How Boards Can Seize the Opportunity to Improve Corporate Reporting
VSCompanies are increasingly expected to expand the quality and scope of their corporate reporting to include enhanced environmental, social and governance (ESG) information. Adopting an enhanced corporate reporting approach enables an organization to articulate a unique narrative about how the business creates long-term value for its stakeholders. Boards of directors have both the responsibility and the opportunity to challenge their organizations to transform into sustainable businesses and redefine reporting to meet the many insights stakeholders seek.
To deliver improved reporting, companies need to think about transforming their financial operating model so that they can inject the same rigor and relevance of traditional financial reporting into ESG reporting. Boards should challenge their Ifnance leaders to take a fresh look at how reporting is delivered by considering three key areas: data analytics, talent strategy, and C-suite collaboration.
LEVERAGE ADVANCED DATA ANALYSIS
Using advanced analytics is key to extracting relevant ESG insights from the data. Advanced analytics can help companies structure, synthesize, interpret and learn from big data, and create credible and useful ESG reports. Based on this, the EY 2021 Eighth Global Corporate Reporting Survey, which examines the views of more than 1,000 CFOs, CFOs and other senior finance executives globally, found that the top technology investment priority for CFOs over the next three years is analytics. advanced and predictive.
Yet even as finance teams seek to build a more agile approach to financial planning and analysis, several data challenges stand in their way. These include the sheer volume of external data, followed closely by issues of data quality and comparability, according to the aforementioned survey. Boards should assess whether IfFinance leaders have adequate resources and budgets to address these challenges and increase their use of advanced data analytics to deliver stronger reports.
A key way to leverage data analytics to improve the quality of reports is to introduce forward-looking information, for example by bringing in external data to corroborate and provide analysis of future trends. Subsequently, this downstream report output can be used to streamline upstream activities, such as capturing data in the correct format to enable efficient collection and analysis. This requires proper planning, from data collection to reporting, with technology as a key enabler. Therefore, this process should be considered part of an organization’s digital transformation journey.
FUTURE-PROOF FINANCIAL TALENT
With the accelerated adoption of technology, technology and data skills will become crucial to Iffundraising teams. Indeed, survey respondents identifiedIfdeep understanding of advanced technologies and data analytics as the two main skills respectively that will be important for Ifnance professionals to succeed in their roles over the next three years.
To make improved disclosure a reality, the board should mandate management toIfn a talent strategy that equips Ifnance with the right skills for the future. This includes hiring talent with critical specialist skills such as knowledge and experience of artificial intelligence, as well as upgrading current skills. Iffinancial manpower.
To sustain the existing Ifnance the workforce, boards of directors can challenge Ifnance leaders to rethink their talent strategy and build an investment case for a major upskilling exercise. They should also assess whether the IfFinance leaders have taken key actions, such as conducting an assessment of gaps in current staff skills and creating incentives to encourage Ifnancing staff to acquire new skills.
Closing the technology adoption gap between the young and mature workforce is important to fostering the right culture. Senior management can empower the younger workforce to champion new ideas on harnessing technology through work improvement initiatives and reward successful initiatives by continuing implementation, with their support.
COLLABORATE ACROSS THE COMPANY
A signIfLittle ESG data belongs to different parts of the company, making collaboration between different functions essential. In this regard, CFOs play a central role in promoting the ESG agenda and sustainability performance to their C-suite peers to foster a consistent ESG approach. For example, IfFinance managers should work with sustainability managers and supply chain managers on environmental performance to better understand how the company uses natural resources and the effect of its activities on the environment. Boards should direct Ifnancing leaders to proactively collaborate across the organization to generate effective ESG reports and demonstrate the economic impact of different ESG strategies and associated objectives to stakeholders.
Boards should also expect CFOs to work closely with them on managing and monitoring sustainability performance. With their deep understanding of the regulatory environment and reporting standards, finance leaders are well placed to lead the building of trust and transparency in ESG performance.
Integrating sustainability – and broader ESG factors – into business strategy and enterprise risk management must be a board priority. In a world where stakeholder demand for reporting on non-Ffinancial reporting is increasing, the board should challenge management to redefineIfDo not report and be prepared to disrupt the status quo. By accelerating the digitization of Ifnancy, ofIfWith a talent management strategy focused on reskilling employees for a very different future and strengthening collaboration with senior executives, companies will be well placed to deliver the insights their stakeholders expect.
Boards should ask themselves the following questions:
• How does the company use non-financial reporting to communicate how it generates long-term value for stakeholders and does its ESG reporting meet stakeholder expectations?
• How does the board support and monitor the development of the ESG strategy and related objectives and metrics, including the identification and integration of non-financial key performance indicators?
• How does the organization inject rigor into non-financial reporting in terms of disclosure processes, controls and obtaining external assurance?
• What governance, control and ethics frameworks are in place to oversee the use of artiFpublic intelligence and other technologies in the Iffunding function?
• What are the key skill sets needed to enable an improved corporate reporting approach and what are the skills gaps in the current Iffinance team?
This article is provided for general information only and does not replace professional advice when the facts and circumstances warrant it. The views and opinions expressed above are those of the authors and do not necessarily represent the views of SGV & Co. and Ernst & Young LLP Singapore.
Aris C. Malantic is a partner and head of financial accounting advisory services at SGV & Co. and EY ASEAN. He is also the Market Group Leader of SGV & Co. Ronald Wong is a Partner and Head of Financial Accounting Advisory Services at Ernst & Young LLP Singapore.