AI seen as potential fix for corporate reporting concerns

Finance leaders worldwide are increasingly concerned about the reliability of non-financial corporate reporting data, with a growing number turning to artificial intelligence (AI) as a potential solution.

The 2024 EY Global Corporate Reporting Survey reveals that 96% of finance leaders express worries about the integrity and reliability of non-financial data, plagued by issues such as varying data formats (39%) and inconsistencies (35%). The survey, now in its ninth edition, collected insights from more than 2,000 finance leaders and 815 institutional investors globally, focusing on challenges within financial and non-financial reporting.

There exists a significant apprehension that current data shortcomings may hinder major sustainability objectives. Only 47% of finance leaders and 53% of investors believe businesses are on track to achieve their stated sustainability targets in the coming years.

The survey notes a rising interest among stakeholders in non-financial value drivers, with 69% of finance leaders observing an increase in investor inquiries about these issues. However, the shadow of greenwashing looms, as 55% of those surveyed express fears that companies may face such allegations due to insufficient due diligence, processes, and data to back non-financial disclosures.

Despite these challenges, investors remain hopeful, with 78% believing new reporting standards could enhance sustainability disclosures. Nonetheless, finance leaders foresee hurdles, with 55% predicting burdensome costs and 44% anticipating complexity in adhering to new regulations.

Myles Corson, EY Global and Americas Strategy and Markets Leader for Financial Accounting Advisory Services, states, "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 functions effective use of data to paint a clear picture of future plans and prospects. But it's clear there are major worries among CFOs and the investor community around data transparency and nonfinancial information, which they cannot afford to ignore."

Nicolas Lecoq, EY Global Financial Accounting Advisory Services Leader, comments, "Finance leaders apprehension around businesses ability to meet crucial goals underscores the growing importance of building confidence in reporting on sustainability efforts.

"Customers, shareholders, regulators and investors increasingly hold companies to account for their environmental impact and commitment to sustainable practices. This means that the integrity of corporate reporting is now more critical than ever - it reflects an organization's dedication to sustainability goals and can directly impact the trust that investors, and the wider public, are willing to invest in it."

Looking towards AI, more than half of investors (57%) view AI as valuable in assessing the credibility and accuracy of disclosures, with 52% considering its utility in alternative data assessments, and 51% for identifying discrepancies. However, finance leaders display mixed feelings: 43% are optimistic about AI's use, while 29% prefer to wait until its risks are better understood. An additional 39% are cautious about costs, and 36% worry about regulatory compliance. Currently, only 32% report having advanced technology for data management and analysis.

Corson notes, "While no one can pretend there's an easy path ahead, there are certainly ways in which organizations can successfully navigate the challenges. Finance leaders who focus on creating sustained value and build confidence in reporting and harnessing technology to enrich data analytics can rest assured that they are heading in the right direction."

Lecoq adds, "Although AI is still in the early stages of adoption, and while it's clear that many finance leaders are nervous about potential costs, compliance and wider possible risks, there's no doubting its immense potential to transform data analytics and corporate reporting for the benefit of all."