Big Shifts, Small Steps: KPMG Survey of Sustainability Reporting 2022

KPMG’s just released biennial Survey of Sustainability Reporting 2022 explains that 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.”

The 2022 survey findings indicate five major trends in sustainability reporting:

Sustainability reporting grows incrementally with movement towards the use of standards framed by stakeholder materiality assessments. The rates of sustainability reporting among the world’s leading 250 companies are at an impressive 96%. Reporting rates are expected to grow as new regulation on non-financial reporting is introduced. While there is still a need for global consistency in ESG reporting, existing standards have increased in usage. The GRI remains the most dominant standard used around the world, though some regions have a clear preference for SASB or local stock exchange guidelines. For the first time, the survey looked at how many companies carry out materiality assessments, finding that around three-quarters across both the N100 and G250 use materiality assessments.

Increased reporting on climate-related risks and carbon reduction targets, in line with TCFD. The survey found that nearly three-quarters of companies report their carbon targets, although 20% do not disclose any link to an external target (such as a 1.5˚C scenario). The number of companies reporting against TCFD has nearly doubled, leading to more consistent and comparable climate disclosure.

Growing awareness of biodiversity risk 2022 is a pivotal year for nature and biodiversity with international efforts stepping up to halt biodiversity loss. Despite growing awareness of biodiversity loss as a critical issue, less than half of companies recognize this loss as a risk to the business. On the positive side, most sectors now acknowledge this risk, even many of those that can be considered low risk. The launch of the TNFD and CSRD frameworks are expected to drive up reporting in the immediate years.

UN SDG reporting prioritizes quantity over quality. The majority of companies report on SDGs, with 10% of companies reporting against all 17 SDGs. Three SDGs remain the most popular for companies: 8: Decent Work and Economic Growth; 12: Responsible Consumption and Production; and 13: Climate Action.

Climate risk reporting leads, followed by social and governance risks. Since 2017, there has been a marked improvement in the number of companies that acknowledge climate change as a risk to their business. Less than half of companies, however, report on social and governance risks to their business. In general, the descriptions of these risks are overwhelmingly narrative-driven and do not quantify the financial impact of these risks on companies or on society. Sustainability continues to become a priority for company leadership but there is room for improvement. Only one-third of companies in the N100 have a dedicated member of their board or leadership team responsible for sustainability matters. Compensation conditions related to sustainability outcomes for leadership teams are prevalent for only 40% of G250 companies.

The Intro to the survey concludes with a call to action. “With significant concerns of the changing climate, increased conflict, rising inflation subsequently escalating the cost of living, and the looming threat of another recession in less than two decades, this has become a critical intersection for leaders. Those with vision and an unyielding focus on the future will likely seek and embrace business opportunities for long-term value creation in a purpose-led, sustainable, low-carbon economy. We have tools. We have knowledge and awareness. We have responsibility. Let’s commit!”

For all the research findings, please see Big shifts, small steps (assets.kpmg).