The job description of CFOs around the world is quietly changing. As regulators mandate climate-related reporting in the annual reporting suite, companies are asking financial leaders to take responsibility for climate reporting and risk management. In fact, a recent Accenture survey of 730 CFOs showed that over 90% believe that ESG issues will be a major focus of their role over the next five years. 

Challenges as reporting moves beyond just numbers 

In Australia, legislation for mandatory sustainability reporting will come into effect from 1 January 2025, following New Zealand where mandatory reporting against ISSB-aligned standards—the Aotearoa New Zealand Climate Standards—has been in place since 1 January 2023. 

With these new regulations, a point of difference for CFOs is that rules applying to climate-related disclosures go beyond just financial statements to include narrative and forward-looking statements such as governance and strategy claims, and emissions metrics and targets. Verifying that these types of statements are accurate and not misleading will now form a part of the annual financial reporting obligations, above and beyond the existing audited financial and greenhouse gas emissions data obligations. 

Doing statement-by-statement verification effectively

The Accenture survey showed that over 80% of CFOs do not feel well-prepared to report on—and seek external assurance on—climate-related risks and opportunities. One simple way for CFOs to reduce personal responsibility is to conduct a statement-by-statement fact-checking process, rather than conducting broad-brush sign-offs. Without the right tools, this form of verification can be arduous. 

Verification tools can generate an audit log showing what’s been approved, when, and by whom. When it comes time to approve reports, CFOs can be confident that they are signing their name to clear, evidence-backed documents, and that nothing is slipping through the cracks. 

The cost of inaccurate ESG reporting

ESG-related claims are under increasing regulatory scrutiny, even before the new sustainability reporting mandates have come into force in Australia. The Federal Court recently fined one company $11.3 million for misleading consumers about the nature of its sustainable-branded financial services. This is one of over 47 interventions into greenwashing that ASIC has made in the last fifteen months, and it continues to be a key priority. While New Zealand regulators have so far been less active in their pursuit of greenwashing, the Commerce Commission has issued the Environmental Claims Guidelines, and the Financial Markets Authority is “sharpening its focus” on greenwashing. As sustainability reporting becomes mandated, regulatory risk will only increase. 

Furthermore, climate-related reporting has a direct impact on the bottom line. A recent PwC survey revealed that 49% of investors have divested from companies that have failed to take adequate action on ESG initiatives. Additionally, nearly all investors (94%) believe that corporate sustainability reports include some degree of unsubstantiated claims, commonly referred to as ‘greenwashing.’ This perception likely drives investors to call for clearer and more consistent corporate reporting from regulators and standard-setters. Investor confidence in sustainability reporting increases substantially when assurance is provided, with 85% of investors stating that ‘reasonable assurance’—the same level applied in financial audits—would significantly boost their trust.

With mandatory sustainability reporting coming into effect in Australia in 2025, and similar regulations in New Zealand, ensuring that all disclosures are supported by evidence will go a long way to reducing risk. CFOs are at the forefront of navigating these new challenges and guiding companies towards improved long-term outcomes.