Environmental, Social and Governance (ESG) services
As climate-related risks become more acute, both investors and consumers are increasingly shifting towards more sustainable businesses. To stay competitive, organisations now see environmental, social, and governance (ESG) not as something nice to have, but as an essential part of their business strategy. Businesses want to understand how ESG can help them identify new revenue streams, reduce costs and attract investors, while helping to contribute towards a more sustainable future. Companies that can successfully tackle these challenges will generate new opportunities, while those that fail to act may put their business models at risk.
KPMG China has a dedicated cross-functional team of experts who help corporates and public sector clients plan and execute ESG programmes to create long-term value. Our propositions sit under ten main pillars:
- ESG Assurance
- ESG Reporting
- ESG Strategy & Implementation
- Climate and Nature
- ESG Deals & Value
- ESG Tax
- Sustainable Supply Chain
- Circular Economy
- ESG Governance
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With ESG and non-financial reporting demanding the attention of board and audit committees, demand for confidence in companies’ ESG disclosures is growing. Only if the information that businesses report is robust and independently assured can it gain the trust of investors, stakeholders, and the wider public. However, given ESG disclosures are shaped by where a business is on their ESG journey, there is no one-size fits all approach to ESG assurance.
Through our ESG Assurance services, KPMG serves the public interest and provides confidence in companies’ ESG disclosures. We work with financial institutions and real economy clients across all sectors to assess their readiness for assurance and conduct high-quality, independent assurance in line with recognised local and global standards.
KPMG’s ESG Assurance experts offer the following services:
- KPMG-led workshops to provide an overview of ESG assurance and the current reporting landscape and highlight what clients need to do to get ready for assurance
- Readiness assessments to ensure clients have the right processes, procedures, and controls in place to allow ESG data to be assured
- External assurance of reported ESG metrics and disclosures (including green bond/loan and financing statements) in line with ISAE 3000 (limited or reasonable assurance, depending on stakeholder or regulatory needs)
- External assurance of reported greenhouse gas
- (GHG) statements in line with ISAE3410 (limited or reasonable assurance)
How we have supported a leading beverage company’s ESG assurance journey
Recently, KPMG worked with a leading beverage company in Asia Pacific to provide assurance on their annual ESG report and develop a consistent global assurance methodology aligned to the practice of the client’s parent group.
As a subsidiary of a global beverage company, the client and their parent company were concerned about achieving accuracy and consistency between local and group ESG disclosures. They were seeking an expert local assurance provider who understood their business and the underlying ESG metrics seeking assurance, and could communicate effectively with their parent company and their ESG assurance practitioner.
KPMG China proactively proposed the scope of work and components to be covered, minimising effort for the client, before mobilising a team comprising staff from the Chinese Mainland, Hong Kong SAR, and Korea. Centrally organised under a single lead, the KPMG team delivered a globally consistent assurance methodology, even reconciling certain parent company and client metrics.
Throughout this process, KPMG ensured proactive and timely communication with the client, including regular progress meetings and status updates, minimising senior management time and effort.
Sustainability reporting is developing quickly, with new requirements emerging from the International Sustainability Standards Board (ISSB), the European Union (European Sustainability Reporting Standards, ESRS) and the United States Securities and Exchange Commission (SEC climate-related disclosures). These standards are ambitious and represent a significant step up from existing standards, such as the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD). Furthermore, while commonalities exist between the standards, there are also areas where they are not aligned: multinationals and companies that need to apply multiple frameworks face the challenge of trying to design coherent and consistent reporting that meets the needs of global investors and jurisdictional regulators.
KPMG’s ESG Reporting service helps clients understand their ESG reporting obligations, determine their readiness for ESG reporting and be confident in complying with ESG reporting requirements. We work with financial institutions, listed issuers, and other organisations that expect to produce ESG reporting.
KPMG’s ESG Reporting experts offer the following services:
- Technical assistance to educate clients on ESG reporting (e.g., through workshops, peer benchmarking) and set their ESG reporting strategy and operating model ambitions
- Assist clients to interpret and apply ESG reporting requirements (HKEX Appendix 27/ISSB, ESRS, SEC, GRI, TCFD, SASB), conduct materiality assessments, select targets and metrics
- ESG reporting readiness assessments, including gap assessments between current and target state reporting, data, and operating models
- Design and implement the target operating model for people, processes, and technology, including system architecture, vendor selection and data strategy
How we helped a global insurer and asset manager accelerate their non-financial reporting
The client sought to obtain reasonable assurance overs its 2021 TCFD statements and had a goal to enable reasonable assurance for all ESG disclosures in future. The company had a mature SOX-style controls framework for its financial reporting and sought to define and align its ESG reporting processes to the same standard.
