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PracticalESG

PracticalESG.com

Keeping you in-the-know on environmental, social and governance developments

KPMG conducted a survey this spring of 750 companies about their readiness for external assurance of their ESG data and reporting. The results may be more concerning than you expect. The headline: only “25% of companies feel they have the ESG policies, skills, and systems in place to be ready for ESG assurance.” But it is worth drilling down a bit more:

“Of those least ready for ESG assurance, 58% say it is challenging to balance ESG assurance goals with the profit expectations of shareholders… Companies in North America average the highest maturity score followed by Europe, Asia Pacific and Latin America… 64 percent [of survey respondents] say they are feeling regulatory pressure to obtain assurance over their ESG disclosures…

Of the 56 percent of firms that are reporting ESG data in the public domain, 93 percent are doing some level of external assurance. Yet, of those, just a fraction are obtaining reasonable assurance (14 percent) or limited assurance (16 percent).” 

Given that only 25% of companies feel they are prepared for assurance, the following isn’t particularly surprising:

  • Only 27% have robust policies and procedures to support the development of their ESG disclosures, and
  • Only 26% have a clear audit trail to support their non-financial information.

The six challenges to being assurance ready were identified as:

  • High costs
  • Lack of internal expertise
  • Lack of clarity/evolving regulations
  • Inadequate supplier ESG information
  • Insufficient IT systems
  • Lack of clear metrics

Benefits of ESG assurance were noted:

“Assured ESG data helps to give companies greater credibility with investors and all stakeholders potentially increasing brand loyalty, which once lost can be difficult and expensive to win back. More than half of all respondents (54 percent) and 47 percent of CEOs and board members look beyond just compliance and see gaining greater market share as a potential benefit, attracting ethically minded customers and investors seeking to align their values with their choices. A range of other potential benefits highlighted in our research are increased customer satisfaction (46 percent) and, greater innovation (49 percent), with a significant number, 44 percent, also citing decreased costs (e.g. operational costs), investment/asset optimization, and stronger reputation.”

KPMG suggests these five steps to being ready for ESG assurance:

1. Determine applicable ESG reporting standards

2. Build robust ESG governance and develop the right skills

3. Identify the applicable ESG disclosures and data requirements across functions

4. Digitize ESG data processes and ensure high quality data

5. Work with the value chain to collect ESG information

If you aren’t already, subscribe to our complimentary ESG blog here: https://practicalesg.com/subscribe/ for daily updates delivered right to you.

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The Editor

Lawrence Heim has been practicing in the field of ESG management for almost 40 years. He began his career as a legal assistant in the Environmental Practice of Vinson & Elkins working for a partner who is nationally recognized and an adjunct professor of environmental law at the University of Texas Law School. He moved into technical environmental consulting with ENSR Consulting & Engineering at the height of environmental regulatory development, working across a range of disciplines. He was one… View Profile