The environmental, social and governance (ESG) agenda is rapidly moving forward, with increasing scrutiny on the quality of ESG information disclosed by businesses. As a number of regions, especially the EU, Australia and New Zealand have started to mandate ESG assurance, and the new International Standard on Sustainability Assurance 5000 being recently approved by the International Auditing and Assurance Board (IAASB), the time has come for companies put in place necessary systems, processes, and controls to manage ESG data that not only facilitates performance monitoring, but also supports external assurance.
Against this backdrop, KPMG hosted Navigating ESG Assurance: Unlocking Value and Trust on 8th November 2024. Experienced ESG professionals from Hongkong Land Limited, Prudential, Fidelity, and NWS Holdings Limited joined KPMG’s ESG team, Irene Chu, Eddie Ng, Derek Yuen, and Angus Choi to talk about the latest development in ESG assurance.
Here are the key messages from the event:
1. Importance of ESG Assurance:
- Assurance improves the credibility and reliability of ESG data, which is crucial for different stakeholders.
- Quality ESG assurance helps investors make informed decisions and increases investor confidence.
- Increased regulation around ESG disclosures mandates the provision of comprehensive and reliable data.
2. Global Landscape of ESG Assurance:
- The EU has taken the lead in mandatory ESG assurance in 2024, with other regions like Australia and New Zealand following this trend.
- Several jurisdictions in Asia, including Hong Kong, encourage ESG assurance and half of the Large Cap Hong Kong Stock Exchange listed companies, have had their ESG information assured on a voluntary basis.
- Given the developments, EGS assurance is expected to become increasingly common, calling for companies to be proactive in improving their data quality and management.
3. Challenges in ESG Assurance:
- Collecting high-quality ESG data and ensuring accuracy across different business units and segments is challenging, especially for large companies with diverse operations.
- It is important to regularly discuss ESG issues at the board level and integrate ESG considerations into strategic decision-making, with consistent monitoring and controls.
- Data integration and the complexity of information lead to difficulties in connecting ESG disclosures with financial reporting.
4. Scope 3 Emissions and Assurance:
- It is suggested to focus on the most material categories within Scope 3 emissions to prioritise efforts and improve data quality.
- Collaborating with suppliers to obtain accurate data and improve the overall quality of Scope 3 disclosures is important.
- Different industries face sector-specific challenges, necessitating tailored approaches to measure and report Scope 3 emissions, with complex and evolving calculation methodologies.
5. Best Practices in Preparing for ESG Assurance:
- Invest time to design an efficient process and controls to streamline data collection, analysis and reporting.
- Leverage digital tools and integrated data management systems to streamline ESG management.
- As ESG regulations and reporting requirements evolve and become more complex, companies will need to develop effective training programmes to upskill existing employees to address talent gaps.
