The world’s top companies improving on climate reporting, but the UK leads the way across E, S and G disclosures
UK companies are global leaders in ESG reporting, according to the findings of KPMG’s Survey of Sustainability Reporting
UK companies are global leaders in ESG reporting, according to the findings of KPMG’s Surv
- The latest findings from KPMG reveal that sustainability reporting has grown steadily, with 79 per cent of leading global companies providing sustainability reports
- Globally there has been marked improvements in companies reporting carbon reduction targets, but action remains too slow in key related areas, with less than half of companies currently recognizing biodiversity loss as a risk
- Almost all (99 per cent) UK companies are providing some form of sustainability reporting, but they also top the boards for social (95 per cent) and governance (95 per cent) risk reporting
- In contrast, less than half of the world’s largest companies are providing reporting on ‘social’ and ‘governance’ components of ESG
- KPMG outlines a series of recommendations, including companies shifting from a narrative-driven approach and making better use of data to drive change and provide evidence of action
UK companies are global leaders in ESG reporting, scoring in the top quartile of the 58 countries measured across the Environmental, Social and Governance (ESG) reporting criteria assessed, according to the findings of KPMG’s Survey of Sustainability Reporting.
First published in 1993, the KPMG Survey of Sustainability Reporting is produced every two years and this year’s edition provides analysis of the Environment, Social and Governance (ESG) reports from 5,800 companies across 58 countries and jurisdictions. The findings released today show that there is still a disconnect between the urgency of addressing climate change and social equity, and the ‘hard results’ provided by businesses.
The latest findings reveal that sustainability reporting has grown steadily. The world’s top 250 companies – known as the G250 – are almost all providing some form of sustainability reporting, with 96 per cent of this group reporting on sustainability or ESG matters.
Meanwhile, there has been a steady and consistent increase in reporting from the so-called N100 (the top 100 companies in each country or jurisdiction analysed). Ten years ago, around two-thirds of the N100 group of companies provided sustainability reports. The figure now stands at 79 per cent. In the UK this figure has risen to 99 per cent of companies reporting on sustainability, up from 94 per cent two years ago, and 93 per cent include those disclosures in the annual report and accounts, up from 87 per cent in 2020.
UK Ahead of the curve on Social and Governance disclosures
Among the thousands of reports analysed, less than half of the world’s largest companies provided reporting on ‘social’ components (e.g. modern slavery; diversity, inclusion and equity; community engagement; and labour issues), despite an increasing awareness of the link between the climate crisis and social inequality.
At the same time, less than half of companies disclosed their governance risks (e.g., corruption bribery and anti-corruption, anti-competitive behaviour or political contributions.) In addition, only one-third of N100 companies have a dedicated member of their leadership team responsible for sustainability and less than one-quarter of these companies link sustainability to compensation among business leadership.
In contrast, 95 per cent of UK companies were providing reporting on social and governance related risks, while UK boards were the most likely (83 per cent) to have a member of the board or leadership team responsible for sustainability, and almost two thirds (59 per cent) linked compensation to sustainability among the leadership team.
George Richards, Head of ESG Reporting and Assurance, KPMG in the UK, commented:
“The trend in increased ESG reporting and transparency noted from this survey is really encouraging, especially at a time when such reporting is largely voluntary. Currently, ESG disclosures continue to be overwhelmingly narrative-driven, rather than publishing quantitative or financial data regarding impacts. The next couple of years will see rapid change in regulatory requirements which will significantly increase the level of granularity and quantification that is needed in that reporting – creating a whole new level of challenge for companies.
“The focus on ESG and climate in particular has led to companies rightly setting targets and ambitions. Within the drive for far greater transparency in reporting companies will now have to shift to reporting their progress against those targets. This makes evidencing tangible actions very real and creates a much clearer link between reporting and a company’s strategy.”
Climate continues to dominate
The latest findings reveal that businesses across the globe are increasingly recognizing that they have a role to play in helping to achieve climate targets, with an impressive 71 per cent of the N100 and 80 per cent of the G250 setting carbon reduction targets. Reassuringly, most companies recognise that they must reduce their own emissions to achieve their carbon targets rather than rely solely on carbon credits. The number of companies reporting against Task Force on Climate-related Financial Disclosures (TCFD) guidance has nearly doubled, leading to better climate disclosure.
