Sustainability reporting: Progress needed in key areas despite improvement

While sustainability reporting has grown steadily, there are some key areas that need further improvement, said KPMG recently.

According to the latest KPMG Survey of Sustainability Reporting, 79% of the top of the N100 — the top 100 companies in each country or jurisdiction analysed —provide sustainability reports.

The survey collected responses from 5,800 companies across 58 countries and jurisdictions, according to KPMG.

However, among the thousands of reports analysed, less than half of the world’s largest companies are providing reporting on ‘social’ and ‘governance’ components of ESG, KPMG pointed out.

Study highlights

• 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 recognising biodiversity loss as a risk.
• The world’s top 250 companies – known as the G250 – are almost all providing some form of sustainability reporting, with 96 percent of this group reporting on sustainability or ESG matters.
• 71% of the N100 and 80%of the G250 setting carbon reduction targets. 
• 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, only 64% of G250 companies formally acknowledge that climate change is a risk to their business, and less than half of companies currently recognise biodiversity loss as a risk. 

Sustainability reporting through the ESG lens

This year’s report has also highlighted some further challenges the world’s major companies are facing reporting on ESG, said KPMG. 

These challenges are as follows, according to the company.

• Among the thousands of reports analysed, less than half of the world’s largest companies provided reporting on ‘social’ components such as modern slavery; diversity, inclusion and equity; community engagement; and labor issues, despite an increasing awareness of the link between the climate crisis and social inequality.
• Less than half of companies disclosed their governance risks such as corruption, bribery and anti-corruption, anti-competitive behaviour or political contributions.
• 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.
• ESG disclosures continue to be overwhelmingly narrative-driven, rather than publishing quantitative or financial data regarding impacts. This is clearly an area of improvement for companies around the world.
• On a positive note, around three-quarters of reporting companies conducted materiality assessments and are disclosing material topics.
  

The regional picture
The Asia Pacific region leads in sustainability report, with 89% of its companies undertaking sustainability reporting, said KPMG. 

This is followed by Europe (82%), the Americas (74%) and the Middle East and Africa (56%), the firm added.

This year’s report highlights regional variations in the contents of sustainability reporting, largely driven by top-of-mind concerns and regulatory differences, KPMG observed. 

While North America (97%) and Western Europe (85%) stand out with the highest overall reporting rates, the Middle East (55%) and Asia Pacific region (30%) stand out on integrated reporting, according to the firm.