KPMG’s recent report, ‘Road to trust: KPMG ESG Assurance Maturity Index 2023’ reveals that as many as 75% of companies around the world feel that they have a long way to go to be ready to have their ESG data assured and meet new regulatory requirements. However, in a matter of months, the first tranche of mandatory regional and international sustainability reporting standards will come into force.
The ESG Assurance Maturity Index captures the views of senior executives and board members at 750 companies across industries, global regions and revenue sizes, measuring the progress companies have made in key areas to gauge their relative maturity for being ‘ESG assurance ready’.
Respondents were ranked as either leaders (top 25%), advancers (next 50%), or beginners (bottom 25%) based on their maturity.
Key findings include:
- Larger companies (US$10B+) tend to be more ESG assurance ready, with an average score of 56.3 (on a 0-100 scale), compared to companies US$5-10B (45.3 average score) and under US$5B (41.7).
- Geographically, the ESG assurance readiness of companies is relatively close between the highest-ranking countries – France (50.4), Japan (50.0) and the US (49.4) and the lowest-ranking – Brazil (43.1) and China (43.0).
- Leaders ranked more than three times higher than other respondents (50% to 14%) for having processes and controls documented, in place and tested for environmental data, with similar leadership for governance data (52% to 19%) and social data (45% to 16%).
- 87% of Leaders are integrating their ESG data systems with financial reporting systems to gain the benefit of consistent financial controls over non-financial data, compared with only 35% of others.
From the survey, just 52% of respondents are obtaining some level of external assurance over their current ESG disclosures. Of those just a fraction are obtaining reasonable assurance (14%) or limited assurance (16%) over all of their ESG disclosures that will be required under incoming regulations, signaling that there is still more progress to be made on their ESG assurance maturity journey.
The report identifies five critical steps that leading companies are doing to become ESG assurance ready:
- Determining applicable ESG reporting standards
- Building robust ESG governance and developing the right skills
- Identifying the applicable ESG disclosures and necessary data requirements
- Digitizing ESG data processes and ensuring high quality data
- Working with the value chain to collect ESG information.
Robust governance sets the foundation for becoming ESG assurance ready. For Leaders, not only is ESG a CEO priority and on the board’s agenda, more than half (53%) say their board is knowledgeable about their company’s ESG assurance issues, compared to just 28% of less ESG-mature respondents. It is also notable that at firms that are less ready for ESG assurance, 58% of CEOs and board members say it is challenging to balance ESG assurance goals with the profit expectations of shareholders. Yet about half of all respondents (54%), and CEOs and board members notably (47%), say that ESG assurance has the potential to increase market share, as the company’s values become more aligned with like-minded customers and investors.
