ESG metrics and disclosures are an increasing focus for businesses as they respond to a wave of scrutiny from all manner of stakeholders, from investors and regulators to employees and customers. There’s an expectation that ESG disclosures will comply with mandatory and voluntary reporting requirements and be reliable, verifiable and comparable to allow those stakeholders to make decisions that matter to them.
For many organizations, getting ESG reporting right is a real challenge. The range of ESG metrics used is vast and varies by sector, size and complexity of business as well as the multitude of measurement and disclosure frameworks that exist globally.
What to report?
There are a host of reporting standards, such as the Corporate Sustainability Reporting Directive (CSRD), Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the Taskforce on Climate-related Financial Disclosures (TCFD). Individually, these all represent steps in the right direction.
But it’s hard to decide which standard to adopt. And, for investors and other stakeholders, a lack of universal standards makes it difficult to compare different companies’ performance.
That’s why we are so excited about Measuring Stakeholder Capitalism, the new set of metrics from the World Economic Forum’s (WEF) International Business Council, as a step towards a uniform global reporting standard. Along with representatives from several other organizations, KPMG professionals have been involved in putting these together.
The 21 metrics are based on industry best practice from around the world and represent a major step towards a common, global approach. Among the key measures are carbon footprint, renewable energy, climate risk oversight, equal pay, diversity and inclusion, anti-corruption, and stakeholder engagement.
They can apply to any sector, making them relatively easy to adopt.
Do I need to replace my current ESG reporting?
There’s been a huge amount of interest in these new metrics, but also a lot of questions about how to integrate them into existing reporting.
We should emphasize that they’re not intended to replace what you’re already doing. Because they borrow from the best of the current guidance, published by recognized bodies, they’re designed to enhance or supplement your current ESG reporting.
However, you may need to acquire or access new skills, as ESG risks are different from traditional financial risks. A recent KPMG global report, Towards net zero, found significant gaps in companies’ climate change reporting, particularly around scenario analysis and forward-looking metrics, with a need for improvement in both the quantity and quality of disclosure.
Many of the principles of ESG reporting are similar to financial reporting: a need for strong governance, along with independent assurance from a trusted third party, to ensure that the data is reliable and accurate.
Risk management that reflects the new normal
Pandemics, climate change, workplace practices and corporate citizenship bring risks, as well as significant opportunities for enterprise value.
As key influencers, investors of all types need confidence in companies’ ability to quantify and manage financial, market and ESG risks, in order to assess their future prospects.
Although we don’t yet have a global standard, the new WEF metrics point us in that direction and will remain relevant as different standards converge.
Thorough, accurate and transparent ESG reporting really is a win-win. The new metrics bring greater consistency, transparency and comparability and play an increasing role in investors’ decisions on where to allocate capital.
Your company will be better prepared for risks like climate change, talent shortages and supply chain disruptions. Customers will be more likely to trust you and buy your products and services, and the best candidates will view you as a fulfilling place to work. And you’re likely to enjoy greater support from investors to manage your business for the long term.
Most importantly, you’ll be staying true to your purpose, to help the world grow and prosper sustainably, to treat people fairly, and to positively impact the planet and the communities in which you operate.
How can we help
As well as providing external assurance opinions on both qualitative and quantitative ESG corporate reporting, we can help our clients:
- Meet the requirements of the EU CSRD, including the EU Taxonomy, as well as the Task Force on Climate Related Financial Disclosures (TCFD)
- Improve data quality, governance, and reporting processes, and become ready for external assurance
- Design and implement technology enabled solutions and operating models to efficiently gather and collate ESG metrics and report them externally
- Develop a clear storyline and narrative to investors and other stakeholders
- Benchmark across sectors to identify best practice
- Understand how financial statement auditors are factoring ESG and climate risk into their audit work
