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Small- to medium-sized businesses are shifting toward creating long-term value for all stakeholders, whether customers, employees, or other shareholders. Achieving this requires CFOs to rethink how financial reporting can add more value to the business, which can present a significant challenge when dealing with numerous disruptions.
The CFO's role has evolved far beyond traditional financial stewardship. These days, creating long-term value requires an integrated approach to both financial and nonfinancial reporting. For many CFOs, this is an opportunity to drive sustainable growth, manage risks, and enhance corporate reputation.
According to the 2020 EY Global Financial Accounting Advisory Services (FAAS) corporate reporting survey, 69% of respondents think that CFOs and senior finance leaders are seen by key stakeholders as the stewards of long-term value." Their report also mentions that 72% of respondents believe more finance teams are expected to assess and communicate how the company can create long-term value for investors and other stakeholders.
Non-financial reporting is rooted in the Global Reporting Initiative and has gained popularity among investors and stakeholders. This has led to initiatives like the Sustainability Accounting
Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD), the Corporate Sustainability Reporting Directive (CSRD), and the World Economic Forum's consultation on sustainable value metrics.
The IFRS Foundation has proposed a global sustainability reporting framework to help align financial and non-financial reporting. According to Leo van der Tas, EY Global IFRS Services Leader, these efforts are crucial to providing a cohesive view of a company's performance, while helping investors understand financial results and long-term value drivers like business relevance and environmental impact.
For finance leaders, it is crucial to understand how to derive value from both financial and nonfinancial reporting.
Here's how CFOs can leverage these tools to unlock long-term value.
Financial reporting provides insight into a company's past performance and financial health, using key metrics like earnings, cash flow, and balance sheet strength to assess profitability, liquidity, and efficiency. These metrics are essential for decision-making, investor relations, and compliance.
Non-financial reporting covers environmental, social, and governance (ESG) factors, offering insights into broader value drivers like environmental impact, social responsibility, and corporate governance. By combining financial and non-financial reporting, CFOs can view their organization's overall performance completely.
For example, Financial Metrics show how efficiently resources are used today. ESG Metrics offer a forward-looking perspective, signaling the company's resilience to future risks like climate change or regulatory shifts. Having a holistic view helps finance leaders identify areas for improvement in operations and long-term strategic planning.
Traditional financial reports focus on risks like market fluctuations, liquidity, and debt, but today's CFOs must also consider non-financial risks, such as:
CFOs should integrate non-financial data into risk management by tracking metrics like carbon emissions or diversity and inclusion (D&I). This approach helps anticipate regulatory changes, improves decision-making, and strengthens the company's resilience to disruptions.
Many investors incorporate ESG criteria when making crucial decisions by providing robust financial performance and transparent non-financial metrics. Companies can attract a broader range of investors—especially institutional investors and funds focused on sustainability. For CFOs, clear, consistent, and accurate reporting on financial and non-financial metrics enhances transparency and increases investor confidence. This, in turn, can:
Finance teams should focus on aligning their reporting with recognized frameworks such as the
Global Reporting Initiative (GRI), Task Force on Climate-Related Financial Disclosures (TCFD), or Sustainability Accounting Standards Board (SASB). These frameworks help ensure comparability and credibility in non-financial disclosures, increasing their relevance to investors.
Non-financial reporting can help CFOs focus on cost control and operational efficiency. Tracking the use of energy, water consumption, or employee turnover rates can reveal many inefficiencies that may not be evident through traditional financial analysis alone. Data gathered from non-financial reporting can lead to:
By focusing on these operational drivers, CFOs can cut costs and promote long-term value.
Beyond investors, many stakeholders place increasing value on non-financial aspects of a company's performance. CFOs can leverage non-financial reporting to:
Knowing the top concerns of stakeholders and integrating them into reporting efforts can enhance the company's reputation while creating competitive advantages.
Integrating financial and non-financial reporting is not only a regulatory but also a strategic requirement. This allows finance teams to manage risks, communicate value to a broader range of stakeholders, and drive long-term operational improvements. When CFOs integrate insights gained from financial performance with sustainability and governance metrics, they can drive new avenues for growth and ensure their organizations can thrive.
Epicor FP&A adds value to financial reporting for small and large organizations by streamlining and automating key financial processes, making the generation of needed financial and management reports quick, accurate, and effortless. Epicor FP&A offers finance teams the power to work via the Web or Excel, whichever interface they prefer. This makes the reporting workflow flow more naturally for them.
To pull other types of data from the ERP system, like Sales, Epicor FP&A uses prepackaged finance logic built into the additional modules. It also uses BAQs, making the extraction of different types of data from the ERP easier.
In the next release of features, Epicor FP&A will help users to further improve their control and analysis of BAQ data by allowing them to use these insights as a data source; these capabilities will empower businesses to map BAQs into dimensions within reports. This combination of BAQ support and prepackaged finance logic across the solution leads to more dynamic, accurate, and timely financial reporting. Epicor FP&A helps customers access precise P&L, balance sheet, cash flow, working capital movement, EVA, utility costs, and employee costs in reports.
In addition, Epicor ERP systems (most notably Kinetic) are now enhancing their capabilities in carbon accounting by providing Rolled-Up Carbon Bills of Materials (BoM). This means that by using a modern Epicor ERP system, carbon (CO2e) data can be collected and presented at the part /SKU level and then collated in reports to help the C-suite, especially the CFO, make informed choices. For example, the company can choose an alternative lower carbon supplier, alternative manufacturing method, exchange materials or transport methods, or decide whether to redesign whole products and processes. Consequently, FP&A will be in an excellent position to develop its sustainability reporting capabilities further, as it reads and integrates the data from the ERP system.
Partner with Epicor to kickstart your sustainability and risk management journey. Visit Epicor FP&A to learn more.
