EY asks: Can Reporting Encourage Sustainability Investing?
As companies invest increasing amounts of capital into sustainability, data and reporting becomes a priority.
Companies need to prove to stakeholders that their investments are driving value and creating results, as well as meet increasing regulatory requirements from governments, suppliers and partner agreements.
As reporting becomes an essential, EY argues that the levels of accuracy and accountability that are needed are becoming harder to achieve.
“Trust in sustainability information is arguably declining rather than improving,” says Matthew Bell, EY Global Climate Change and Sustainability Services Leader.
“This is due to increasing concerns about greenwashing (a process, when an organisation spends more resources on marketing itself as environmentally friendly than on actually minimising its impact) and green-wishing (belief that voluntary sustainability efforts are closer to achieving the necessary change than they really are).”
What does this look like in practice? On a consumer level, individual retail customers no longer believe in sustainable labelling, requiring retailers to go above and beyond in demonstrating sustainability practices along the value chain, including showing interest in materials suppliers and Scope 3 emissions. There are currently no specific regulatory standards in showcasing sustainability to individuals at this level, which makes it difficult for organisations to report accurately and to the ever-developing standards of the modern shopper.
Financing the future of decarbonisation
The 2022 EY Global Corporate Reporting and Institutional Investor Survey highlights the disconnect between companies and investors on long-term strategy.
Whilst 78% of investors surveyed think companies should make investments that address sustainability issues relevant to their business – even if it reduces profits in the short term – only 55% of the company finance leaders surveyed are prepared to take that stance. An overwhelming 80% of investors surveyed say that too many companies fail to properly articulate the rationale for long-term investments in sustainability, which can make it difficult for them to evaluate the investment.
This highlights an issue in uniting long term sustainability strategy into wider company strategy, as well as the mobilisation of capital to back it.
The report shows that there are three priorities for companies and those leading corporate reporting within their organisations:
- Focus – what is material? What really matters? Focussing creates more financial value and unlocks action.
- Use framework – productively using governance and accountability frameworks drives results, and therefore capital.
- Be ambitious – the companies making waves in the sustainability space are the ones taking big steps to decarbonise, making big commitments towards net zero, and being ambitious with their goals. They’re also the ones attracting the attention and support to achieve these goals.
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