First published in 1993, the KPMG Survey of Sustainability Reporting is produced every two years and this year’s edition provides analysis of the sustainability and Environment, Social and Governance (ESG) reports from 5,800 companies across 58 countries and jurisdictions, including Romania. The findings released today show that there is still a disconnect between the urgency of addressing climate change and social equity, and the ‘hard results’ provided by businesses.

The latest findings reveal that sustainability reporting has grown steadily. The world’s top 250 companies – known as the G250 – are almost all providing some form of sustainability reporting, with 96 percent of this group reporting on sustainability or ESG matters.

Meanwhile, there has been a steady and consistent increase in reporting from the so-called N100 (the top 100 companies in each country or jurisdiction analyzed). Ten years ago, around two-thirds of the N100 group of companies provided sustainability reports. The figure now stands at 79 percent.

Climate continues to dominate

The latest findings reveal that businesses are increasingly recognizing that they have a role to play in helping to achieve climate targets, with an impressive 71 percent of the N100 and 80 percent of the G250 setting carbon reduction targets. Reassuringly, most companies recognize that they must reduce their own emissions to achieve their carbon targets rather than rely solely on carbon credits. The number of companies reporting against Task Force on Climate-related Financial Disclosures (TCFD) guidance has nearly doubled, leading to better climate disclosure.

However, the report also reveals some key areas where faster progress is required. Only 64 percent of G250 companies formally acknowledge that climate change is a risk to their business, and less than half of companies currently recognize biodiversity loss as a risk.

Sustainability reporting through the ESG lens

This year’s report has also highlighted some further challenges the world’s major companies are facing in reporting on ESG. Among the thousands of reports analyzed, less than half of the world’s largest companies provided reporting on ‘social’ components (e.g. modern slavery; diversity, inclusion and equity; community engagement; and labor issues), despite an increasing awareness of the link between the climate crisis and social inequality. At the same time, less than half of companies disclosed their governance risks (e.g., bribery and anti-corruption, anti-competitive behavior or political contributions.) In addition, only one third of N100 companies have a dedicated member of their leadership team responsible for sustainability and less than one-quarter of these companies link sustainability to compensation among business leadership.

ESG disclosures continue to be overwhelmingly narrative-driven, rather than through the publication of quantitative or financial data on impacts. This is clearly an area for improvement for companies around the world.

On a positive note, around three-quarters of reporting companies conducted materiality assessments and are disclosing material topics.

John McCalla-Leacy, KPMG’s Global Head of ESG, said: “Last year, scientists from the IPCC warned the world was on ‘Code Red’ for human driven global warming. It was followed by a number of commitments from political leaders at COP26. As we head towards COP27, immediate action is now needed to avert human and environmental tragedies on an ever-increasing scale.

“KPMG’s 2022 Survey of Sustainability Reporting reveals regulation is making a difference. My view is that it is critical to provide guidance and direction to companies and help drive cultural change. Business leaders have accepted they have a responsibility and role to play in helping to slow and potentially avert the unfolding crisis. What’s needed more than ever is globally consistent standards from governments and a collective effort from the world’s major companies to report on all aspects of ESG, recognizing the clear links between the environment and wider social equality issues.”

Jennifer Shulman, report co-author and Global Lead for KPMG’s Global ESG Advisory Hub, commented: “The COP26 summit offered the world a human face to the unfolding climate tragedy facing the planet. Representatives from some of the world’s most remote and heavily impacted nations and territories were present to share their story. But, despite that growing recognition of the human side of ESG, our latest survey continues to highlight a real challenge facing the C Suite – which is in how they demonstrate and reflect on their company’s wider societal impact.

The global picture

There has been significant growth in sustainability reporting in three countries since 2020: Iceland (+ 39 percentage points), United Arab Emirates (+22 percentage points) and South Korea (+22 percentage points).

The Asia Pacific region leads in sustainability reporting, with 89 percent of its companies undertaking it. This is followed by Europe (82 percent), the Americas (74 percent) and the Middle East and Africa (56 percent).

This year’s report highlights regional variations in the content of sustainability reporting, largely driven by top-of-mind concerns and regulatory differences. While North America (97 percent) and Western Europe (85 percent) stand out with the highest overall reporting rates, the Middle East (55 percent) and the Asia Pacific region (30 percent) stand out on integrated reporting. Meanwhile, Latin America (50 percent) stands out on biodiversity reporting and Africa stands out on social and governance reporting (51 percent and 49 percent, respectively).

A call to action

New ESG requirements are driving a different perspective and set of conversations in boardrooms, driving business leaders to stretch their thinking and ensure that from the top down they are making strategic decisions that take climate and broader ESG considerations more into account.

The KPMG report outlines the tangible ways businesses can invest in sustainability reporting:

  • Understanding stakeholder expectations
  • Incorporating materiality assessments into reporting
  • Aligning reporting to mandatory or voluntary frameworks
  • Investing in quality non-financial data management
  • Understanding the impact of climate change and social issues on business

The pressure on businesses to report on non-financial metrics is only expected to grow as regulations evolve. By acting now, companies can make informed choices to drive the change that is much needed and be good corporate citizens in today’s world.

Ssr Report Final Low by start-up.ro