A recent survey has highlighted a rising concern among global finance leaders regarding the reliability of corporate reporting data, focusing particularly on nonfinancial information. According to the 2024 EY Global Corporate Reporting Survey, an overwhelming 96% of Chief Financial Officers (CFOs) are anxious that their companies’ current nonfinancial data may not adequately back strategic decision-making. Key issues identified include troubles with data formats and inconsistencies, with 39% and 35% of respondents respectively indicating these as significant challenges.
The survey also sheds light on a pressing apprehension with respect to sustainability targets. Half of the finance leaders fear that organisations might fail to meet essential sustainability goals in the upcoming years. Currently, only 47% of finance leaders and 53% of investors are confident that most corporations are aligned to achieve their declared objectives. The emphasis on nonfinancial metrics, which drive value, appears to be escalating. Indeed, 69% of financial chiefs have noticed an increase in inquiries from investors over the past two years regarding these nonfinancial issues.
Myles Corson, who serves as the EY Global and Americas Strategy and Markets Leader for Financial Accounting Advisory Services, notes the challenges finance leaders face amid current economic turmoil. He underscores the critical role of the finance function in navigating both immediate market fluctuations and maintaining a trajectory for long-term growth. Corson also points out a widespread concern among CFOs and investors about data transparency, particularly surrounding nonfinancial data, and emphasizes the need for heightened attention to these aspects.
In terms of regulatory developments, investors hold optimistic views about the potential of new reporting standards to enhance sustainability disclosures. A notable 78% of investors believe that tighter regulations could positively alter the landscape. In contrast, more than half of the surveyed finance leaders (55%) are concerned about the potential financial burden these new standards may impose, with 44% foreseeing significant complexity in compliance.
Nicolas Lecoq, the EY Global Financial Accounting Advisory Services Leader, highlights the rising urgency in ensuring confidence in sustainability reporting. He stresses the accountability that customers, shareholders, regulators, and investors demand from companies regarding their environmental footprint and sustainable practices. Lecoq maintains that the dependability of corporate reporting is ever more crucial as it reflects corporate commitments to sustainability, which, in turn, influences investor and public trust in these enterprises.
Artificial Intelligence (AI) emerges as a potential ally in overcoming these concerns, with 57% of investors believing AI could play an essential role in verifying the credibility and accuracy of both financial and nonfinancial disclosures. Moreover, 52% of stakeholders think AI could be leveraged to assess alternative data, while 51% see it as a tool capable of identifying discrepancies within company disclosures.
Despite the promising prospects of AI integration, there remain significant hesitancies. While 43% of finance leaders express a positive disposition towards deploying AI in corporate reporting, nearly a third (29%) decide to wait until the risks are more comprehensively understood. Concerns centre around the costs involved (39%) and the compliance complexities related to AI-driven systems (36%). Additionally, only 32% of those surveyed report possessing advanced technology to manage and assess data effectively.
Corson reflects on the potential pathways forward, suggesting that finance leaders who seek to create sustained value, enhance confidence in reporting, and exploit technological solutions for bolstering data analytics are likely moving in the right direction. Lecoq also acknowledges the nascent stage of AI adoption but recognises its transformative potential in optimising data analytics and corporate reporting.
These insights provide a glimpse into the evolving landscape of corporate reporting, where the interplay between traditional methods and cutting-edge technology is poised to redefine organisational efficacy and transparency.
Source: Noah Wire Services