Calls for globally consistent ESG standards to be created and mandated have been renewed as an EY report shows three-quarters of world finance leaders support these moves.
The consultancy’s 2021 EY Global Corporate Reporting Survey surveyed more than 1,000 finance leaders from companies spanning 14 sectors and 26 countries, finding 76% in favour of global ESG standards and 74% calling for these to be mandatory.
There have been several moves towards creating global ESG standards throughout the year. In November the CFA Institute launched voluntary global ESG reporting standards, and most recently at COP26 the new International Sustainability Standards Board was announced, which aims to develop sustainability disclosure standards that can be used around the world.
Challenges
Although EY survey respondents noted the increasing focus on ESG reporting, they also cited a number of challenges. The biggest barrier to ESG disclosures from companies was understanding what investors want from it, as well as realising its importance.
In addition, some 39% said there is a disconnect between ESG reporting and mainstream financial reporting; 38% pointed to a lack of focus on material issues; and the same proportion observed that there is a lack of information on long-term value. A third (33%) said they believe a lack of real-time information is an obstacle, while 32% highlighted the absence of any forward-looking disclosure.
Nevertheless, Marie-Laure Delarue, EY global vice-chair – Assurance, said: “Companies increasingly recognise the crucial need for globally consistent standards; and they can see the benefits of making the rules compulsory.”
But she added: “If businesses are going to meet the needs of investors and other key stakeholders, and if they are going to build real trust in the data, they need to give ESG reporting the same prominence as financial reporting. There is a vital role for finance teams to play here, but it’s no mean feat and will need a much more acute focus on material issues.”
Solutions
To help deal with these challenges, the report noted the need to upskill professionals to tackle this increase in non-financial data, as well as investing in technology that can help process it. Investment in analytics, including predictive, cloud-based, AI, robotics and blockchain, proved popular.
Tim Gordon, EY global financial accounting advisory services leader, said: “The skills gap in relation to data is clear and needs to be addressed urgently if companies are to make progress on corporate reporting. Finance functions and their leaders have a critical role to play in advancing this change.”
