Is your business ESG assurance-ready?
Environmental, social and governance (ESG) related topics are reshaping business operations, performance measurement, and risk management, introducing both new challenges and opportunities. Many firms have been voluntarily reporting on their ESG performance. Now, with new regulatory requirements, obtaining assurance over the ESG information that a company discloses is becoming more important.
In September 2023, KPMG launched the inaugural ESG Assurance Maturity Index, which we have developed to help inform companies, investors and wider stakeholders on the current landscape. It comes at a pivotal time, as companies globally undertake a critical journey to prepare for new ESG regulatory requirements.
The Index and associated research were designed to offer a path forward and provide a roadmap with guidance on areas to focus on, and the steps to take to become ready for ESG assurance. The views of senior executives and board members at 750 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%), Advancers (next 50%), or Beginners (bottom 25%) based on their maturity.
Wei Lin
Partner, Head of Environmental, Social and Governance
KPMG China
Patrick Chu
Partner, Head of ESG Reporting and Assurance
KPMG China
Irene Chu
Partner, ESG Advisory
KPMG China
Derek Yuen
Partner, ESG Reporting and Assurance
KPMG China
Brenda Wang
Partner, ESG Reporting and Assurance
KPMG China
Anthony Ng
Partner, ESG Reporting and Assurance
KPMG China
Eddie Ng
Partner, ESG Advisory
KPMG China
Five steps to help you become ready for ESG assurance
The Index highlights critical steps that help companies become ready for ESG assurance. As there will be new regulatory and assurance requirements, it raises the bar on controls and processes, as well as qualitative statements that will need to be made around the data. By focusing on these steps, companies can enhance their ability to meet the stringent requirements of ESG assurance and demonstrate their commitment to transparency and accountability.
To be ready for assurance, companies should ensure that their ESG disclosures will meet preconditions for assurance. This means having suitable criteria for disclosures. Having sufficient evidence in terms of data, that is of appropriate quality, will allow your organisation’s auditor or assurance provider to form an assurance conclusion.
With meticulous preparation, clear communication strategies, and collaboration among stakeholders, companies can establish a robust foundation for the assurance process, ensuring the accuracy and transparency of their ESG data and reporting for external validation.
Implications for companies in China
As the second-largest economy in the world, China is increasingly making a global impact and the country’s enterprises are showing significant improvement in ESG reporting. Nevertheless, with investors zeroing in on ESG factors, Chinese enterprises will be under increasing pressure to enhance the quality and rigour of their ESG reporting to gain trust and avoid greenwashing. This involves investing in and improving data quality and applying robust internal control and risk frameworks, akin to those used for financial reporting.
Although assurance on sustainability reporting is not a mandatory requirement for Hong Kong-listed companies, the HKEX does encourage issuers to obtain independent assurance. Given the evolving regulatory landscape, highlighted by the International Auditing and Assurance Standards Board (IAASB)’s exposure draft (ED) for the proposed International Standard on Sustainability Assurance (ISSA)TM 5000, General Requirements for Sustainability Assurance Engagements (ED-5000) issued in August 2023, Chinese enterprises are increasingly encouraged to pursue ESG assurance to augment the transparency and credibility of their ESG reports.
KPMG’s ESG Assurance Maturity Index offers valuable insights for Chinese enterprises to benchmark their ESG assurance maturity against global peers, fostering continuous improvement by taking reference from international best practices and developing robust practices on ESG assurance according to their own stage of development.