Starting with the client’s TCFD climate metrics, KPMG produced process maps with risk and controls and built a detailed SOX-style Risk and Controls Matrix (RACM), highlighting control gaps and improvement areas. KPMG advised on remediations required and supported the client to implement those remediations. For the client’s remaining ESG metrics (>100 KPIs), KPMG prioritised the highest risk items, produced process maps and RACMs, and highlighted control gaps and improvements.
KPGM then supported the client to implement a new risk and controls tool to host the process maps and RACMs, working closely with the client and an external supplier to tailor the implementation approach to accommodate TCFD and broader ESG reporting.
As a result of KPMG’s work, the client achieved greater clarity of ownership of ESG reporting processes, risks, controls, data, and reporting requirements, had a clear remediation plan in place for gaps in risks and controls. As a result, the client achieved readiness for assurance, with clarity on areas where future issues could potentially arise, and was able to reassure their audit committee of the standard of controls governance.
Faced by the looming climate crisis and concerns around social inequality, investors and consumers are increasingly shifting towards more sustainable businesses. As a result, ESG is no longer a “nice to have” for organisations, but an essential part of their strategy to stay competitive. Businesses want to understand how ESG can help them identify new revenue streams, reduce costs, and attract investors, while transitioning to a more sustainable future. Companies that successfully tackle these challenges will generate new opportunities, while those that fail to act may put their business models at risk.
KPMG’s ESG Strategy services help clients develop and implement ESG strategies that support their business growth objectives, while balancing their business needs with those of the environment, external stakeholders, and society. We work with financial institutions and real economy sector clients driven by capital market requirements and/or shareholder expectations to integrate ESG factors into their business strategies.
KPMG’s ESG Strategy professionals offer the following services:
- ESG maturity and ambition assessments, including conducting gap assessments against industry frameworks and market best practice, and peer benchmarking
- Materiality assessments to identify material ESG risks and opportunities
- ESG strategy development, aligned to and integrated with, corporate strategy and financial plan
- ESG strategy implementation support and PMO services
How we helped a leading organic baby food brand become one of the first companies in China to develop and launch their ESG strategy and action plan
Dedicated to producing the purest, most natural baby food products, the client was one of the top-selling baby food brands in China, with operations across the Chinese Mainland, Hong Kong SAR, and the UK.
KPMG’s ESG Strategy teams in China and the UK collaborated closely with the client to identify industry best practice and benchmarks, and engaged with key stakeholders to identify substantive environmental and social issues to guide the company’s ESG strategy.
Based on these ESG issues, we worked with the client to develop their ESG strategy, supported by a three-year action plan, and ambitious sustainability targets to track the client’s implementation.
Climate change is one of the greatest risks faced by businesses and society, requiring urgent attention from businesses and society to reduce carbon emissions and transition to a low-carbon economy. However, decarbonisation is not just a policy and regulatory-driven trend requiring organisations to avoid and mitigate risk – it is also a chance for organisations to seize opportunities linked to climate change, enhance resilience, and lead the transition to a net-zero world.
KPMG’s Decarbonisation services provide climate risk and decarbonisation advisory to support clients across the decarbonisation lifecycle. We work with real economy clients across a range of sectors, from industrial manufacturing to real estate, and with financial investors such as banks, asset managers, and insurers who have ambitions to reduce their emissions and become carbon neutral.
KPMG’s Decarbonisation team of multidisciplinary professionals offer the following services:
- Climate risk advisory, to measure, quantify and assess climate risks and opportunities under a range of climate scenarios, including the impact on business performance
- GHG baseline monitoring, performance evaluation and target-setting
- Decarbonisation strategy and action planning
- Decarbonisation performance disclosures and reporting
How we helped a major global ports operator develop their end-to-end net zero strategy
The client is one of the world’s largest shipping port operators, with an ambitious target to reach net zero across their full value chain by 2050. The client aspired to prepare a formal submission to the Science Based Targets Initiative (SBTi) to validate their target and decarbonisation measures. However, with significant challenges collecting reliable emissions data and large scope 3 data gaps, the client needed a credible scientific methodology for emissions baselining and an actionable decarbonisation strategy.
KPMG undertook emissions baselining in line with the GHG Protocol and SBTi standards and built a tailored emissions reduction model to help the client determine the effectiveness of individual emissions reduction measures and enable adoption of no/low-emission technologies. KPMG then developed a net zero strategic roadmap, reflecting the client’s expected future throughput, appetite for investment in low-emission equipment, and growth plans. Throughout this process, KPMG worked closely with the client’s stakeholders, obtaining their input and feedback on the client’s emissions reduction plans.
