Wananchi Opinion: Why Kenyan CFOs have to juggle both regulatory and ESG requirements

There is a radical change of the Chief Financial Officer (CFO) in Kenya. Having been focused on budgeting, reporting, and cost control, the modern CFO further is likely to be expected to work in the convergence of sustainability, risk management, and corporate strategy.

This change is both global and local regulatory changes, as the finance role is a key factor in ensuring business sustainability in the long term.

Conventionally, accounting practitioners in Kenya paid attention to financial statements, audits, and tax compliance.

Although these technical pillars are still crucial, the current CFO now needs to incorporate the environmental, social and governance (ESG) issues in their financial decision making.

International Finance Corporation notes that the integration of ESG is becoming a major factor in determining the venture of investment into emerging economies, Kenya’s inclusive.

Investors and multinational partners are becoming more and more demanding about carbon emissions, social impact, diversity, and governance practices.

CFOs capable of matching financial output with these expectations are in a better position to unlock capital and produce an increase in enterprise worth.

Meanwhile, the regulatory environment in Kenya is increasingly challenging and difficult.

Capital Markets Authority, Sacco Societies Regulatory Authority, and Central Bank of Kenya have tightened the requirements with regard to financial reporting, anti-money laundering (AML) and consumer protection.

Such domestic demands are being affected more and more with global standards, such as the International Sustainability Standards Board standards of IFRS Foundation, which require standardised sustainability disclosures, and policy standards, such as the EU Green Taxonomy that influence investor behaviour on an international scale.

Because of this, Kenyan CFOs have to juggle both regulatory and ESG requirements with technical rigour and long-term proactivity.

This development requires a wider and more vibrant expertise. In addition to accounting skills, CFOs now should have data analytics, enterprise risk management, and sustainability reporting skills.

According to the study by the Deloitte, it is seen that finance leaders around the world are becoming more and more accountable in converting ESG metrics into financial ones, like cost reductions through energy saving, access to green financing, and reputational enhancement.

The CFO no longer has only the finance department to work with as it is evident that good financial leaders need to work together between the operations, strategy, and compliance functions to inculcate ESG principles within the business models.

This needs to also include ensuring compliance is not only considered a piece of legislation, but something which drives efficiency in operations and the reduction of risks.

The World Economic Forum is among those promoting that sustainability should be woven into companies' strategy, because those that do will be more resilient and will be able to generate value over time.

This implication is generalized to the career development in accounting career.

Those who would wish to become CFOs in Kenya will need to build their skills in traditional accounting competencies as well as new ones like sustainability accounting, regulatory intelligence and stakeholder engagement.

The emergence of these various fields continues to be stressed by organizations such as the Institute of Certified Public Accountants of Kenya (ICPAK) which look towards continuous growth in the academe, industry and in the classroom.

One of the newer competitive requirements that will make a candidate competitive in the ‘talent pool' is the ESG/risk management certification, and a strategy work experience that can be cross-functional.

In the end, the Kenyan CFO is transforming into a hybrid leader, who is also a financial steward, strategist and sustainability champion.

Organizations who invest in developing such capacity will not only satisfy the increasing demands of regulations, but they will also be able to project themselves as progressive and appealing as it relates to investors.

On the other hand, companies that will not evolve will be at risk of becoming out of date in an ever-ESG-aware market, where transparency, accountability, and responsible governance stand as the most crucial elements, alongside profitability.

The finance industry in Kenya has reached a crossroad. The future of CFOs will be the manner in which businesses will balance between purpose, performance and sustainability versus profitability.

To those in the field of finance who want to become leaders, the message is clear: one no longer needs to master numbers. Leadership also requires negotiating ESG, compliance as well as the realities of the present-day business.