KPMG’s John McCalla-Leacy on the Importance of Committing to ESG Reporting

Originally published at home.kpmg. John McCalla-Leacy works in Leadership, Climate change, Environment, Ethical business and governance, Sustainability at KPMG. KPMG ranked No. 11 on The DiversityInc Top 50 Companies for Diversity list in 2022.

 

The bar is being raised on sustainability reporting.

Established requirements like the Global Reporting Initiative (GRI) already have considerable traction, while new and emerging frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD) are expanding the reporting landscape.

As disclosure standards become more comprehensive and consistent, they give companies a solid foundation for measuring their ESG impacts and outcomes — and comparing themselves with peers.

And the more that companies report, the better they can get at tracking their own ESG performance.

According to Big shifts, small steps, KPMG’s Survey of Sustainability Reporting 2022, 96% of the G250 — the world’s top 250 companies — report on sustainability, along with 79% of the N100 — the 100 largest firms in each country surveyed.

But this shouldn’t just be a casual, tick-the-box exercise.

Increased transparency brings greater trust — but also greater accountability. Investors, regulators, customers and employees want to see action on reducing carbon emissions, halting biodiversity loss and tackling social inequality.

With the eyes of the world on COP27 in Sharm El Sheikh, Egypt in November 2022, it is more important than ever for companies to show how they are doing their level best to act on climate change.

This means keeping up the pace in sustainability reporting, not just to satisfy stakeholders, but to help measure how effectively they are executing their wider ESG strategy.

Almost two-thirds of G250 firms surveyed in Big shifts, small steps report on climate change as a business risk. This acknowledges the importance of meeting global temperature targets — and developing strategies to cope with an environmentally uncertain future.

Shifting the Narrative

Corporate sustainability reporting offers a wonderful opportunity to drive a different type of business conversation. One that considers how companies are working towards non-financial goals like net zero, a low-waste circular economy, greater biodiversity and respect for human rights.

For some, it may be quite a stretch to shift focus from what a company ‘must’ do (compliance) to what it ‘wants’ to do (bring change). And it’s not free.

Integrating traditional business and ESG goals calls for sustained discretionary spending, with ESG remaining a line item on the annual financial plan.

Make no mistake: this is a long-term commitment, but a commitment that company leaders should budget for and get comfortable with.

Avoiding Distractions

Today’s businesses are grappling with disrupted supply chains, resource shortages, rising inflation and the looming threat of another recession.

But they cannot afford to let these concerns distract them from the challenges of implementing sustainable, transparent and resilient business models, and creating a better world for future generations.

Sustainability should not be seen as an ‘either/or’ option. Instead, it should be front of the corporate mind and the lens through which business strategies, plans and behaviors are viewed.

At this critical intersection, creating longer-term, sustainable growth and value has never been more important.

We have tools. We have knowledge and awareness. We have responsibility. Let’s commit.

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