Following KPMG’s work, the client achieved clarity and confidence in the data integrity and collections approach for their scope 1, 2 and 3 emissions calculations, had an actionable net zero roadmap to reach their decarbonisation targets, and a tailored modelling tool incorporating port-level inputs to inform their decision-making. Furthermore, as a result of KPMG’s continuous stakeholder engagement, the client had the necessary buy-in required to implement their decarbonisation strategy.
Climate change and biodiversity loss require urgent action. Together they pose the next high impact, high probability risks facing businesses and society. In particular, climate change and nature loss have the potential to impact financial institutions’ investment portfolios and bottom lines through physical risks such as extreme weather events, transition risks associated with the shift to a low-carbon economy, and reputational risks for firms that fail to take action on these issues. However, these changes also present an opportunity for organisations to be recognised as leaders among their peers.
KPMG’s Climate and Nature Risk Consultancy services offer comprehensive risk assessment, analysis, and management services for clients. We work with financial institutions, including banks, insurance companies, and asset managers who are exposed to climate change and nature-related risks through their business and investment activities, and are expanding our coverage to work with corporate clients from high-emission sectors, such as real estate and construction.
KPMG’s Climate and Nature services include:
- Risk assessment of clients’ exposures to climate change and nature-related risks, including physical and transition risks, using localised risk assessment tools and models
- Risk and scenario analysis of the potential financial impacts of climate change and nature-related risks on clients’ investment portfolios, enabling them to make informed decisions about how to manage these risks
- Risk management strategy design, tailored to clients’ specific needs and investment portfolios, incorporating transitional risk management approaches and innovative solutions
- Reporting and disclosure on climate change and nature-related risks in compliance with relevant regulatory requirements
How we worked with an Asian banking regulator to design and implement an online climate risk management platform
The client was the banking regulator of a leading financial market in Asia with a plan to integrate climate risk into its banking supervisory practices. In particular, the client wanted to develop an online platform to host climate risk (physical risk) data and analytical tools to enable regulated banks to conduct physical risk assessments and assess the impact of physical risks on real estate.
KPMG mobilised a cross-functional team, including financial services, climate risk, ESG and technology subject-matter experts, in addition to engaging external climate risk experts, professional modelling vendors, and database services providers to accelerate the project’s progress.
Leveraging’s KPMG’s deep understanding of the relevant regulatory requirements and expectations for licenced banks, KPMG designed and built a platform for banks to access data and analysis tools to conduct internal climate risk analysis for exploratory or simulation purposes. This included a database of open source/publicly available data and proprietary data, as well as analytical tools to provide insights into the impact of physical risks on residential and commercial buildings. Given KPMG’s extensive regulatory compliance bank sector experience, KPMG also supported the client to identify and resolve implementation challenges in the delivery of this solution to over 180 regulated financial institutions.
By assisting the design and implementation of a comprehensive, innovative tool to assess and manage physical risk, KPMG supported the client’s goal of accelerating the banking sector’s progress in managing climate risk and building banks’ understanding and capacity for assessing climate risk going forward.
The megatrend of ESG has reached the M&A world. Across sectors and around the world, more and more deals are starting to be influenced by sustainability criteria. Targets with strong sustainability stories (and the data to back it up) are enjoying price premiums, and M&A teams are increasingly conducting ESG due diligence on targets at an early stage. And for good reason: statistics consistently demonstrate that higher ESG performance is linked to better financial performance and investment return.
KPMG’s ESG Deals & Value service enables investors to integrate ESG into their investment strategy and maximise ESG value creation post-deal. We work with financial and corporate investors and asset owners/companies in the process of selling a business or raising funds to develop and execute ESG deal strategies.
KPMG’s ESG Deals & Value experts offer the following services:
- ESG investment framework development, including fund- and corporate-level ESG strategy and integration of ESG into valuation models and processes
- ESG deal/portfolio strategy development, including portfolio review and improvement, market assessment and deal sourcing, and ESG operational improvements
- ESG due diligence to ensure acquisitions are aligned to ESG strategy at the fund- and corporate-level
- ESG performance improvement of assets to enhance long-term financial performance and exit values
How we supported a Hong Kong plastics manufacturer and distributor to manage ESG-related risks in the acquisition of a carve-out acquisition
The client was considering acquisition of a global chemical company’s carved-out business with operations in multiple jurisdictions, covering Europe and Asia Pacific, and wanted to assess the financial, tax, commercial, and ESG implications of the deal. Given the geographic dispersion of its operations, the client required access to local experts to understand relevant local ESG and other regulations and conduct physical site visits of the target’s operations.
