Sustainability continues to rank higher on the list of key company disclosures, with an increasing number of firms worldwide now choosing to be more transparent about their sustainability commitments, according to new research by KPMG.
When it comes to sustainability reporting, companies in the Asia-Pacific region lead the way among the top 100 companies worldwide (N100), with 89 percent of firms disclosing related information, up from 84 percent in 2020 and by nearly 40 percentage points compared with 10 years ago.
That’s according to the Global Survey of Sustainability Reporting 2022 from KPMG, which looks at sustainability and ESG reporting data from 5,800 companies in 58 countries.
Interestingly, some territories within the Asia-Pacific region boast sustainability reporting rates even higher than 90 percent, with 100 percent of companies in Japan and Singapore undertaking reporting.
Looking West, the report notes a 3 percentage-point fall in sustainability reporting in the Americas as a whole since 2020, primarily driven by a decline in the reporting rate in Latin America.
While the dip is more significant if compared with pre-pandemic levels (2017) when 83 percent of companies embraced sustainability reporting, the research notes that North America remains the strongest reporter regionally. In fact, 97 percent of North American companies in the N100 reported on ESG in 2022, up 2 percentage points in 2020.
In the Middle East, sustainability and ESG reporting marginally decreased by 3 percentage points, down from 59 percent in 2020.
On a global scale, sustainability reporting has increased among both N100 companies and the world’s top 250 largest companies, the G250. KPMG notes that while this is positive, there is a lack of ‘global consistency’ that highlights how ESG-related issues are important to investors.
‘An increasing number of today’s investors take non-financial data just as seriously as financial data. They believe those companies that measure and report ESG risks are also likely to be managing these risks better and delivering greater long-term value,’ the report points out.
Popular frameworks
Globally in 2022, the rate of sustainability disclosure is unchanged from 2020 at 96 percent, while for N100 companies it has increased to 79 percent, up from 77 percent in 2020.
In terms of frameworks used by companies for their disclosures, the reports notes:
‘GRI remains the most commonly used reporting standard globally with increased adoption across both the N100 and G250. It has longevity and reputation on its side: since 1997, GRI has remained the incumbent standard for non-financial reporting.’
More than two thirds of N100 companies use the GRI framework, compared with 78 percent of the G250. But the report points toward a ‘marked increase in TCFD adoption’, with figures almost doubling in 2022 compared with 2020 among both N100 and G250 firms.
Mike Hayes, head of global renewables at KPMG, says companies are starting to understand how ESG-related risks influence a firm’s financials.
‘It’s not a particularly surprising result that the number of companies reporting their exposure to climate risks in line with the TCFD recommendations has increased significantly from 2015 to 2022,’ he writes in the report.
‘The reality is that companies have become better informed about the fact that the physical and transition risks of climate change represent a very real financial risk, which impacts the value of assets on the balance sheet (and ultimately could impact on corporate valuations).’
