The world’s largest companies are increasingly recognizing sustainability risks like climate change as a business risk, and corporate reporting on these issues are improving, according to a new report by global professional services firm KPMG, yet disclosure gaps remain in areas including quantification of ESG impacts and in terms of the breadth of risks covered.

For the new report, “Big shifts, small steps,” KPMG analyzed the financial reports, sustainability and ESG reports and websites of 5,800 companies across 58 countries, territories and jurisdictions. The reports findings highlight the largest companies, the “G250,” or largest 250 companies by revenue, as well as a broader set of companies by region, the “N100,” or top 100 companies in the 58 regions.

The survey found that sustainability disclosure has steadily grown over the past several years, with 96% of the G250 and 79% of N100 companies now providing some form of ESG or sustainability reporting.

The report also indicated that companies’ sustainability reporting appears to be increasingly standards-based, with convergence around frameworks such as GRI, SASB and TCFD.  The survey found, for example, a 78% GRI reporting rate for the G250 companies, up from 73% in 2020, and roughly half now report against SASB. In addition to enabling better comparability across companies and sectors, increasing use of standards will likely aid companies in the coming shift in many jurisdictions to mandatory sustainability and climate disclosures, as many are heavily informed by these frameworks.

Environmental and climate issues in particular are increasingly coming into focus, according to the survey, with reporting using TCFD (Task Force on Climate-Related Financial Disclosures) recommendations increasingly at the most rapid rate, reaching 61% in the 2022 survey, up from 37% in 2020. According to KPMG, 64% of G250 companies now formally acknowledge that climate change is a risk to their business.

Despite the increase in recognition of environmental issues, however, the survey highlighted significant blind spots, particularly in the quantification of risks, with only 17% of G250 and 9% of N100 companies reporting including either scenario-based modeling of potential impacts or financial quantification of potential impacts of climate change.

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

“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.”

Environmental risks outside of climate change receive less attention, with less than half of companies surveyed reporting on biodiversity risks, although the number has been rising quickly. Similarly, social and governance risk reporting lags, with each remaining below the 50% disclosure threshold.

A new topic covered in this year’s survey was the use of materiality assessments to inform reporting with encouraging results with around three-quarters of companies disclosing material topics. For example, 77% of G250 companies are identifying material topics that impact either the company, stakeholders and broader society, with 30% reporting across all 3 groups.

Alongside the survey results, KPMG released a U.S.-focused report by Maura Hodge, KPMG ESG Audit Leader, and Rob Fisher, KPMG ESG Leader. While the report found some encouraging trends, with 100% of U.S. large companies providing ESG disclosures and 70% of U.S. CEOs believing that their ESG programs improve their financial performance, the country lags peers in some key areas. For example, only 43% of U.S. companies acknowledge climate risk, and 13% for social risk, as risks to their businesses. Additionally, only 23% of large U.S. companies have sustainability representation at the leadership level, compared to around a third of global peers with dedicated member of their board or leadership team responsible for sustainability matters.

Hodge and Fisher wrote:

“With increasing stakeholder demands for transparency and with mandatory ESG reporting regulation soon becoming a reality, it is essential that companies orient themselves to the evolving sustainability reporting landscape.”

Click here to access the “Big shifts, small steps” report.

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