There is a significant gap that remains between companies’ understanding of sustainability and their ability to translate it into financial value, according to a new global KPMG study.
The report, which polled over 2,000 executives across 19 countries and territories, revealed that sustainability is now firmly on the boardroom agenda, with 60% of organisations considering sustainability risks and opportunities in financial planning, and half embedding it into core strategy.
The Closing the Sustainability Valuation Gap study also found that while 72% of executives say they understand their organisation’s sustainability strategy, metrics and performance, only 19% apply robust quantification approaches to measure its financial impact, highlighting a critical disconnect at the center of corporate decision-making.
According to the research, few organisations have succeeded in translating sustainability into financial metrics such as EBITDA, cash flow and capital expenditure impacts, challenging whether it is considered in financial planning, and creating a disconnect between sustainability initiatives and enterprise value.
Because of this, KPMG points out that companies risk overlooking both the cost of inaction and the potential value creation opportunity of sustainability investments.
In terms of sectors, those leading on the use of advanced valuation methodologies include banking and capital markets, energy and natural resources, and automotive.
