Current State of ESG Data and Reporting
- Non-financial reporting is a focus area for consulting and advisory firms, as it is key to building trust and momentum.
- Compared to financial reporting, non-financial reporting in the current state is less rigorous and often reactive. Going forward, ESG metrics are going to be extremely important. Therefore, a stronger focus is required on sustainable value creation and alignment of ESG data with business strategy.
- The adoption of integrated financial and ESG reporting remains low, despite advancements in reporting standards and adoption by many top organizations. Very shortly, almost all businesses will be required to report across a broad range of ESG metrics.
- As the demand for ESG data increases, its quality and authenticity will become crucial. This further points towards the need for a more reliable, complete, and objective reporting of these metrics, reducing the gap between the data and data-driven impact.
- It is critical that companies use science to define targets and measurements for environmental emissions and the use of natural resources.
1. Is reliance on ESG data overrated? What is falling short of the self-disclosed ESG data and metrics?
Reliable and complete ESG data and metrics are going to become more and more important over the coming years that's very clear. However, in spite of a lot of the work done on reporting standards and indeed with many more and more leading organizations, adopting Integrated Financial and ESG reporting, we still face huge challenges in terms of consistency and completeness.
There's quite a big gap in the data and this is important the focus tends to be somewhat reactive, they often but on compliance and risk rather than on sustainable value creation, and sustainable value creation is going to be really important because understanding the value can create through sustainable business models and the way in which you communicate that to brands for example.
- Lawrence Hutter, Chairman, BXG – The Brand Experience Group
2. How is KPMG helping clients with non-financial reporting? More specifically, how do you prioritize E, S, and G dimensions as you put purpose to practice?
KPMG is an organization that is both in the business of consulting and trying to get the best possible data as well as in the business of assurance of companies currently on their financial metrics. But we expect a future also across all of their E, S, and G metrics. We see this as a hugely significant development that's going on in the market.
I think the important message for businesses to grasp is that our expectation is, as KPMG, within this decade and possibly much more quickly, all businesses all over the world are going to be required to report against a broad range of ESG.
- Richard Threlfall, Global Head of KPMG IMPACT, KPMG
3. How do current metrics allow for a complete and balanced decision-making process for policymakers? What are challenges faced by policymakers in navigating issues like dynamic climate risks, and double materiality, given that a lot (e.g., natural asset accounting, TNFD, GR303) is still work-in-progress globally?
The United Nations Global Compact – there is quite a bit of emphasis right now on using science and developing science-based targets with leading companies on climate change, as well as on other aspects of the environment, environmental emissions, and also the use of natural resources. So, using science to set targets and metrics for companies is a really important activity for companies to be involved in and reliance on science is extremely important and appropriate. On timelines and adoption, the time is right for the United States and merger between SASB and IIRC is an indication of how fast things are moving.
- Dr. Deborah Gallagher, Professor of the Practice, Duke University