NEW YORK–(BUSINESS WIRE)–The urgent need for global environmental, social and governance (ESG) performance reporting standards that emerged at COP26 through the International Financial Reporting Standards Foundation (IFRS) ushers in a new era of measurement organizational performance and redefining what success means for businesses, according to new research from Accenture (NYSE:ACN). According to the report, while the CEO is leading this seismic shift, CFOs and other senior leaders must also raise the bar to measure and drive better performance that delivers value and impact for all stakeholders.
“Transparency builds trust – the foundation of strong partnerships and a compelling reason people join a company,” said Julie Sweet, president and CEO of Accenture. “Using the right technology and good business practices, organizations now have the ability to collect comprehensive ESG data that can help transform the way they do business, building accountability across the organization, achieving global sustainability goals and ultimately creating greater business value.
In his Measure sustainability. Create value. report, Accenture analyzed responses from more than 640 finance leaders across 12 industries and six countries to understand how companies can better measure, manage and report on ESG performance to fully meet their sustainability commitments. The report found that while the majority (78%) of finance leaders seek to understand the financial risk that sustainability poses to their business, only 47% have defined key indicators and data sources for their ESG reporting.
According to the report, companies that translate ESG metrics into key performance indicators (KPIs) to track and advance their progress on concrete sustainability goals are more likely to be rewarded by the market. Between 2013 and 2020, companies with consistently high ESG performance tended to achieve a total shareholder return (TRS) 2.6 times higher than companies with average ESG performance.
“The urgent call for a unified set of ESG standards has finally put sustainability at the top of the priority agenda in how companies report and disclose financial data, making COP26 potentially the GAAP moment for sustainability,” said Peter Lacy, Principal and Global Head of Sustainability Services at Accenture. responsible officer. “This is not just a call to improve disclosure and reporting or checkboxes, but rather a top-down transformation opportunity that empowers people at all levels of the organization to make better decisions by using new data, balancing shareholder and stakeholder value over sustainability and financial performance.
According to the report, only 26% of companies have clear and reliable data to measure and monitor their sustainability goals. The study also revealed that 70% of companies still use manual or semi-automated processes for their ESG reporting. Additionally, with only 31% of companies claiming to have ESG data and metrics fully integrated into their key operational and management information systems, it is clear that sustainability data is not yet treated as essential business data. , despite the impact they may have on an organization’s bottom line. line.
A lack of talent is also hampering progress on sustainability, with more than half (54%) of leaders citing inadequate skills as a challenge to measuring and reporting on ESG performance, making the need for sustainability even more important. leadership from above.
“Digital and sustainability will be the twin drivers of competitiveness in this decade. Leaders now need to rethink what performance means in their organizations and devote the same resources and attention to ESG as they do to financial data streams if they are to unlock the full value and impact of sustainability,” said Jason Dess, Global Head, CFO and Enterprise Value at Accenture. “CFOs will play a central role – as they allocate capital and oversee performance – in financial reporting and strategic engagement with capital markets. They have a real opportunity to close the ESG data gap by working with a broader set of partners in the ecosystem and within their companies to identify, extract, interpret and report all required data.
The Accenture report offers companies, and CFOs in particular, guidance on how to address ESG challenges and lead change by revamping performance backed by reliable data that can be measured accurately and transparently . This includes:
- Inform and play a role in the development of the sustainable development strategy – To respond to market demands and ensure that ESG reporting remains more of an opportunity than a financial risk, companies should publicly commit to setting value targets for their sustainability strategy and ambition – towards, for example, net zero, circularity or delivery of the UN Sustainable Development Goals.
- Focus on measurement, accountability and effective management – Finance leaders should assess and shape the “sustainability DNA” of their organizations alongside CHROs and other talent; transform the operating model through organizational design and the latest tools and capabilities; and embed ESG objectives and responsibility across the business to drive fundamental change towards creating value and impact for all stakeholders.
- Seek the right data to make better decisions at all levels, including using existing and rapidly emerging technology solutions – Currently, financial and ESG data are not treated in the same way. Businesses need to recognize and improve how sustainability data is collected. This includes defining a clear plan for capturing key data; establish quality and readiness systems for disclosure; designing end solutions for storing and reporting ESG data; and identify key metrics for value creation and internal performance.
- Go beyond reporting and disclosure to completely rethink the definition of performance and success for stakeholders – Align with a strong narrative that presents an effective storyline for key metrics, then create integrated, modular interactive elements – from voluntary reporting to compliance – that communicate results in a unified way and take advantage of technology advancements and news working methods to drive a new era of performance.
“Accenture’s Sustainability Value Promise is to embed sustainability into everything we do, including our reporting with the recently launched 360° Value Reporting Experience, a comprehensive view of our goals. , progress and performance of financial and ESG measures. We also work closely with our ecosystem partners – from software and platform leaders to new disruptors – to build foundational modules that help our customers measure and manage performance to drive value and impact,” added Lacy. “As sustainability measurement matures into an instrument of transparency, it will offer organizations a unique opportunity for new ways of working, new markets to generate value and new opportunities to impact all stakeholders. .”
Accenture commissioned McGuire Research Services to conduct a survey of corporate finance executives on their approach to ESG measurement and reporting, and the challenges they face. We surveyed 640 finance leaders, ranging from CFO to CFO, in August and September 2021. We surveyed executives of companies that reported more than $1 billion in revenue, spanning 12 industries and with headquarters in six countries (China, France, Germany, Italy, United Kingdom and United States). Accenture also convened and led an expert roundtable at COP26 with six sustainability leaders from different industries at an event that took place in Glasgow, Scotland on November 4, 2021.
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