China hinders growth in sustainability reporting at world’s largest firms

Sustainability reporting is inching towards 100% at the world’s largest 250 companies (G250) but the figure remains unchanged since 2020 at 96%, according to KPMG. Publishing its biennial Survey of Sustainability Standards, KPMG says the only companies in the G250 that do not report on sustainability are in China, although new reporting regulations this year for listed Chinese firms are expected to see adoption rates pick up. At the same time, KPMG says as transparency on sustainability through corporate disclosure increases, companies are subject to greater accountability for action to reduce carbon emissions, halt biodiversity loss and tackle social inequality. “This work is challenging and growth in reporting has slowed as companies focus inward, assessing the investment necessary to mitigate their risks and take advantage of the opportunities that have come to light,” the report says. In a separate sample of 5,800 companies taken from the top 100 businesses in 58 countries (N100), 79% now report on sustainability or ESG, up from 64% ten years ago, the survey finds. KPMG says Asia-Pacific leads sustainability reporting with 89% of companies delivering this data, followed by Europe at 82%, the Americas at 74% and the Middle East and Africa at 56%. Seven Asia-Pacific countries have higher sustainability reporting rates than average, including Japan and Singapore with 100%, Malaysia 99% and South Korea 99%. Some 87% of companies in the Philippines and Vietnam, new countries in the survey, report on sustainability. In Europe, N100 companies increased sustainability disclosures from 77% in 2020 to 82%, which KPMG says is likely to be influenced by regulators, investors and consumers. “The pressure on companies to be more transparent is only expected to grow, with more regulatory activities, such as the Corporate Sustainability Reporting Directive, on the horizon,” the report says. The top 100 companies in the Americas recorded a 3% drop in sustainability disclosure reports, largely driven by those in Latin America. Reporting rates for North America hit 97% in 2022. John McCalla-Leacy, head of global ESG at KPMG International, says corporate sustainability reporting should not be a box-ticking exercise but should drive a different conversation and stretch thinking from the top down. “These HQ conversations become less about what a company ‘must’ do (comply) and more about what a company ‘wants’ to do (bring change). This is a good thing,” he says. McCalla-Leacy adds that such change requires long-term commitment and spending. “Without question, this modern and holistic approach will include sustained discretionary spending, with ESG remaining a line item on the annual financial plan. Company leaders should budget the required human and financial resources to face our global ESG predicaments head on – with grit and zeal – continuously. There is no ‘one and done’,” he says. “This is a long-term commitment, an annual expenditure we should get comfortable with if we genuinely intend to effect real change within and across our borders,” he adds. While carbon reduction is widely disclosed by 80% of G250 and 71% of N100 companies, under half (46%) of the G250 report on biodiversity and just 40% of N100 companies. Only one third of companies in the N100 have a dedicated member of their board or leadership team responsible for sustainability matters. “Since 2017, there has been a marked improvement in the number of companies that acknowledge climate change as a risk to their business. However, less than half of companies report on social and governance risks to their business,” KPMG says. Picking up on the survey’s findings, the Global Reporting Initiative (GRI) said its sustainability standards are now being used by more large companies than ever before at 78% of G250 companies, up from 73% in 2020. Some 68% of the N100 companies use GRI sustainability standards, up from 67%. Eelco van der Enden, CEO of GRI, said: “With more companies committing to globally accepted reporting standards to deliver transparency on their impacts, this major research from KPMG offers reasons to be encouraged. If there was any remaining doubt, it is now abundantly clear that comparable sustainability reporting is widespread across countries and sectors – and it’s here to stay.” Van der Enden said more needs to be done to boost biodiversity disclosure as the GRI prepares to launch a revised standard next year, which he said will drive further reporting. “Deeper accountability, however, requires deeper disclosure, ensuring decisions are based on robust data and not just perceptions. While the research shows climate risks are widely addressed, recognition of biodiversity impacts is worryingly low,” he added.

China hinders growth in sustainability reporting at world’s largest firms

More focus needed on biodiversity, say experts

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