Additional insights into the U.S. reporting landscape
First published in 1993, this twelfth edition of KPMG’s global survey reflects on the current state of reporting and overarching business strategies that can enable companies to meet increasing regulatory expectations—all while making the underlying business more resilient, reducing carbon emissions to thrive in a low carbon economy and meeting stakeholder expectations: investors, customers, employees, business partners and more.
Sustainability reporting has been largely voluntary over the past three decades. But the reporting landscape is poised to change dramatically, with many policymakers on the precipice of adopting mandatory and regulated sustainability reporting.
So where do U.S. companies stand at this particular moment? And how can they interlock their current state with future requirements? Below are a handful of key insights from the KPMG online presentation.
Getting the story right
According to the survey, all of the top 100 U.S. companies currently report in some way on their sustainability or ESG efforts. That's one sign that businesses recognize the importance of telling their ESG stories and embedding them into their long-term business strategies.
Going a step further, 41% of the same audience are getting third-party assurance over at least a part of that information, which allows companies to boost the credibility and reliability of the information they’re releasing publicly. As drafted, ESG reporting regulations will mandate assurance, so it’s important to start now to understand how to be prepared for this requirement.
Leadership and Sustainability
23% of the top 100 U.S. companies have sustainability representation at the leadership level. However, we are starting to see that figure increase as different C-level positions are taking on more and more responsibility in this area and boards are considering their charters to explicitly incorporate consideration of ESG across all committees. It’s clear there’s a growing emphasis on weaving ESG into the fabric of a company.
Not just about climate risk
Our research found that U.S. companies, despite maintaining a substantial focus on climate risk, are not disclosing social and governance risks in the same manner. On the social side, only 13% of U.S. companies acknowledge risks; for governance, that number is even lower at 4%. This disparity is likely because the framework developed by the Taskforce for Climate Related Financial disclosures (TCFD) was specific to standardizing discussion around climate-related risks and opportunities and their impact on the financial performance of the company. Yet, the pillars underpinning this framework can serve as a basis for all ESG metrics and in fact will be applied in this way by the International Sustainability Standards Board (ISSB). KPMG expects an increase in reporting on social and governance risks as adoption of ISSB increases.
Keeping an eye on Europe
Regulations developed and enforced abroad could still affect U.S. companies in certain circumstances. Legislation like the EU’s Corporate Sustainability Reporting Directive (CSRD), which is more closely aligned with the Global Reporting Initiative (GRI) standards, is being closely monitored. Remember that even a relatively small EU operation may potentially trigger full compliance with the CSRD by the parent company headquartered in the U.S. On a global scale, the GRI standards continue to be the most dominant, with 78% of the top 200 global companies using it.
A total of 75% of the top 100 U.S. companies are referencing the Sustainability Accounting Standards Board (SASB) standards—perhaps not surprising since SASB came out of the U.S. SASB has merged with the IFRS Foundation and is being incorporated into the ISSB standards, which are expected to serve as a global baseline for sustainability reporting.
Wrapping it all up
At the end of the day, ESG strategy is a business strategy.
CEOs who are proactive in identifying and addressing ESG risks and opportunities for their businesses are going to have the upper hand during this enormous transition to a low-carbon economy. So even though we don’t expect the new SEC climate disclosure rules until Q1 2023, starting to implement ESG now is crucial if you haven’t already. Why? The sheer complexity of rules, the amount of time to organize internally, and understanding how to structure everything while working together demands nothing less than a robust and comprehensive approach to ensure your company is not only complying—but also successful.
As noted, this is a very high-level view of the U.S. findings. For additional global perspective, we invite you to read the 2022 Global “Survey of Sustainability Reporting.”