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Most companies now understand climate risk, but less than a fifth quantify the impact

According to a new report by global professional services firm KPMG, the world's largest companies are increasingly recognizing sustainability risks such as climate change as business risks, and corporate reporting on these issues is improving. However, disclosure gaps remain in areas such as the quantification of ESG impacts and the breadth of risks covered.



KPMG studied the financial reports, sustainability and ESG reports, and websites of 5,800 companies across 58 nations, territories, and jurisdictions for the new report "Big shifts, modest steps." The report's conclusions highlight the "G250," or the top 250 companies by revenue, as well as the "N100," or the top 100 companies in the 58 regions.


96% of the G250 and 79% of the N100 companies now provide some type of ESG or sustainability reporting, according to the poll.




The survey also highlighted that corporations' sustainability reporting appeared to be becoming standardized, with convergence around GRI, SASB, and TCFD frameworks. 78% of G250 companies now report to GRI, up from 73% in 2020, and about 50% now report to SASB, according to the poll. In addition to facilitating greater comparability across companies and industries, an increase in the use of standards will likely aid businesses in the upcoming shift in many jurisdictions to mandatory sustainability and climate disclosures, as many of these frameworks are heavily influenced by them.


TCFD (Task Force on Climate-Related Financial Disclosures) guidelines will be used by 61% of respondents in the 2022 survey, up from 37% in the 2020 survey. KPMG reports that 64 percent of G250 corporations now formally see climate change as a business risk.


Despite the growing awareness of environmental issues, the survey revealed substantial blind spots, particularly in the quantification of risks, with just 17% of G250 and 9% of N100 corporations reporting scenario-based modelling or financial quantification of probable climate change impacts.


John McCalla-Leacy, KPMG International's Head of Global ESG, stated:


"Business leaders have acknowledged that they have a responsibility and role in helping to slow and possibly avert the escalating disaster. More than ever, we require globally comparable standards from governments and a concerted effort from the world's largest corporations to report on all areas of ESG, recognising the clear links between environmental and broader social equality challenges."


Less than half of companies questioned report on biodiversity concerns, despite the fact that this number is rapidly increasing. Similarly, social and governance risk reporting falls behind, with each maintaining below the minimum level of 50% disclosure.


The use of materiality evaluations to inform reporting was a new topic included in this year's survey, with encouraging findings, as about three-quarters of companies disclosed material themes. For example, 77% of G250 businesses identify material topics that touch the company, stakeholders, or society at large, with 30% reporting on all three groups.


In addition to the poll results, KPMG produced a paper focusing on the United States by Maura Hodge, KPMG ESG Audit Leader, and Rob Fisher, KPMG ESG Leader. While the survey revealed some hopeful trends, such as the fact that 100 percent of large U.S. companies provide ESG disclosures and 70 percent of U.S. CEOs believe that their ESG initiatives help their financial performance, the United States trails behind in some critical areas. For instance, only 43% of U.S. corporations recognize climate risk and 13% see social risk as a threat to their businesses. Additionally, only 23% of large U.S. corporations have sustainability representation at the leadership level, compared to roughly a third of their worldwide counterparts who have a committed member of their board or leadership team responsible for sustainability issues.


Hodge and Fisher authored the following


"Companies must adapt themselves to the shifting sustainability reporting landscape in light of rising stakeholder demands for openness and the imminent implementation of mandatory ESG reporting regulations,"


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