approach and set of goals, here are three common opportunities for treasury to align with overarching company ESG:

1. Reduce carbon footprint

Carbon dioxide buildup contributes to climate change, making reduced footprints imperative. Achieving carbon-related goals depends on companies implementing change across the scope of operations—which treasury can carry out in its own sphere of influence.

What can treasury do?

  • Reduce paper use by migrating all accounts payable and receivable to electronic invoicing and payments.
  • Replace physical, plastic cards with virtual cards for accounts payable and receivable. 

What are the potential benefits?

  • Cost reductions, thanks to less reliance on paper.
  • Improved business resiliency and wider process improvement.
  • Access to financial incentives for green allocation (e.g., better credit terms or deposit rates).
  • Flexible workplace that appeals to an accessible workforce.

How can progress be measured?

  • Track percentage of paperless workflows.
  • Estimate carbon footprint of cash management policies. 

2. Cultivate a diverse workforce

Workplace representation is an important social initiative. As companies strive to appeal to diverse employee demographics, treasury has many options available to become more inclusive and supportive.

What can treasury do?

  • Consider earned wage access as an employee benefit (i.e., allowing employees to access pay without waiting until the end of a pay period).
  • Coordinate with a banking provider to host employee financial wellness programs.
  • Recruit from nontraditional talent pools to bring in diverse experiences and perspectives—such as employees who aren’t treasury-specific.
  • Foster a departmental culture of allyship and inclusion, possibly by recommending that employees participate in business resource groups.

What are the potential benefits?

  • Improved talent acquisition and retention.
  • Increased appeal to employees who place a higher emphasis on ESG.
  • Greater employee engagement.

How can progress be measured?

  • Track treasury workforce employee demographics.
  • Survey employees on how they rate business support for financial wellness.

3. Promote sustainable business operations

Sustainability is a holistic cause for the business. Treasury can take the lead here by leveraging its organizational pull inside and outside the company to champion efficiency and drive sustainable change.

What can treasury do?

  • Set minimum ESG standards for doing business with counterparties, including banks, vendors and others.
  • Automate processes and consider digital tokens for more efficient transactions.
  • Audit internal processes to see where waste and costs can be reduced.
  • Implement strong procedures and controls for cybersecurity and fraud mitigation.
  • Influence one-off situations like M&A activity (i.e., vetting the ESG performance of a target acquisition and how that impacts valuation).

What are the potential benefits?

  • Partners and providers are aligned on the value of ESG commitments.
  • Treasury leads in promoting sustainable operations inside and outside the business.  

How can progress be measured?

  • Track progress toward investment goal in ESG-compliant partners.
  • Benchmark vendors along value chain in terms of ESG goals and real performance.
  • Report on ESG metrics through regular disclosures.

Treasury can spur a culture shift

Treasury has a prime opportunity to influence the business and hold it accountable in terms of ESG performance.

The more concrete steps that treasury can take to demonstrate the tangible benefits of an ESG focus, the more likely that the overall business performs better in sustainability, inclusion and other factors.

To succeed, treasury must maintain an active stake in ongoing process change. The operating landscape will continue to evolve, as will investor and stakeholder expectations.

Reach out to your JPMorgan Chase relationship team to learn more about making ESG a treasury focus.

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