When it comes to corporate reporting, there are multiple challenges facing CFOs, said EY recently.
In the face of a challenging and uncertain macro-environment, CEOs and boards are looking to their CFOs to effectively balance trade-offs between short- and long-term priorities, EY pointed out.
This can be a difficult balancing act between two important business requirements, the firm said.
The first requirement is to drive cost efficiencies required to deliver against short-term financial performance expectations, EY said.
The second one is to tackle material ESG risks and opportunities that can be important to protecting and growing long-term value, while addressing environmental and societal challenges, the firm added.
However, CFOs face a significant challenge in articulating to stakeholders through their corporate reporting, how the organisation is providing the short-term financial performance the market expects while driving long-term, sustainable value, EY observed.
The recent EY Global Corporate Reporting Survey research finds that CFOs and senior finance leaders believe there is still further to go in building an enhanced reporting model that encompasses financial and nonfinancial (ESG) reporting, the firm said.
Highlights of survey results
- CFOs and finance leaders themselves are uncertain if today’s ESG reporting is communicating what is material.
- For example, just 51% of CFOs surveyed believe their company provides investors with relevant and material reporting insight on the company’s ESG risks and opportunities.
- Overall, CFOs and finance leaders identify two important challenges with sustainability reporting.
- First is “the lack of supporting evidence and assurance to provide trust in the information.”
- Second is “the disconnect between ESG reporting and mainstream financial information.”
- At the same time, and perhaps linked to this point about materiality, there are doubts about whether investors understand the link between company priorities and long-term value.
- For example, fewer than half of financial controllers surveyed (48%) are convinced that “investors clearly understand the financial benefits of longer-term investments in sustainability.”
