The future of ESG and corporate reporting - how should CFOs navigate in a changing landscape?

First published on LinkedIn Pulse by Anne Randmæl Jones, January 17, 2021.

Stakeholder expectations and regulatory requirements for ESG and corporate reporting are escalating, and CFOs need to be able to respond. With the move towards global standard setting picking up pace, and the urgency demonstrated by regulators, particularly in the EU, companies and CFOs need to up their game. The role of the CFO is rapidly expanding to Chief Value Officer where responsibility will lie not just on the financial aspect of company performance but the total value creation.

In a round-table meeting with leading CFOs in Norway, hosted jointly by Deloitte and Workiva, panelists discussed three areas that CFOs should pay attention to:

Authoritative global standards will take time to develop – do not let this become a reason to do nothing!

The development in global standard setting for sustainability reporting has been high on the agenda in 2020 and many organisations have called for more consistency in standards. Global sustainability standard setters are consolidating their activities to develop a unified interoperable digitised system of sustainability reporting. The direction is now clear and international standards setters are focused on this topic, but it will take time. In the meantime, companies and CFOs should look closely at their business models and implement the current sustainability frameworks that work for them, and which address the sustainability risks and opportunities as well as value creation of their business and industry.

The EU is moving fast – this will cause both headaches and opportunities

The EU is moving fast in order to achieve the Paris agreement and to move capital flows in the direction of a green economy. The EU commission has launched multiple projects as part of the European Green Deal to drive this, and CFOs need to understand the impact of e.g. the EU Taxonomy, the revised Non-financial Reporting Directive (NFRD) and the Sustainable Finance Disclosure Regulation (SFDR). “Being green” will be the measure that will impact investments and financing. Implementation will be a challenge.

It’s all about data governance – from data collection to digitised reporting formats

Digitisation will play a key part in the future of corporate reporting. Companies will need to report financial and sustainability data to bring the right data at the right time to the right audience. The EU Commission is looking to standardise the way companies report on sustainability data both for PIE and SMEs through a taxonomy structure. Companies and CFOs will thus need to consider combining and broadening their reporting capabilities. This will require new skills sets, new technology, new processes, a different way of working and a clear focus on data governance and control. The challenge is precisely where to start, but it is clear that the journey needs to start now.

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