Reporting on environmental, social and governance (ESG) issues and setting carbon targets has become “part of business as usual” for leading corporations, according to KPMG.

Carried out every two years, the firm’s Survey of Sustainability Reporting examines two business groups: the G250, or the world’s top 250 companies by revenue, and the N100 – 5,800 businesses made up of the 100 biggest companies from each of the 58 nations polled.

As hinted by the title of this year’s report, The move to mandatory reporting, KPMG has taken the pulse of how entities are addressing sustainability at a time when regulated reporting looms on the horizon. Findings show that companies are broadly striving to get ahead of the curve. For example, 95% of the G250 are publishing carbon targets, up from 80% in 2022. Plus, 56% now have a sustainability leader – up 11% on the previous poll.

Almost four-fifths of both the G250 and N100 are currently using materiality assessments to evaluate sustainability-related topics. The largest of the G250 companies are more likely to use double-materiality to gauge not just their impacts on the environment and society, but how those impacts affect their financial performance. As KPMG pointed out in a statement, double-materiality is “a cornerstone of compliance” with the EU’s Corporate Sustainability Reporting Directive (CSRD). Therefore, some of the companies adopting the method “are likely to be doing so to prepare for it becoming mandatory”.

More than half of the European companies that took part in the research are already making disclosures using the EU Taxonomy.

Adoption rates

Another key sign of the direction of travel is uptake of the reporting framework recommended by the Task Force on Climate-related Financial Disclosures (TCFD).

Adoption has risen over the past two years, with TCFD-based reporting underway at 72% of G250 companies (up from 61% in 2022) and 43% of the N100 (up from 34%). TCFD reporting is most prevalent in Asia, with 54% of companies surveyed using it now, compared with 34% in 2022. 

As a result of new regulations, Malaysia produced the sharpest national rise in TCFD use, from 8% of companies two years ago to 69% now. And a spike in US uptake from 62% of companies to 84% was a major contributing factor behind the broader rise across the G250: a third of the companies in that group are American.

This year’s edition of the report is the first to track adoption of the International Sustainability Standards Board’s IFRS S2 standard. While it came into effect halfway through KPMG’s study period, the standard is already referenced by 4% of companies across the G250 and N100 – including 8% in the Asia-Pacific and 6% in the Middle East and Africa.

Interestingly, enthusiasm for voluntary reporting systems and frameworks remains high. The advent of mandatory CSRD reporting in Europe, “does not appear to have affected this noticeably”, according to the report. 

Among those systems, the most popular continue to be those run by the Global Reporting Initiative (GRI). In the G250, GRI adoption is holding steady at 77% – one point down on 2022, but two points up on figures for 2017. In the N100, GRI use has hit 71% – up 3% since 2022 and 8% since 2017. 

However, adoption rates between jurisdictions vary wildly: while 75% of Asia Pacific companies use GRI, the figure in India is just 27%, with 89% of companies there flocking to stock exchange standards.

Meanwhile, findings show that the framework set up by the Sustainability Accounting Standards Board (SASB) – now part of the IFRS Foundation – has grown in popularity among

both the G250 (from 49% in 2022 to 56% now) and the N100 (from 33% to 41%). Companies using SASB standards are “better prepared” to meet standards set out by the ISSB, “particularly if they also follow the TCFD recommendations”.

Illustrating the strength of concerns over nature, reporting on loss of biodiversity as a business risk has doubled among the G250 in the past four years, from 28% in 2020 to 56% now. Among the N100 in the same period, it has more than doubled – from 23% to 49%.

In terms of how all this is affecting senior figures’ remuneration, KPMG Global ESG Governance Lead Nadine-Lan Hönighaus says in the report: “Companies increasingly see linking leadership pay to sustainability performance as a means to get management to implement sustainability goals and improve performance – not only among the largest G250 companies, but also within the N100.”

Striking a balance

Some companies and investors have weakened – and, in a few cases, abandoned – their ESG policies over the past two years. However, the report notes that the figures demonstrate that a majority of large companies are engaged with at least some aspects of the ESG agenda, through measures such as setting carbon reduction targets.

Rapid changes in fuel costs in response to conflicts in Ukraine and the Middle East, it says, show the importance of businesses not only being resilient, but providing disclosure to communicate how effectively they are preparing for the future.

“We have seen much progress over the past few years in climate-related reporting — the E in ESG — but despite some progress in reporting social and governance issues over the last two years, more needs to be done,” says the report.

Companies continue to find it challenging to strike a balance in sustainability reporting, the report adds. There is a continued emphasis on positive reporting and qualitative descriptions of impact, but limited insight into the impact of the environment and society on the business itself. “Companies must find a way to address both their positive and negative impacts.”

For ICAEW Head of Corporate Reporting Strategy Sally Baker, the report provides “clear evidence of global progress” in sustainability reporting, emphasising just how far companies – and the wider corporate reporting ecosystem – have come in a relatively short time.

“With 30 jurisdictions around the globe now implementing requirements based on ISSB Standards, alongside requirements under CSRD and the US Securities and Exchange Commission’s climate rule, mandatory reporting is a useful driver of behavioural change. The hope is that, as sustainable behaviour and subsequent reporting become further embedded in companies in the coming years, we will also start to see evidence of progress in tackling the environmental and societal issues that lie beneath the reporting requirements.”

• ICAEW Sustainability Accelerator Programme available from January 2025.