55% of CFOs fear that their sustainability reporting is perceived as greenwashing

55% of CFOs fear that their industry's sustainability reporting is perceived as greenwashing due to a lack of due diligence. 47% of financial leaders and 53% of investors doubt that companies will meet their stated sustainability goals, according to a new EY survey, cited by esgnews.com.

CFOs need to re-engineer non-financial reporting to meet investor demands and align sustainability with financial decision-making.

Fears of greenwashing in sustainability reports

Concerns about the credibility of sustainability claims are growing, with 55% of CFOs surveyed in EY's Global Corporate Reporting Survey 2024 warning that sustainability reporting in their industry is at risk of being perceived as greenwashing. This fear stems from concerns that insufficient due diligence and unverified disclosures can undermine trust.

The study, which surveyed more than 2000 financial leaders and 815 institutional investors globally, highlights widespread doubt about companies' ability to meet sustainability goals. Specifically, 47% of financial leaders and 53% of investors doubt whether these goals are realistic, citing poor quality disclosures that fail to show meaningful climate action.

A staggering 96% of finance leaders express concern that their organizations' non-financial data is not fit for purpose to support decision-making, citing problems with data formats (39%) and inconsistencies (35%).

Half of the financial leaders surveyed fear that organizations will miss vital sustainability goals in the coming years. Only 47% of financial leaders and 53% of investors believe that most corporations are on track to achieve their stated goals. The focus on non-financial drivers of value is intensifying, with 69% of finance leaders seeing more investor inquiries on these issues than two years ago.

Need for credible, verifiable reporting

The risk of greenwashing also raises the threat of potential litigation from stakeholders if companies are found to be overstating their sustainability performance. According to the report, "while the disclosures were undoubtedly made in good faith, financial leaders clearly doubted that the necessary due diligence was done."

For CFOs, addressing these challenges will require a fundamental realignment of non-financial reporting practices, ensuring that sustainability efforts are transparent, verifiable and aligned with financial decision-making.