The world’s largest companies are increasingly integrating ESG performance in executive and board compensation, and are appointing dedicated sustainability leaders, as they continue to set climate goals and prepare for regulatory sustainability-related disclosure requirements, according to a new report released by global professional services firm KPMG.

For the report, KPMG’s Survey of Sustainability Reporting 2024, KPMG analyzed the sustainability reports of 5,800 companies across 58 countries and jurisdictions globally. The reports findings highlight the largest companies globally, the “G250,” as well as a broader set of companies by region, the “N100,” or top 100 companies in the 58 regions. KPMG produces the report every two years.

The report comes as companies are set to face mandatory sustainability requirements over the next few years, including the EU’s Corporate Sustainability Reporting Directive (CSRD), which will apply to the largest EU companies beginning this year, with smaller companies and thousands of the largest global companies in subsequent years. Based on new underlying European Sustainability Reporting Standards (ESRS), the CSRD introduces detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk.

The study found that most companies are still at the early stages of CSRD reporting, with only 2% of G250 companies, and 12% of European companies, making reference to the ESRS in their reporting, although it also indicated that companies are also increasingly focusing on key implementing CSRD requirements in their disclosure practices.

A key aspect of the new CSRD rules, for example, is a requirement to obtain independent assurance for sustainability reporting. The KPMG study found that companies have been increasingly addressing this requirement, with 69% of G250 companies and 54% of N100s publishing a sustainability assurance report in 2024, compared with 63% and 47% in 2022.

Additionally, companies are performing double materiality assessments, a key CSRD requirement which includes considering both the risks and impact of sustainability issues on an enterprise, as well as the enterprises’ impacts on environment and society. According to the report, 50% of G250 companies and 45% of European companies are now using double materiality.

Companies are also broadening the scope of their sustainability reporting, according to the study, which found that reporting on biodiversity has doubled since 2020 to 56% of G250 companies, from 28% in 2020 and 45% in 2022, and to 49% for N100 companies, from 23% in 2020 and 40% in 2022.

Jan-Hendrik Gnändiger, Global ESG Reporting Lead at KPMG International, said:

“Mandatory sustainability reporting is nearly upon us. The EU is phasing in its CSRD over several years but 2024’s KPMG Survey of Sustainability Reporting suggests that many companies are adopting its measures before they are required to do so.”

Despite the approach of mandatory sustainability reporting requirements, the study found that companies continue to provide reporting using voluntary standards and frameworks. Among the voluntary systems, the Global Reporting Initiative (GRI) standards remain the most popular, with adoption by 77% of G250 companies, roughly flat with 78% in 2022, and by 71% of N100 companies, up from 68% in 2022. Companies are also increasingly utilizing the Sustainability Accounting Standards Board (SASB) standards, including 56% of G250 companies, up from 49% in 2022, and 41% of N100s, up from 33% two years ago.

Similarly, Task Force on Climate-related Financial Disclosures (TCFD)-aligned reporting has increased, with 72% of G250 companies and 43% of N100 companies reporting climate risks in line with TCFD recommendations, up from 61% and 34%, respectively, in 2022, according to the study.

The report also found that nearly all of the world’s largest companies are now setting climate goals, with 95% of G250 companies having published carbon reduction targets in 2024, up from 80% in 2022, and 80% of N100 companies, up from 71% two years ago. Climate goals also appear to be increasing in integrity, with 60% of companies linking their carbon reduction goals to the Paris Agreement aim to limit global temperature increase to 2°C, up from 54% in 2022, and 51% of companies adopting or planning to adopt science-based targets for carbon reduction, up from 43% in 2022.

As reporting on sustainability and climate target setting “become part of business as usual” for companies, the report found that companies are increasingly appointing sustainability-focused leadership and incentivizing sustainability performance.

According to the report, well over half (56%) of G250 companies have a dedicated member of their boards or leadership team with responsibility for sustainability matters, up from only 45% in 2022. Among N100 companies, 46% have dedicated sustainability leaders, up from 34% in 2022.

Additionally, the use of sustainability considerations in pay for board or leadership teams has increased to 30% of N100 companies, up from 24% in 2022, and to 41% from 40% of G250 companies. Notably, while the increase is lower for the G250 companies, this group is heavily influenced by U.S. companies, which actually saw a decline in sustainability integration in compensation to 39% from 53% in 2022. Other regions saw significant growth sustainability-linked compensation, with Europe increasing to 34% of companies, up from 29% in 2022, and Asia Pacific reaching 33%, up from only 20% in 2022.

John McCalla-Leacy, Head of Global ESG at KPMG International, said:

“KPMG’s findings – and the fact that there are more sustainability leaders within executive teams at the boardroom than ever before – are clear evidence that we’re making solid progress on the journey toward greater transparency and positive corporate actions to address environmental, societal and governance challenges. An increasing number of today’s investors are now taking non-financial data just as seriously as financial data. The mainstream view today is that businesses that measure and report ESG risks – clearly and in-depth – are also likely to manage these risks better and deliver greater long-term value.”

Click here to access the report.