Global ESG Assurance Report
The international accounting firm KPMG released a global ESG assurance report, which aims to measure the company’s data collection, information disclosure and reporting standards in ESG assurances.
KPMG conducted a survey of the boards of directors and senior management of 750 companies and found that although most companies are conducting voluntary reporting on sustainability matters, there is still a gap with existing regulatory requirements. Only 52% of companies have received external assurances on ESG disclosures.
Related Post: KPMG Establishes ESG Academy
Current Development of ESG Assurance
KPMG’s survey shows that two-thirds of respondents believe that the driving factor for ESG assurance is regulatory policies. Obtaining an ESG assurance has moved from a competitive advantage to a stakeholder requirement. A rigorous assurance process can lead to higher quality data and information, generating business benefits for the company. In addition, attracting potential investors (54%), improving customer satisfaction (46%), and reducing operating costs (44%) are also common considerations.
Currently, 56% of the companies are reporting ESG data, and 93% of them are seeking third-party ESG assurances. While this action would increase the transparency of disclosures and reduce the risk of greenwashing, respondents also described challenges, such as high initial costs (44%), lack of experience (44%), and lack of regulatory guidance (42%), insufficient information technology (39%), lack of indicators (36%).
In addition, companies also mentioned challenges during ESG data collection and inspection. In addition to environmental factors, regulators are beginning to require companies to report on social factors, putting pressure on corporate data collection. Some respondents have yet to include indicators such as diversity and inclusion in their disclosures. In addition, only 40% of companies conduct annual data checks and 22% check all ESG performance indicators.
KPMG’s ESG Assurance Maturity Index
KPMG designed the ESG Assurance Maturity Index to measure the readiness of different companies. From industrial perspective, the energy industry (scoring 50.7), manufacturing (49.1) and banking industry (48.8) are relatively well prepared, while the utilities industry (46), communications industry (44.6) and pharmaceutical industry (42.4) are less prepared.
In terms of regions, ESG assurance preparation is better in North America (48.3) and Europe (46.8), while ESG assurance preparation is relatively lower in Asia (45.8). At the same time, company size is related to ESG assurance maturity, with companies with more than $1 billion in revenue averaging a score of 56.3, higher than companies with revenue between $500 million and $1 billion (45.3) and companies with revenue below $500 million (41.7). The ESG assurance of listed companies (48.5) is also higher than that of unlisted companies (43.3).
Recommendations for Improving ESG Assurance
KPMG believes that improving ESG assurance involves multiple aspects, such as:
- Choose applicable reporting standards: Numerous ESG reporting standards have emerged around the world, such as the sustainability reporting guidelines issued by the ISSB, as well as reporting requirements designed by various jurisdictions. Companies (especially multinational companies) need to choose appropriate ESG reporting standards to reduce compliance costs.
- Establish a governance framework: Companies need to establish a governance framework, starting with the board of directors and senior management, to improve accuracy in data collection and information disclosure. Companies also need to conduct ESG training for employees at the business level.
- Determine disclosure requirements: Companies need to determine material indicators and develop a data collection process. Companies also need to develop internal controls to ensure data quality.
- Design a digital data collecting process: Companies can choose digital collection and aggregation methods when collecting environmental data and social data to eliminate the cost of collecting non-financial data and reduce unnecessary errors.
- Cooperate with the value chain to collect information: The collection of many environmental data involves other partners in the company’s value chain, so the company needs to cooperate with them to obtain accurate information.
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