In a study by EY, the 2024 Global Corporate Reporting Survey highlights the growing concerns among global finance leaders regarding the integrity and reliability of nonfinancial data.
According to ESG News, a critical 96% of these leaders express apprehension that their organizations’ nonfinancial data might not be robust enough for decision-making, pinpointing issues with data formats and inconsistencies as significant hurdles.
This skepticism extends to sustainability goals, with only half of the finance leaders believing that companies will meet critical sustainability targets in the foreseeable future. Despite these challenges, there’s an increased focus on nonfinancial drivers of value, noted by 69% of finance leaders who have observed a rise in investor queries on these issues over the past two years.
Myles Corson, EY Global and Americas Strategy and Markets Leader, Financial Accounting Advisory Services, reflects on the situation: “These are tumultuous times for all business leaders and finance chiefs are no exception. The task of guiding an organization through short-term volatility while keeping a firm hand on long-term growth relies in no small part on the finance function’s effective use of data to paint a clear picture of future plans and prospects. But it’s clear there are major worries among CFOs and the investor community around data transparency and nonfinancial information, which they cannot afford to ignore.”
Amid these concerns, investors are hopeful. A strong 78% believe that impending reporting standards could foster better sustainability disclosures. However, the path to compliance appears daunting, with over half of finance leaders (55%) expecting high costs, and 44% foreseeing complexities in adhering to these new regulations.
The survey also casts a spotlight on the potential of artificial intelligence (AI) in enhancing the transparency and accuracy of both financial and nonfinancial reporting. More than half of investors (57%) see AI as a crucial tool in verifying financial disclosures. Yet, finance leaders remain cautious, with 43% enthusiastic about employing AI, while others wait to fully understand the associated risks.
Nicolas Lecoq, EY Global Financial Accounting Advisory Services Leader, notes, “Finance leaders’ apprehension around businesses’ ability to meet crucial goals underscores the growing importance of building confidence in reporting on sustainability efforts. Customers, shareholders, regulators, and investors increasingly hold companies to account for their environmental impact and commitment to sustainable practices. This means that the integrity of corporate reporting is now more critical than ever—it reflects an organization’s dedication to sustainability goals and can directly impact the trust that investors, and the wider public, are willing to invest in it.”
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