What’s the Difference Between a CFO and a Chief Value Officer?

The chief financial officer’s role is rapidly changing as businesses place a greater focus on values-based activities and reporting.

How does your organisation generate value?

Economic and geopolitical volatility, environmental issues and digital disruption, among other factors, are forcing many businesses to take a closer look at this question. Addressing risk, handling market fluctuations and measuring performance are tasks traditionally performed through the financial lens of a chief financial officer (CFO). However, forward-thinking enterprises are putting a greater emphasis on nonmonetary values such as human capital and sustainability.

Enter the chief value officer (CVO). Chief value officers support business strategy and performance tracking for both financial and nonmonetary indicators of value. This article takes a closer look at how CVOs and CFOs differ and why a value-centric approach can benefit your business.

What is a chief value officer, and how is one different from a CFO?

Put simply, a CFO is responsible for overseeing a company’s financial performance, while a chief value officer manages value creation in both financial and nonfinancial terms. For example, CFOs track cash flow, create financial budgets and reports, and support executives with strategic financial decision-making. A chief value officer integrates these practices with other value drivers that determine overall business success. These can include:

• Intellectual capital and innovation.
• Workplace morale and culture, as well as employee well-being.
• Sustainability, often in terms of environmental, social and governance (ESG) performance.
• Diversity and inclusion.
• Brand loyalty and reputation.
• Business relationships and partnerships.

Because CVOs are responsible for all aspects of value creation within an organisation, they tend to have more dynamic, wide-ranging responsibilities than CFOs. In addition to financial expertise, they have a deep knowledge of all value-generating business processes. A chief value officer must also possess the communication skills to effectively interpret these performance measures for board members and other stakeholders, and be able to champion value creation as a part of the company’s culture.

Why are chief value officers important?

By considering practices such as sustainability or workplace culture, a chief value officer can influence greater progress in those areas than is possible through a CFO’s traditional role. Over time, these changes can improve your business’s bottom line. For instance, delivering on your ESG targets may attract investors and help diversify supply chains for fewer disruptions. Or focusing on improving workplace culture and employee satisfaction can promote productivity and innovation, which will translate to your balance sheet. Because CVOs take a more holistic view, they are also positioned to identify problems earlier.

Businesses are taking a greater interest in chief value officers because of increased scrutiny from investors, regulators, customers and other stakeholders when it comes to a business’s impact on people and the planet. Take ESG, for example. More organisations are required to report on value-based business practices, with approximately $30 trillion worth of professionally managed assets worldwide now subject to ESG standards. 

The challenge with validating your business’s value-centric activities, and ESG in particular, is that it’s difficult to monitor progress. For example, it’s easy to measure the number of people from marginalised groups in leadership — but much harder to report on the outcomes of their representation. Similarly, many businesses have the means to track their greenhouse gas emissions, whereas understanding how their supply chains affect biodiversity is much harder and more complex. According to research by BNP Paribas, incomplete and inconsistent data is the biggest barrier to ESG investing. Chief value officers are needed to fill this gap, helping organisations develop better systems and measures for understanding the impact of their value drivers in a more meaningful way.

How to approach value management in your organisation

The idea of a chief value officer is still relatively new, with no one-size-fits-all way to implement the role. Some businesses treat CFOs and CVOs as separate positions that work closely together. Others may replace a CFO with a CVO. In many cases, CFOs are adopting chief value officer duties even if they haven’t changed their titles. A joint report by the Association of Chartered Certified Accountants (ACCA) and BDO, a professional services company, found that many CFOs say they already fulfill a chief value officer’s responsibilities. 

Regardless of the approach you take, an effective chief value function must adopt a multidisciplinary perspective that works with multiple departments. This collaboration is necessary to gather the data and establish metrics and systems ideal for monitoring, measuring and reporting on value performance.

The bottom line about CFOs and CVOs

Alongside financial achievements, indicators such as human capital, social capital and intellectual capital have always been key to business success. These elements are increasingly being managed by CFOs or rebranded entirely under the authority of a chief value officer. 

Still a nascent concept, managing financial, social, human and intellectual capital under a CVO is a smart investment for any finance or treasury team. In the near future, organisations will most likely lean on CVOs and their CFO equivalents to stay resilient in an uncertain business landscape — and perhaps most importantly, pave the way for more reliable measures of nonfinancial business value.

Learn more about how C2FO’s solutions can support enterprise value.