KPMG assembled a multi-disciplinary team comprising financial, tax, commercial, and ESG due diligence specialists from four of KPMG’s member firms to execute a combined due diligence exercise. Working closely in parallel with the other due diligence workstreams, KPMG’s on-the-ground ESG specialists assessed local ESG regulatory requirements and conducted site visits to build a comprehensive picture of the target’s operational reality for the client.
Through the due diligence process, KPMG assisted the client to identify the key financial, tax, commercial and ESG risks and potential upsides associated with the deal, including identifying on-site soil and groundwater contamination at some of the target’s sites.
Leveraging our teams’ deep ESG expertise and experience, KPMG also provided the client new perspectives on ESG risks and opportunities, identifying potential significant impacts of business and integration plans for operations, human capital and staff pensions, and recommending measures to be taken by the client to address these areas as part of their post-deal integration plans.
Around the world, governments are committing to ambitious net zero strategies and more sustainable economies. Tax is one of the key tools available to governments to achieve these goals. As carbon taxes and measures like the EU Green Deal and the Carbon Border Adjustment Mechanism (CBAM) emerge globally, navigating the evolving tax regulatory environment is becoming even more challenging for companies. Planning the impact of these measures across business and operating models must become a fundamental part of a business’ tax strategy.
KPMG’s Carbon Services provides high-quality, cost-effective services for clients to quantify greenhouse gas (GHG) emissions, energy, and other environmental indicators for compliance purposes. We work with clients across Hong Kong SAR and the Chinese Mainland to provide advice on climate policies and their corresponding implications for clients.
KPMG’s Carbon Services experts possess strong engineering backgrounds and a deep understanding of ISO and other international standards and offer the following services:
- Standards-based GHG emissions and energy quantification and management, including ISO 14064-1 & GHG Protocol, ISO 14064-2, ISO 14067, ISO 50001, ISO 20400, and PAS2060
- Standards-based environmental indicator quantification and management, including life-cycle assessment (LCA), environmental management, water management, and biodiversity
- International climate policy advisory, including the EU Green Deal, EU Emissions Trading Scheme, EU CBAM, CSRD ESRS, EU CSDD/Germany Supply Chain Due Diligence Act, EU Batteries Regulations, and the US IRA
How we assisted a new energy technology company to quantify the carbon footprint of a photovoltaic module product
The client was one of the biggest new energy technology companies in China and was looking to respond to requests from their downstream customers to provide carbon footprint data for their photovoltaic module product.
Based on the internationally recognised standard ISO 14067 (carbon footprint of products) and relevant category rules, KPMG Carbon Services conducted a lifecycle assessment to systemically record the entire lifecycle of the client’s product and analyse the greenhouse gas emissions generated across that lifecycle. Based on the findings of the LCA, KPMG produced a carbon footprint analysis report.
As a result of KPMG’s report, the client was able to meet their own customers’ requirements for carbon footprint data and supply chain transparency, in addition to identifying optimisation potential and levers for carbon emissions reduction within the product.
In today’s increasingly competitive business environment, supply chain sustainability is a source of potential business risk but also competitive advantage. By understanding and managing environmental and social impacts across the supply chain, organisations can mitigate supply chain risks, improve their reputation, reduce costs, and grow revenue.
KPMG’s Sustainable Supply Chain Services offer a comprehensive solution to help companies embed sustainability in their supply chains to realise their ESG ambitions, manage risks and enhance resilience. We work with real economy sector companies from a range of industries with complex, geographically diverse supply chains.
KPMG’s Sustainable Supply Chain experts offer the following services:
- Supply chain sustainability assessments to measure, monitor and manage supply chain ESG risks and seize opportunities
- Supply chain decarbonisation, including carbon footprint mapping, identifying and prioritising decarbonisation activities, and engaging suppliers on decarbonisation
- Sustainable sourcing and integrating ethical and sustainability practices into procurement processes
How we worked with a global sustainable trade organisation to enhance their supply chain social sustainability monitoring programme
The client was a global business association with a socially responsible sourcing programme to monitor, engage, and empower member businesses to adopt sustainable trade practices. KPMG was engaged as an audit integrity assurance partner to ensure the quality and consistency of the client’s monitoring partners’ auditing processes, assess auditor performance, and maintain the credibility of the client’s auditing system.
KPMG performed quality audits of the audit companies’ management systems at a management- and local office-level and conducted witness audits to evaluate audit implementation in the field. KPMG also assessed qualitative and quantitative data from over 20,000 social audit reports to identify trends, flag quality issues, and track KPIs for the auditing companies.
