Driving transformation and impact through ESG reporting

Since the introduction of the CSRD, companies are required to substantiate their sustainability reporting far more rigorously. This not only brings additional obligations, but also creates an opportunity: with external assurance, organizations can transform ESG reporting from a compliance exercise into a tool for steering, transparency, and value creation. At the same time, it becomes a key driver of real sustainability impact. Steven Mulkens and Filip De Bock of KPMG explain how.

When the Corporate Sustainability Reporting Directive (CSRD) came into force in 2024 for an initial group of companies, it sent ripple effects across Europe. The directive requires organizations to approach their sustainability reporting in a structured way. While this brings clear strategic advantages, it also comes with its share of challenges. “Financial reporting has been around for more than two centuries and is built on well-defined rules. Sustainability reporting is a much younger discipline and therefore far less mature. The requirements are complex and continuously evolving, which creates challenges,” says Steven Mulkens, Partner at KPMG.

Many companies have been producing sustainability reports for years. Even outside the scope of the CSRD, several voluntary frameworks can serve as useful guidance. “We’re seeing a growing number of companies that fall outside the CSRD adopting the Voluntary Sustainability Reporting Standard for SMEs (VSME) as their framework,” says Filip De Bock, Head of Audit at KPMG. “These guidelines provide structure within a simpler, more flexible voluntary framework. Companies that report voluntarily also tend to focus on a more limited set of indicators.”

A clear focus

“Preparing for sustainability reporting and obtaining assurance is a complex process for companies. An assurance engagement can be compared to a financial audit: it involves several steps, including planning, risk assessment, performing data-driven procedures, and reporting,” says Mulkens.

A double materiality assessment helps companies determine the impact they have on their environment, as well as the risks and opportunities that sustainability topics present for the organization.

“It provides a clear indication of where to focus. For many companies, this includes climate-related information, data on their own workforce, and governance topics. It also immediately defines which information or data needs to be collected.”

That data collection can be challenging, as mature reporting processes or suitable tooling are often still lacking.

“Preparing a sustainability report is often a good opportunity to bring information and reporting processes up to standard. Through our assurance work, we can also challenge and help refine these processes, as there is always a risk of errors creeping into data collection and reporting. For example, we often see underestimations of CO₂ emissions or inaccurate reporting of workplace incidents. Indirectly, systems and processes are also put to the test.”

More than just paper

The involvement of an external party such as KPMG in the assurance of sustainability reporting leads to improved data quality and, as a result, greater peace of mind for stakeholders. “We review and validate the reported information, strengthening its credibility and reliability,” says Mulkens. “This transforms ESG reporting from corporate storytelling into coherent, robust, and high-quality information that investors and other stakeholders can rely on for decision-making.”

“Sustainability reporting is a form of transparency that is important for stakeholders,” adds De Bock. “They look not only at ambitions but also at the results achieved and the actual impact. Many companies therefore link concrete targets to their ambitions, allowing them to translate their values into measurable actions and figures.”

This increased transparency and reliability has far-reaching effects, Mulkens explains. “Stronger internal governance, improved operational efficiency, lower cost of capital, and capital allocation toward more sustainable business models are just some of the outcomes we observe. Measurable, actionable, and verified sustainability information is becoming a management tool, much like financial information has been for years.”

Demonstrating ambition

A first sustainability report is more than a snapshot in time. It marks the beginning of a journey of continuous improvement. “Sustainability is not just about reporting. Targets need to be translated into operational reality and concrete initiatives. Measurable and verified sustainability goals and results can then be transparently communicated in subsequent reporting cycles,” says Mulkens.

“A key step is to embed sustainability into your culture, values, strategy, and ambitions. Set clear goals to work towards and track your progress against them, also in response to stakeholder expectations,” adds De Bock. “This can ultimately shape strategic and investment decisions, making sustainability part of the company’s DNA.”

That many Belgian companies are actively contributing to a more sustainable world is reflected in the Changemakers initiative. De Tijd and L’Echo have identified 30 Belgian companies with the most promising climate and environmental solutions, rewarding them with media visibility.
This year, awards will once again be presented in two categories: Established Companies and Emerging Companies. Readers of De Tijd and L’Echo can also vote for their favorite company.

“These companies truly embrace sustainability and translate it into operational action. It doesn’t feel like a box-ticking exercise. Moreover, there is clear evidence that companies that invest strongly in sustainability are better equipped to manage business risks, particularly in times of crisis. Consider, for example, the use of alternative energy sources when supply is under pressure, as we are currently seeing due to the situation in the Middle East,” says Mulkens.

Beyond compliance

According to De Bock, Europe’s decision to make CSRD requirements slightly less rigid does not mean sustainability has become less important, although he does observe a shift. “Companies that see sustainability purely as a compliance exercise are more likely to scale back their initiatives and reporting. Organizations that genuinely focus on value creation stay the course and stand out. They are building a competitive advantage today for tomorrow.”