However, the report also reveals some key areas where faster progress is required. Only 64 per cent of G250 companies formally acknowledge that climate change is a risk to their business, and less than half of companies currently recognize biodiversity loss as a risk.
John McCalla-Leacy, KPMG’s Global Head of ESG, said:
“Last year, scientists from the IPCC warned the world was on ‘Code Red’ for human driven global warming. It was followed by a number of commitments from political leaders at COP26. As we head towards COP27, immediate action is now needed to avert human and environmental tragedies on an ever-increasing scale.
“KPMG’s 2022 Survey of Sustainability Reporting reveals regulation is making a difference. My view is that it is critical to provide guidance and direction to companies and help drive cultural change. Business leaders have accepted they have a responsibility and role to play in helping to slow and potentially avert the unfolding crisis. What’s needed more than ever is globally consistent standards from governments and a collective effort from the world’s major companies to report on all aspects of ESG, recognizing the clear links between the environment and wider social equality issues.”
The regional picture
There has been significant growth in sustainability reporting in three countries since 2020: Iceland (+ 39 percentage points), United Arab Emirates (+22 percentage points) and South Korea (+22 percentage points).
The Asia Pacific region leads in sustainability report, with 89 per cent of its companies undertaking sustainability reporting. This is followed by Europe (82 per cent), the Americas (74 per cent) and the Middle East and Africa (56 per cent).
This year’s report highlights regional variations in the contents of sustainability reporting, largely driven by top-of-mind concerns and regulatory differences. While North America (97 per cent) and Western Europe (85 per cent) stands out with the highest overall reporting rates, the Middle East (55 per cent) and Asia Pacific region (30 per cent) stand out on integrated reporting. Meanwhile, Latin America (50 per cent) stands out on biodiversity reporting and Africa stands out on social and governance reporting (51 per cent and 49 per cent, respectively).
A call to action
New ESG requirements are driving a different perspective and set of conversations in Boardrooms, driving business leaders to stretch their thinking and ensure that from the top down they are making strategic decisions that take climate and broader ESG considerations more into account.
The KPMG report outlines the tangible ways businesses can invest in sustainability reporting:
- Understanding stakeholder expectations
- Incorporating materiality assessments into reporting
- Aligning reporting to mandatory or voluntary frameworks
- Investing in quality non-financial data management
- Understanding the impact of climate change and social issues on business
The pressure on businesses to report on non-financial metrics is only expected to grow as regulations evolve. By acting now, companies can make informed choices to drive the change that is much needed to be a good corporate citizen in today’s world.
Notes to Editors:
Launched in 1993, The KPMG Survey of Sustainability Reporting aims to shine a light on how the world’s largest companies are responding to and reporting on their response to the climate crisis and wider social issues. This year’s survey is the 12th edition from KPMG and the most extensive to-date, offering an in-depth ‘report card’ on the state of sustainability reporting in 2022.
John McCalla-Leacy, Global Head of ESG, KPMG International and Partner, KPMG in the UK
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About KPMG’s Survey of Sustainability Reporting
First published in 1993, this 2022 survey marks the twelfth edition, examining sustainability reporting trends around the world. Over the past two decades, sustainability reporting has been largely voluntary, so the purpose of this survey was to offer meaningful insights about how to improve levels of disclosure by business leaders, sustainability professionals, and company boards.
Today, we are on the precipice of adopting mandatory and regulated sustainability reporting and the reporting landscape is poised to change drastically. The findings in this report reflect on the current state of reporting today, the gaps that should be filled to meet regulatory requirements and the overarching business strategy considerations that can allow companies to meet increasing regulatory expectations while still creating impact and generating value.
About KPMG in the UK
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 15,300 partners and staff. The UK firm recorded a revenue of £2.43 billion in the year ended 30 September 2021.
KPMG is a global organization of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 145 countries and territories with more than 236,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.
About KPMG International
KPMG is a global organization of independent professional services firms providing Audit, Tax and Advisory services. KPMG is the brand under which the member firms of KPMG International Limited (“KPMG International”) operate and provide professional services. “KPMG” is used to refer to individual member firms within the KPMG organization or to one or more member firms collectively.
KPMG firms operate in 144 countries and territories with more than 236,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. Each KPMG member firm is responsible for its own obligations and liabilities.
KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.
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