Finance for a sustainable future
Building trust with data and reporting

And their demands are acute. New research conducted jointly by Deloitte and The Fletcher School at Tufts University found that 80 percent of US institutional investors use sustainability information when they make investment decisions. If the data weighs so heavily in high-stakes investment decisions,¹ it follows that the trustworthiness of that data is paramount. This is consistent with enterprise-wide mandates to build “trust equity”—the amount of trust an organization has accumulated with its stakeholders over time. Note that the definition focuses on the trust accumulated by doing—not only saying. Organizational trust, or its lack, can create or erode value,² through correlating trust with customer loyalty, employee engagement, and financial results.

What’s the takeaway? Because investment runs on data, today’s sustainability mandate goes beyond doing; it’s the showing that builds trust as well. Having reliable, transparent, trustworthy sustainability data is not only a matter for regulatory reporting but also a key to demonstrating value—as well as a lever for creating it. In one study, trustworthy companies outperformed other businesses by up to 400 percent.³ Conversely, if an organization’s sustainability data is opaque, ill-substantiated, or poorly communicated, there’s a risk that trust may erode. If that happens, it may not reflect a lack of faith in the organization’s reporting but may instead indicate how important sustainability is to the organization’s performance, transitional risk posture, and ability to deliver returns.

That puts sustainability data in the same elevated category as other critical data a company provides to regulators, auditors, analysts, and investors. And that puts it squarely in the CFO’s area of responsibility. The data that backs up a company’s sustainability commitments should be audited, assured, and presented in a clear, consistent way.

Trustworthy sustainability data is important for CFOs in part because sustainability has become an important component in financial statements, and in part because gathering and verifying the required data requires the organization to make a significant investment in measurement and reporting capabilities.

The Deloitte-Fletcher research has found that global institutional investors are most likely to trust either their own in-house data systems or corporate disclosures that are audited or assured. Surveyed institutional investors lack trust in the unaudited information a company self-reports and is the least used data. The same research found that sustainability investing is important to US institutional investors, and 83% have sustainability policies in place.⁴

There’s one place where the comparison to other data falls short. In many financial and other compliance areas, CFOs are managing data in accordance with well-established regulatory and reporting standards. In the sustainability arena, regulations around the world are still evolving. Yet the investor demand for trust and clarity is happening right now. Once regulations are in place, the consistency and standardization they provide may clarify the landscape. But in the meantime, investors are relying on what companies decide to report.

While the clarity of available data lags, organizations may be tempted to engage in what has been termed “greenhushing”—holding back on some information, perhaps because it’s difficult to provide with precision. The reasoning? Better to say nothing than to be found in error or to fall short of commitments. Yet this can have unforeseen competitive consequences because some rating agencies publish comparative lead tables that put different companies’ sustainability information side by side. No reporting organization or data point exists in a vacuum, and if someone shows progress where you report nothing, the reputational impact can be immediate.