This year’s edition of KPMG’s Survey of Sustainability Reporting provides an analysis of the sustainability and environment, social and governance (ESG) reports from 5,800 companies across 58 countries and jurisdictions.

The findings released show that there is still a disconnect between the urgency of addressing climate change and social equity, and the ‘hard results’ provided by businesses.

The latest findings reveal that sustainability reporting has grown steadily. The world’s top 250 companies – known as the G250 – are almost all providing some form of sustainability reporting, with 96 per cent of this group reporting on sustainability or ESG matters.

Meanwhile, there has been a steady and consistent increase in reporting from the so-called N100 (the top 100 countries in each country or jurisdiction analysed). Ten years ago, around two-thirds of the N100 group of companies provided sustainability reports. The figure now stands at 79 per cent.

Climate continues to dominate

The latest findings reveal that businesses are increasingly recognising that they have a role to play in helping to achieve climate targets, with an impressive 71 per cent of the N100 and 80 per cent of the G250 setting carbon reduction targets.

Reassuringly, most companies recognise that they must reduce their own emissions to achieve their carbon targets rather than rely solely on carbon credits.

The number of companies reporting against Task Force on Climate-related Financial Disclosures (TCFD) guidance has nearly doubled, leading to better climate disclosure.

However, the report also reveals some key areas where faster progress is required. Only 64 per cent of G250 companies formally acknowledge that climate change is a risk to their business, and less than half of companies currently recognise biodiversity loss as a risk.

Sustainability reporting through the ESG lens

This year’s report has also highlighted some further challenges the world’s major companies are facing reporting on ESG. Among the thousands of reports analysed, less than half of the world’s largest companies provided reporting on ‘social’ components (e.g. modern slavery; diversity, inclusion and equity; community engagement; and labour issues), despite an increasing awareness of the link between the climate crisis and social inequality. At the same time, less than half of companies disclosed their governance risks (e.g., corruption, bribery and anti-corruption, anti-competitive behaviour or political contributions.)

What’s needed more than ever is globally consistent standards

In addition, only one-third of N100 companies have a dedicated member of their leadership team responsible for sustainability and less than one-quarter of these companies link sustainability to compensation among business leadership.

ESG disclosures continue to be overwhelmingly narrative-driven, rather than publishing quantitative or financial data regarding impacts. This is clearly an area of improvement for companies around the world.

On a positive note, around three-quarters of reporting companies conducted materiality assessments and are disclosing material topics.

Rachel Decelis, ESG lead at KPMG in Malta said: “KPMG’s 2022 Survey of Sustainability Reporting reveals regulation is making a difference. My view is that regulation is critical to provide guidance and direction to companies and help drive cultural change. 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, recognising the clear links between the environment and wider social equality issues.”

David Pace, partner, head of Advisory, KPMG in Malta, added: “We should start to see some progress over the coming year as organisations like the International Sustainability Standards Board (ISSB) roll out new global standards for reporting and as the Corporate Sustainability Reporting Directive (CSRD) comes into effect. But companies shouldn’t wait to be told. Leadership from the top is essential.

“Many major organisations are responding with proactive action that should be applauded. We’re seeing far greater action on gender equality, pay equity and community impact assessments. It’s time for organisations to be transparent in their reporting to highlight what they’ve achieved and hold themselves to account on areas where further progress is required.”

The regional picture

There has been significant growth in sustainability reporting in three countries since 2020: Iceland (+3%), United Arab Emirates (+22%) and South Korea (+22%).

The Asia Pacific region leads in sustainability report, with 89% of its companies undertaking sustainability reporting. This is followed by Europe (82%), the Americas (74%) and the Middle East and Africa (56%).

This year’s report highlights regional variations in the contents of sustainability reporting, largely driven by top-of-mind concerns and regulatory differences. While North America (97%) and Western Europe (85%) stand out with the highest overall reporting rates, the Middle East (55%) and Asia Pacific region (30%) stand out on integrated reporting. Meanwhile, Latin America (50%) stands out on biodiversity reporting and Africa stands out on social and governance reporting (51% and 49%, respectively).

A call to action

New ESG requirements are driving a different perspective and set of conversations in boardrooms, driving business leaders to stretch their thinking and ensure that from the top down they are making strategic decisions that take climate and broader ESG considerations more into account.

The KPMG report outlines the tangible ways businesses can invest in sustainability reporting:

• Understanding stakeholder expectations;

• Incorporating materiality assessments into reporting;

• Aligning reporting to mandatory or voluntary frameworks;

• Investing in quality non-financial data management;

• Understanding the impact of climate change and social issues on business;

The pressure on businesses to report on non-financial metrics is only expected to grow as regulations evolve. By acting now, companies can make informed choices to drive the change that is much needed to be a good corporate citizen in today’s world.

To read the full report, visit: home.kpmg/sustainabilityreporting .

About the survey

First published in 1993, KPMG’s Survey of Sustainability Reporting aims to shine a light on how the world’s largest companies are responding to and reporting on their response to the climate crisis and wider social issues.

This year’s survey is the 12th edition from KPMG and the most extensive to-date, offering an in-depth ‘report card’ on the state of sustainability reporting in 2022 and examines sustainability reporting trends around the world.

Over the past two decades, sustainability reporting has been largely voluntary, so the purpose of this survey was to offer meaningful insights about how to improve levels of disclosure by business leaders, sustainability professionals, and company boards.

Today, we are on the precipice of adopting mandatory and regulated sustainability reporting and the reporting landscape is poised to change drastically.

The findings in this report reflect on the current state of reporting today, the gaps that should be filled to meet regulatory requirements and the overarching business strategy considerations that can allow companies to meet increasing regulatory expectations while still creating impact and generating value.

For more information, e-mail Rachel Decelis on racheldecelis@kpmg.com.mt or David Pace on davidpace@kpmg.com.mt.