Navigating the Evolving Landscape of Corporate Reporting: Harnessing AI to Enhance Transparency and Reliability

The global corporate reporting landscape is undergoing a transformative shift, as finance leaders and investors grapple with the integrity and reliability of crucial nonfinancial data. The 2024 EY Global Corporate Reporting Survey sheds light on the pressing challenges and the emerging role of Artificial Intelligence (AI) in addressing these concerns.

Empowering Transparency and Accountability in Corporate Reporting

Widespread Concerns over Nonfinancial Data Integrity

The survey findings reveal a near-universal concern among finance leaders regarding the integrity and reliability of the nonfinancial data produced by their organizations. With 96% of respondents expressing worries, the report highlights the pressing need to address the shortcomings in data formats (39%) and inconsistencies (35%). This crisis of confidence in nonfinancial reporting has far-reaching implications, as it raises doubts about organizations' ability to achieve vital sustainability targets, with only half of finance leaders and investors believing that most corporates are on track to meet their stated goals.

Intensifying Stakeholder Scrutiny and Greenwashing Fears

The survey underscores the growing focus on nonfinancial drivers of value, with more than two-thirds of finance leaders (69%) reporting an increase in investor inquiries about these issues over the past two years. This heightened attention has also given rise to fears of greenwashing, with 55% of respondents harboring concerns that their industries could face such allegations. This highlights the underlying doubts about the credibility and transparency of nonfinancial disclosures, which are not always backed by robust data and processes.

Navigating the Regulatory Landscape: Opportunities and Challenges

The survey reveals a mixed outlook on the impact of new reporting standards. While 78% of investors believe that these regulations could have a positive effect, finance leaders express concerns about the potential burden. More than half (55%) anticipate that the costs will be burdensome, and two-fifths (44%) believe that meeting the new rules will be highly complex. This highlights the need for a balanced approach that enhances transparency without unduly burdening organizations.

Harnessing the Power of AI: Transforming Data Analytics and Corporate Reporting

Amidst the challenges, the survey sheds light on the growing optimism surrounding the potential of AI to address the issues plaguing corporate reporting. More than half of investors (57%) believe that AI could be a valuable tool in assessing the credibility and accuracy of financial and nonfinancial disclosures, while 52% think it could be used to analyze alternative data, and 51% believe it could help identify discrepancies in company reports.However, finance leaders exhibit a more cautious approach, with only 43% expressing enthusiasm about using AI in corporate reporting. Concerns over the risks, compliance, and potential costs of the technology remain prevalent, with 29% of respondents holding out until the risks are better understood, 39% apprehensive about the likely costs, and 36% worried about ensuring compliance with relevant rules and regulations.

Navigating the Path Forward: Strategies for Sustained Value Creation

The survey underscores the need for finance leaders to focus on creating sustained value and building confidence in their reporting. By harnessing the power of technology, including the transformative potential of AI, organizations can enhance their data analytics capabilities and strengthen the integrity of their corporate reporting.While the challenges ahead are undoubtedly complex, the survey highlights the importance of a proactive and strategic approach. Finance leaders who embrace the opportunities presented by AI and other emerging technologies, while addressing the regulatory and compliance concerns, will be better positioned to navigate the evolving landscape of corporate reporting and maintain the trust of stakeholders.