KPMG publishes global trends in sustainability reporting
Companies today face mandatory and regulatory frameworks for the sustainability reporting. These are intended to ensure consistency and enable managers and stakeholders to review impact and outcome.
In addition to the regulatory element, sustainability also has an economic effect. For example, according to the latest KPMG Technology CEO Outlook, 55 percent of chief executive officers (CEOs) of technology companies believe that environmental, social and governance (ESG) programmes improve their companies' financial results. This is a significant increase from the previous year (38 per cent).
Sustainability initiatives and related reporting involve long-term commitments for which corporate executives should plan human and financial resources. The twelfth edition of the international KPMG Survey of Sustainability Reporting 2022 examines global trends in sustainability reporting.
For this year's study, KPMG experts analysed numerous reports and websites of the 100 largest companies from 58 countries on financial, sustainability and ESG topics. These 5,800 companies - also known as the "N100" - provide robust results for the global economy. Companies from the technology, media and telecommunications (TMT) sectors make up ten percent of the N100.
TMT is among leading sectors in reporting emissions targets
The Financial Stability Board established the Task Force on Climate-related Financial Disclosures (TCFD) in 2015 to improve corporate reporting on climate-related risks and to enable financial stakeholders such as banks and investors to include such risks in their decision-making processes. Within two years, this has led about half of the N100 companies to disclose in one way or another their climate targets and targeted emission reductions. Today, more than 70 per cent of these companies already provide information on this.
Resource-intensive sectors such as the automotive and mining industries have led the way in reporting CO2 emission targets. But the noticeable growth in TMT is also very promising: in 2017, 61 per cent of large TMT companies published figures on this topic, rising to 81 per cent in 2022. Following this increase, the sector now ranks third.
TMT companies, as socially oriented pioneers, have long been highly aware of their social and environmental responsibilities and use resources and visibility to make a positive impression on regulators, investors and customers through extensive ESG activities.
Katja Modder
Partner, Head of Technology, Media & Telecommunications (TMT)
KPMG AG Wirtschaftsprüfungsgesellschaft
Johann Schnabel
Partner, Audit, Head of Regulatory Advisory, Head of Accounting Advisory Services
KPMG AG Wirtschaftsprüfungsgesellschaft
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TMT has more than doubled adoption of TCFD recommendations
Our Sustainability Survey shows a significant increase in companies adopting TCFD recommendations, particularly since the G-7 states agreed to TCFD-oriented financial reporting in 2021, taking climate aspects into account. One-third (34 percent) of N100 companies now report according to the TCFD recommendations. This is almost double the figure of 2020.
The automotive industry (60 percent), mining (50 percent) and TMT (45 percent) are leading the way. In the TMT sector, the introduction of such reports has more than doubled since 2020, making it faster than in many of the other leading sectors. As ESG disclosures continue to grow in importance even in capital markets, clear and consistent climate reporting is essential for all companies. The upward trend gives hope, but there is still clear room for improvement.
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TMT lags behind in the reporting of biodiversity risks
In 2020, KPMG’s sustainability study examined for the first time how companies report on their risks as a result of the loss of nature and biodiversity, taking into account only high- or medium-risk sectors. In 2022, all sectors were considered. As the threats to nature and biodiversity also impact companies and their supply chains, the need to consider these risks has become more urgent and relevant.
The review of all sectors revealed that on average, 40 percent of N100 companies are currently publishing reports on risks to their business due to the loss of biodiversity and nature. While TMT is not considered a high or medium risk sector, this year’s first benchmark for TMT companies reporting biodiversity risks is comparatively low at 30 percent and well below average. This shows that many TMT companies need to take action to report on these risks.
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TMT companies should also rapidly evolve their risk reporting associated with biodiversity since strengthening global biodiversity and natural systems can mitigate climate change. The introduction of new reporting standards, such as the standards of the Task Force on Nature-related Financial Disclosures, is crucial for promoting improved and standardised disclosures.
TMT once again leading the way in report auditing
The independent external auditing of sustainability reports strengthens the credibility of the information and builds trust among stakeholders.
Nearly half (49 percent) of N100 companies used external and independent audit services in 2020. Surprisingly, the rate dropped to 47 percent in 2022. However, due to new regulatory requirements, this value is expected to increase again in the coming years.
The TMT sector is a cross-industry leader in this measure and has continued to rise over the last three periods of investigation. The audit rate for industry companies is currently 64 percent, well above the N100 average.
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Considerations for sustainability reports from TMT companies
Sustainability reporting is rapidly evolving in the face of numerous frameworks, with the overlap of some requirements and a lack of overall consistency. The spectrum of ESG metrics and disclosure requirements is very complex and comprehensive. It varies by sector, size and region. A company’s ESG performance is measured by many different indices and benchmarks.
In addition, a growing number of investors place as much weight on non-financial information as financial data. They believe that companies that measure and report ESG risks are more likely to better manage those risks and deliver greater long-term value.
To optimise their sustainability reporting, specific opportunities for TMT companies include the following:
- Developing an understanding of how climate change impacts financial reporting,
- Aligning sustainability and ESG reporting with key mandatory and voluntary reporting standards, including, but not limited to, GRI standards and the requirements of the TCFD and the Sustainability Accounting Standards Board;
- Identifying stakeholder expectations for reporting,
- Creating effective ESG reporting based on materiality reviews and benchmarking.
Our ESG experts can help TMT companies identify ways to build trust, mitigate risk and create new value for a sustainable future. We provide training, conduct materiality reviews, support ESG report auditing for compliance with existing reporting requirements, and benchmark against best practices.
The entire study conducted in 2022, in English, on sustainability reporting in various industries can be found below as a PDF file.
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The entire English-language study on sustainability reporting 2022 in various industries can be found below as a PDF file.
