As the environmental, social and governance (ESG) agenda moves rapidly forward, new rules are coming into force that oblige companies to report on their ESG risks, opportunities, and performance. To make ESG reporting credible, disclosures will require independent third party assurance.
In 2023, KPMG first published the KPMG ESG Assurance Maturity Index. The Index found that companies had a long way to go to prepare for ESG reporting and assurance. So, how are those companies doing now?
KPMG's second year of analysis reveals that some progress has been made but nevertheless, many organisations are still in the early stages of ESG maturity. It is now time for a concerted focus on implementation of necessary ESG systems, processes and controls to gather the data required, and aim to ensure these are sufficiently robust to stand up to external assurance.
The Index and associated research has been designed to offer a path forward for business leaders. It provides a roadmap with guidance on ESG areas to focus on, and the steps to take to become ready for ESG assurance.
The views of senior executives and board members at 1000 companies across industries, global regions and revenue sizes were captured to gauge their relative ESG assurance maturity. Respondents were ranked as either Leaders (top 25 percent), Advancers (next 50 percent), or Beginners (bottom 25 percent) based on their maturity.
Insights into ESG reporting maturity in Australia
ISSB adoption
KPMG’s inaugural ESG Maturity survey had taken place before Australian Treasury announced the adoption of ISSB equivalent standards, while the 2024 ESG Maturity survey was undertaken with Australian companies aware of proposed ISSB adoption through draft Australian Sustainability Reporting Standards (ASRS) legislation.
More awareness of ESG reporting
The average ESG maturity for Australian headquartered companies has increased slightly indicating that Australian companies are now actually more aware of the complexities of ESG reporting and, with a better understanding of expectations, better appreciate the task ahead.
Increasing ESG maturity
Australian Boards and management are better at knowing what they don’t know about ESG reporting which may be contributing to the slight increase in ESG maturity in the Australian context. Management and boards are re-assessing their own skills and knowledge gaps and maturing in their understanding and ability to challenge and critically evaluate ESG risks and opportunities as their companies ESG reporting develops.
Timeliness of reporting
In Australia, the other interesting area not called out in this ESG Maturity survey relates to the timeliness of reporting. Draft ASRS legislation will require reporting at the same time as the Annual Report. For many companies producing ASRS compliant reporting at the same time as their annual report will also be a big challenge given the immaturity of data collection, reporting preparation and assurance process that need to be built into an overall reporting timetable.
In Australia, the proposed requirement to disclose Scope 3 emissions and have them independently assured is a big step up in data gathering and data reliability expectations for many corporates which could be seen as a factor impacting a companies own ESG maturity confidence.
This is also an area where independent assurance is going to be important, but may also increase the prevalence of modifications in assurance opinions.
Key ESG reporting facts
75% of firms must now report ESG data or will soon be required to do so.
Amongst leaders, 42% now place robust, product-specific requirements on their suppliers.
29% of companies have a clear audit trail to support their non-financial information.
46% of leaders see digital tools as being key to being ready to obtain assurance.
29% of companies have the ESG policies, skills and systems in place to be ready for ESG assurance.
Watch: KPMG ESG Maturity Index 2024
Navigating ESG assurance maturity
Take our short survey to see how your company's ESG maturity compares against your peers. Upon completion, download our full report to learn how you can become ready for ESG assurance.
KPMG's ESG Assurance specialists
To help your business prepare for ESG assurance compliance, contact us.
