Major Changes Happening in the Corporate Social Contract

In KPMG’s 2020 Canadian CEO outlook report, it was found that 76 percent of Canadian CEOs agree they need to take a lead role on societal issues, and 64 percent say the pandemic has shifted their focus to the social component of ESG.

A recent article by Roopa Dave, partner in KPMG, on the KPMG website provides good evidence of the growing importance of social and environmental issues incorporate reporting and indeed in their social contract. Significant change took place in 2020.

She points out that “ten years ago, economic risks dominated the Global Risk Report by the World Economic Forum (WEF), which identifies the top threats facing our world by likelihood and extent of impact. In the 2020 report, seven of the top 10 risks by likelihood and eight of the top 10 risks by impact are related to environmental, social or governance (ESG) issues.”

In the standards field, important developments enhancing the importance of ESG, occurred in September 2020. The International Business Council of WEF recommended a set of ESG metrics and disclosures for companies. Also, the International Federation of Accountants called for the creation of an International Sustainability Standards Board alongside the International Accounting Standards Board under the IFRS Foundation. A very significant change for ESG Reporting.

And the United Nations Principles for Responsible Investment, representing 2,300 institutional investors with more than $85 trillion in assets under management, states that many are now calling for a more human-centric model, or perhaps a "new social contract" for business, that addresses the economic and health impacts, as well as the inequalities of current systems.

These changes represent the most important and rapid changes in corporate reporting and the relationship of corporations with society in recent history.

For the KPMG article, please click here.  

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CPA Founding Partner

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