Nearly 55 percent of global finance leaders felt that sustainability reporting lacked credibility, revealed a recent EY study.

According to the 2024 EY Global Corporate Reporting Survey released last week, more than half of the finance leaders felt that disclosing nonfinancial performance metrics related to ESG factors was doubtful.

Forty-four percent of these finance executives felt their biggest challenge was that their companies lacked defined policies and processes for sustainability reporting, including robust internal controls for disclosure assurance.

Forty-two percent were concerned about the lack of effective partnership and collaboration between finance function leadership and those charged with sustainability, such as chief sustainability officers.

“As CFOs become more involved in sustainability reporting, their awareness of the immaturity of the reporting mechanisms used in the nonfinancial area has grown,” said EY Global Climate Change and Sustainability Services Leader Matt Bell in the report.

The survey explored the views of more than 2,000 finance leaders and 815 institutional investors across 30 countries between March and May on the state of corporate reporting.

Poor Data Quality

Further, 96 percent of the finance leaders felt that the nonfinancial data produced by their organizations was not fit to support decision-making.

While 39 percent reported issues with data formats, 35 percent complained of inconsistencies.

The findings sounded alarms on corporate reporting standards, exposing fears over the impact of poor data on critical global goals.

Half of those surveyed are apprehensive that organizations will miss vital sustainability targets over the coming years.

Only 47 percent of finance leaders and 53 percent of investors believed that most corporations were on track to achieve stated goals.

The survey shows that the focus by stakeholders on nonfinancial drivers of value was intensifying, with more than two-thirds of finance leaders, or 69 percent, saying that they have noticed investors asking more questions about these issues than they did two years ago.

Greenwashing doubts

Many of those surveyed, or 55 percent, harbored fears that allegations of greenwashing could be leveled against companies in their various industries, highlighting underlying doubts that the necessary due diligence, data, and processes back up nonfinancial disclosures.

Investors are hopeful that new reporting standards could help businesses’ efforts to improve sustainability disclosures, with 78 percent of respondents saying that new regulations could have a positive impact.

However, finance leaders seemed worried:  55 percent said they expect the costs of the new standards to be burdensome, while 44 percent believed that meeting the new rules would be highly complex.

“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,” said Myles Corson, strategy and markets leader of EY Global and Americas.

As businesses navigate the complexities of sustainability reporting, the findings from the EY survey underscore a critical need for enhanced credibility and collaboration in nonfinancial disclosures.