Sustainability reporting in TMT

Businesses today are on the precipice of mandatory and regulated sustainability reporting frameworks that will drive globally consistent, comparable and reliable sustainability reporting.

The KPMG Survey of Sustainability Reporting 2022, now in its 12th edition, reflects on the current state of reporting, gaps to be filled and overarching business strategy considerations for companies to meet increasing regulatory expectations, while still creating impact and generating value.

In the study, KPMG professionals found that technology, media and telecommunications (TMT) companies are leading in several areas. Accounting for 10% of 5,800 companies (referred to as the "N100" group) surveyed, the TMT sector ranked third in carbon target disclosures. The N100 represent a worldwide sample of the top 100 companies by revenue in 58 countries, territories and jurisdictions.

In the road towards building a sustainable future, TMT is a focal point — enabling organisations to turn technologies into environmental, social and governance solutions. 

Explore our findings on the sector's sustainability reporting progress below.

The Task Force on Climate-related Financial Disclosures (TCFD) was established in 2015 by the Financial Stability Board to improve corporate reporting on climate-related risks and enable financial stakeholders to factor climate-related risks into their decisions. Within two years, this spurred more than half of the N100 to disclose climate and carbon reduction targets in some fashion. That number stands at 71% today.

Resource-intensive sectors such as automotive and mining have emerged as leaders in carbon target reporting. However, noticeable growth in TMT is encouraging, and the sector now ranks third, up from 61% in 2017 to 81% in 2022. TMT companies have long been socially conscious champions of environmental stewardship and are leveraging their resources and visibility to be innovators and influencers in this area.  

_{Source: KPMG Survey of Sustainability Reporting 2022, KPMG International, September 2022}

The study shows a notable increase in companies specifically adopting TCFD recommendations, especially since the G7 nations agreed to mandate TCFD-aligned climate-related financial reporting in 2021. Now, one-third (34%) of the N100 report using TCFD recommendations — nearly double the 2020 figure.

TCFD adoption is led by the automotive (60%), mining (50%) and TMT (45%) sectors. TMT’s adoption more than doubled from 2020, a rate that outpaced many other top sectors. As ESG disclosures continue to gain momentum in capital markets, clear and consistent climate reporting will become essential for all companies. While the upward trend is encouraging, there is clearly room for improvement.

_{Source: KPMG Survey of Sustainability Reporting 2022, KPMG International, September 2022}

In 2020, the KPMG Survey of Sustainability Reporting explored for the first time how companies report on the risks faced from nature and biodiversity loss, and only considered sectors at “high or medium” risk. In 2022, this view was expanded across all sectors. Recognition of this risk has become more urgent and pronounced with biodiversity and nature risks impacting businesses and their supply chains.

The review across all sectors shows that an average of 40% of the N100 currently report the loss of biodiversity or nature as a risk to their business. While TMT is not considered a high or medium risk sector, this year’s initial benchmark shows 30% report on biodiversity risk. This is significantly below average and an area of opportunity for TMT companies. 

_{Source: KPMG Survey of Sustainability Reporting 2022, KPMG International, September 2022}
 

Biodiversity risk reporting requires rapid development as the health of the world’s biodiversity and natural systems is linked to climate change mitigation. The introduction of new reporting standards, such as the Taskforce on Nature-related Financial Disclosures, is key to driving disclosure improvements and standardisation. 

Independent external assurance of sustainability reporting enhances the credibility of the information and fosters trust with stakeholders. Adoption generally starts with limited assurance. Then, over time, through the maturation of the markets and regulatory requirements, the needle moves towards more reasonable assurance.

Close to half (49%) of the N100 obtained independent third-party assurance in 2020. In 2022, the assurance rate decreased to 47% among the N100, but further regulation could drive this number back up in coming years.

TMT leads all industries in this metric, showing steady, incremental progress over the last three research cycles. The sector currently has a 64% assurance rate, far above the N100 average.

Sustainability reporting is a rapidly evolving field with various frameworks, with some overlapping requirements but no global consistency. The range of ESG metrics and disclosure frameworks used is vast and varies by sector, size, complexity and location. Company performance is being ranked by many different indices and benchmarks.

An increasing number of investors take non-financial data as seriously as financial data. They believe companies that measure and report ESG risks are more likely to be managing these risks better and delivering greater long-term value.

Here are some tangible ways TMT businesses can invest in sustainability reporting:

• Understand the impact of climate change on financial statement disclosures.
• Align your sustainability and ESG reporting with key mandatory and voluntary reporting frameworks. These could include the TCFD, GRI Standards, and Sustainability Accounting Standards Board.  
• Determine what your stakeholders expect you to report on.
• Create effective ESG reporting based on materiality assessments and benchmarking.

KPMG in Singapore can show TMT companies how to enhance trust, mitigate risk and unlock new value to build a sustainable future. Our ESG professionals can provide training, undertake materiality assessments, help review ESG disclosures for compliance with existing reporting requirements, and benchmark against good practices.