Key Takeaways

  • An EY survey shows that most CFOs and other finance executives believe companies in their industries will fail to meet sustainability goals; only 47% of respondents believe their own companies can achieve net-zero emissions and similar targets on time.
  • Institutional investors are slightly more optimistic, with 53% of respondents believing companies are on track to meet sustainability goals. EY reached these conclusions after surveying 2,000 CFOs, finance directors, and other finance executives, as well as 815 institutional investors.
  • "Clients, shareholders, regulators, and investors are increasingly holding companies accountable for their environmental impact and commitments to sustainable practices," Nicolas Lecoq, EY's global leader for financial accounting advisory services, said in a statement on Wednesday. "This means the credibility of corporate reporting is now more critical than ever."

In-Depth Insights

EY notes that CFOs of companies active in the U.S. and European markets face a "fluid landscape" when navigating sustainability reporting regulations.

Under the EU's Corporate Sustainability Reporting Directive (CSRD), starting next year, approximately 50,000 companies listed on regulated markets in the EU will be required to submit detailed reports on environmental, social, and governance (ESG) issues.

In the U.S., the Securities and Exchange Commission (SEC) scaled back a climate-related risk disclosure rule before facing legal challenges and has put the rule on hold. Companies would have been required to disclose the impact of climate change on their finances, operations, and business strategies.

EY says that more than two-thirds (69%) of finance executives report that corporate stakeholders have raised more questions over the past two years about sustainability and other "non-financial value drivers."

Meanwhile, 96% of finance executives are concerned about the integrity of non-financial data, and 55% believe they could face accusations of "greenwashing" (i.e., exaggerating sustainability performance) due to the potential lack of verifiable data in non-financial disclosures.

Additionally, 55% of finance executives expect the costs of sustainability disclosures to be burdensome, and 44% of respondents consider the related rules to be highly complex.

Two-fifths of finance executives believe artificial intelligence could aid reporting efforts in sustainability and other business areas, but 29% want to first better understand the risks associated with the technology.

EY also found that among institutional investors, more than half (57%) believe AI can help assess the completeness and accuracy of financial and non-financial disclosures.