Governance

KPMG Clara is the global operating system for KPMG Audit and has been fully deployed in the culmination of a multi-year, multi-billion dollar investment. It is a globally consistent methodology and workflow, and a web-enabled, cloud based technology that is used by more than 90,000 audit professionals in more than 140 countries in each of our audits. KPMG Clara is a transformative innovation in the audit sector, empowering our auditors to offer deeper insights and improved audit quality to hundreds of thousands of entities we audit. Our ongoing initiative, KPMG Clara 2.0, demonstrates our commitment to continual innovation, enhancement and digitization of the platform powered by artificial intelligence, deeper data analysis and automation.

Through sustained innovation, we aim to consistently deliver superior quality to audited entities. Across the global organization:

• KPMG firms have implemented a consistent risk-based approach to their system of quality management to drive audit and assurance quality, enabling them to meet the requirements of the International Standard on Quality Management (ISQM) 1.
• We’re utilizing powerful technologies on client engagements around the world, including artificial intelligence, and leveraging our alliances with technology leaders such as MindBridge to further enhance quality and provide even more value through deeper analysis of businesses, no matter their size.
• We believe the same level of rigor, quality, consistency and trust that is applied to financial statement information by companies should also apply to ESG reporting. Therefore, we have deployed, across the global organization, an assurance methodology, KPMG Clara workflow and learning curriculum to upskill and build teams for purposes of providing assurance on ESG reporting that helps our clients build a more sustainable future.

Providing high-quality services is what allows people at KPMG to continuously earn and re-earn the trust that has underpinned our global organization for more than 150 years. Learn more about how KPMG delivers professional excellence and quality in the KPMG International Transparency Report 2023.

In FY23, our tax initiatives included the following:

Embedding new Global Tax Principles: Our Global Tax Principles are designed to ensure that we operate a responsible tax practice. We continue to emphasize the principles in the advice that we provide to clients and in our relationships with governments and the broader community. These principles are consistent with our Values.

Responsible Tax Roundtables: KPMG firms use their convening power to share industry best practice, holding regular roundtables with business and civil society to help them better understand what a responsible tax position looks like in the changing and evolving world. In FY23, we held discussions on the circular economy, carbon pricing, wealth taxation, tax policy and the changing nature of work, as well as the institutional framework surrounding international tax rules, including the roles of the Organisation for Economic Co-operation and Development (OECD), G20, Inclusive Framework and the United Nations.

Investing in technology: We continue to invest significantly in KPMG Digital Gateway. Powered by Microsoft Azure and built on the cloud, the platform helps clients turn ESG data into value at an increased level of quality, speed and scale so they can respond faster to emerging tax issues related to ESG.

Global minimum tax: We recognize the societal benefits of a responsible tax approach and continue to support clients in meeting the evolving responsibilities. The way in which multinational organizations navigate and comply with their tax obligations around the world is about to change with new Base Erosion and Profit Shifting (BEPS) 2.0 measures, necessitating companies to rethink their processes, technology systems and data. To help companies evaluate, monitor, compile, track, calculate, analyze, report and comply with Pillar 2 obligations, we are rolling out KPMG BEPS 2.0 Automation Technology (KBAT) through integration with the KPMG Digital Gateway platform. Through this technology, we will provide ongoing support to a large number of companies across the globe in relation to the tax rules, including data collection, accounting disclosures and helping ensure they meet future compliance obligations.

Tax transparency: In FY23, we saw an increased focus on tax transparency, with voluntary reporting through the GRI standards and mandatory public country-by-country reporting being introduced in the European Union (EU) and Australia. Looking to FY24, large companies with a presence in either the EU or Australia need to apply these new mandatory reporting rules. KPMG teams support clients to create the data and governance processes required for the adoption, collation and presentation of both voluntary and mandatory reporting — underpinning good governance, transparency and stakeholder trust.

Legal Services: Legal advice and compliance is an important aspect of the ESG agenda. Legal considerations can arise, for example, around issues such as directors’ liability, sustainability reporting requirements and access to capital and insurance. Legal teams can help the business understand ESG risks and work with other functions to manage them, developing the policies and governance frameworks needed. KPMG firms with Legal Services¹ work with clients’ in-house legal departments to help them ensure they’re playing a full role in the ESG evolution.

Carbon pricing and incentives: The energy transition is multi-faceted and KPMG firms continue to be at the forefront of providing advice to clients, contributing to policy discussions and issuing thought leadership on carbon initiatives, particularly as incentives deployed across countries and territories can be complex, with many nuanced global impacts.

Sustainability reporting: A rapidly evolving and complex field with a variety of reporting frameworks, requiring a step-change in the level of assurance. We help clients use a range of technology tools to capture, manage and report their ESG data and impacts, driving increased stakeholder confidence.

Circularity: The transition to a circular economy is a central tenet for sustainable business. Through tools and trackers such as the KPMG Circularity Tracker, developed on Microsoft Cloud for Sustainability and Power Platform, we help clients automate data collection and better track circularity across products, locations, materials and more, fostering a holistic approach to sustainability.