Based on our findings, KPMG worked closely with the client to develop reliability/risk scores for each audit company to guide future quality control activities, implemented audit framework enhancements, and developed data analytics tools to identify trends and issues for future audits.
As a result of these changes, the client improved the quality of their audit programme, ensured the reliability of their sustainable supply chain ratings data, and developed the capability to analyse large volumes of data to monitor their member businesses’ supply chain sustainability.
Circular economy is rising on the corporate agenda. Challenges such as increasing regulatory requirements, resource availability, volatile commodity prices, and changing consumer preferences are forcing companies to rethink wasteful and inefficient models of production and consumption. Governments are also recognising the potential of the circular economy to drive business competition, sustainable economic growth, and job creation, with China, Japan, and the EU releasing circular policy strategies and programmes.
KPMG’s Circular Economy services help clients identify and capitalise on opportunities to reduce waste, reuse, and recycle. We work with medium to large real economy sector clients with a high dependency on natural resources to develop new circular strategies and business models, reimagine and reinvent their existing products and services.
KPMG’s Circular Economy consultants and specialists offer a suite of wide-ranging circular advisory solutions, including:
- Circular economy strategy, including assessing current operations, defining the ambition, scope, and business case to embed circularity, detailed strategy design and change management
- Circular measurement, including target-setting and monitoring, tracking and reporting on the performance of circular strategy implementation to provide valuable insights to drive strategic decision-making
- Circular implementation, including defining implementation roadmaps, implementation and capacity-build tailored to specific client needs
How we helped a global energy company conduct a study on the China waste plastics to chemicals market
The client was a global integrated energy company with a portfolio of petrochemical and energy businesses. The client was looking to identify growth opportunities for the plastic recycling market in China and address customer needs by exploring the end-to-end value chain for chemical recycling.
KPMG designed and delivered an approach to help the client screen the China waste plastics market for growth opportunities, focused on chemical recycling. To start, KPMG helped the client prioritise their chemical recycling market entry plan, partner strategy, and business model. KPMG then conducted market, regulatory, and technology assessments to identify the core capabilities and enablers for plastic recycling, enabling further prioritisation of propositions and the value chain ecosystem by the client. Finally, KPMG supported the client to identify critical controls, enablers, and barriers and provided recommendations on the client’s market entry strategy, directions, business and operational models.
The client was left with an in-depth understanding of China’s chemical recycling market, including current state regulations, technology, and competitors, as well as future growth opportunities. As a result of KPMG’s recommendations, the client had a fit-for-purpose market entry strategy and business model to capture identified growth opportunities.
How companies address climate change, diversity, and other ESG risks is now viewed – by investors, research and ratings firms, employees, customers, and regulators – as fundamental to business and critical to long-term sustainability and value creation. Oversight of these risks and opportunities is a significant challenge, requiring robust governance structures and input at a board-level, down to day-to-day processes.
KPMG’s ESG Governance services help clients set their ESG foundation and operationalise ESG. We work with financial institutions and public companies whose stakeholders expect effective ESG governance and disclosure on ESG issues.
KPMG’s ESG Governance, Risk & Compliance Services team provide a broad range of services, including:
- Assessing the organisation’s governance response and providing entity-level guidance regarding ESG matters, including ESG strategy, board composition and committee structure, Internal Audit role, executive compensation and ESG integration with enterprise risk management (ERM)
- Identification of compliance or consulting audits to review the organisation’s operationalisation of ESG, including sustainable supply chain, food safety, HR/culture reviews, ESG regulatory compliance
- ESG regulatory compliance advisory, including stock exchange listing rules and other ESG regulatory disclosures
How we helped a Chinese alternative energy company confirm their compliance with ESG regulatory requirements
The client is a leading private alternative energy enterprise in China that intended to issue a green bond to secure private funding for solar and wind projects in China. The client needed to ensure their green bond met regulatory requirements relating to internal processes and systems prior to issuing the bond in the interbank bond market. KPMG was engaged to provide assurance that these regulatory requirements were met.
With a team comprising sustainability and assurance professionals, KPMG developed an independent assurance approach based on the domestic regulatory requirements and tailored to the client’s green bond. In addition to ensuring the client’s compliance with the China regulations and completing the assurance process within the bond issuance timetable, KPMG also supported the client to enhance the credibility of their green bond with investors: following the guidance of the Green Bond Principles, KPMG supported the client to improve the robustness of their internal systems and controls relating to project evaluation, management of proceeds, and reporting.
As a result, the client’s green bond was the first green bond to be approved under the National Association of Financial Market Institutional Investors (NAFMII) draft guidelines and the client became the first non-financial enterprise to issue a green bond in China.