KPMG ESG Academy: Technology can drive better learning, too. KPMG’s dedicated ESG Academy, launched in collaboration with Microsoft and leading universities, aims to help companies empower and educate their workforce, supporting their ESG initiatives with foundational and advanced learning for their people across a wide range of topics and disciplines.

We strive to embed sustainable practices across our portfolio of tools, solutions and services for use both within our global organization and in our work with clients. We will continue this journey with a particular focus on areas of the greatest client demand: transformation, reporting and assurance.

It shows how our Values and Purpose inspire our greatest aspirations and guide all of our behaviors and actions. It defines what it means to work at, and be part of, the KPMG global organization, as well as our individual and collective responsibilities. We regularly review our Code to make sure it’s a clear reflection of these principles and expectations. In addition, everyone at KPMG can expect to be held accountable for their behavior, consistent with our Code, and are required to confirm their compliance with it.

KPMG firms and professional accountants are also bound by the International Code of Ethics for Professional Accountants, including International Independence Standards issued by the International Ethics Standards Board for Accountants (IESBA). KPMG’s ethical principles and expectations are in alignment with these standards.

KPMG firms provide regular training to partners and employees on a range of topics, including our Code and our anti-corruption policies and procedures. The learning emphasizes the importance of making ethical decisions even when under pressure, and speaking up to ask questions, respectfully challenge, and raise concerns when we are uncertain or when something does not seem right.

To safeguard the principle of holding each other accountable, each KPMG firm commits to having clearly defined channels that allow KPMG people and third parties to make inquiries, raise concerns in relation to providing feedback, and notify reportable matters without fear of reprisal, in accordance with applicable laws and regulations.

Supporting our global and local speak-up culture, KPMG International has an independent hotline which is a mechanism for all of our people around the world, KPMG firms’ clients and other third parties, to confidentially report any concerns they have relating to any activity by KPMG International, KPMG firms or KPMG people. This is in addition to other mechanisms that exist within KPMG firms.

• Work with clients, suppliers and subcontractors that live up to KPMG's core ethical standards.
• Act lawfully, ethically and in the public interest.
• Not tolerate behavior within KPMG, by clients or suppliers, or public officials with whom we deal, that is illegal, unethical or breaches human rights.
• Champion an inclusive and collaborative culture that is free from bullying, discrimination and harassment, where everyone is treated with respect and dignity.

The policies and procedures that KPMG firms across the globe have agreed to implement are consistent with the UN Declaration of Human Rights, the UN Guiding Principles, the International Labor Organization Core Conventions, and the OECD's Guidelines for International Enterprises. KPMG International and KPMG firms:

• Undertake to avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur; and
• Seek to prevent or mitigate adverse human rights impacts that are directly related to their operations, products or services through their business relationships.

We recognize that we have an important role to play in managing potential harm to people, through a risk‐based approach to human rights due diligence.

We monitor human rights impacts across our global organization as part of our Global Quality & Risk Management processes.

The KPMG International Hotline can be used to raise any concern relating to a human rights issue. We take reports received by the International Hotline seriously and we respond and agree on appropriate actions to be taken by KPMG firms.

While the professional services industry is not typically considered a high‐risk sector for labor-related issues such as slavery and human trafficking, we recognize our supply chain poses a higher risk in certain industries and locations. A key priority is to focus on our suppliers, particularly on reviewing, assessing, and monitoring high- and medium-risk suppliers.

We have continued to refine and improve our approach to addressing modern slavery risks throughout KPMG’s supply chain² by leveraging existing best practices across our KPMG firms. Our annual self-assessment supplier outreach now incorporates specific high-risk factors such as a high-risk service type and/or location, and certain high-risk business models (such as a reliance on vulnerable or temporary work staff). Risk analysis is complemented with public scrutiny research, using trusted external sources.

Where a potential risk factor is identified, we complete an additional supplier assessment to evaluate whether relevant policies, standards and controls are in place to prevent and address modern slavery risks in the supplier's organization as well as across their own supply chain.

• Ethical conduct and integrity: Expecting our suppliers to uphold the highest levels of ethics and integrity in line with KPMG’s professional standards.
• Modern slavery and respecting human rights: Expecting our suppliers to respect human rights, promote fair labor practices and meet the same standards and practices as ours in relation to eradicating modern slavery and human trafficking.
• Inclusion and diversity: Articulating our requirement for suppliers to foster an inclusive environment that is free of discrimination and promotes equal opportunity. Suppliers are encouraged to establish appropriate inclusion, diversity and equity (IDE) goals for their organization.
• Environment: Articulating our expectation that suppliers will collaborate with us to support our climate goals and can evidence programs or initiatives within their own organization that help to reduce their impact on the environment.

The refreshed Supplier Code of Conduct is an important step in formalizing our requirement for suppliers and incorporates language in our contracts that underpins our ESG commitments. KPMG firms can leverage the refreshed code in adopting and applying a supplier code of conduct for their local firm.

The Supplier Code of Conduct specifically references the fact that the KPMG International Hotline is open to our suppliers’ workforces to report any potential unethical behavior experienced, without any form of retaliation, while engaged in the fulfillment of a KPMG contract.

Incorporated into our standard supplier policies for contracting with KPMG International, we review our Supplier Code of Conduct regularly to ensure continued alignment to our ESG commitments.