Reporting journey: ESG debate moves from ‘if’ to ‘how’

By Jan-Hendrik Gnändiger, global lead for ESG reporting, KPMG International

ESG is a topic that’s become embedded in corporate conversations. Boardrooms from Paris to Washington are deliberating how they can be more proactive on their environmental and societal impact, conscious they have a profound role to play in creating a more sustainable planet.

For senior executives, the debate has moved on from ‘if’ to ‘how’. We’ve finally reached a point in time where it’s widely acknowledged that ESG has moved from corporate social responsibility initiatives to the heart of company strategies and growth plans.

While it can be reassuring that many CEOs and their wider stakeholder groups are now ‘on board’ with ESG, there is a common theme and concern across multiple industries. How does a business measure and demonstrate what it is doing to tackle such a wide variety of issues – from social inequality to the climate crisis? Political leaders are facing the same dilemma and they’re now finally edging towards regulation and enforcement.

The International Sustainability Standards Board (ISSB) was formed to create the IFRS Sustainability Disclosure Standards – a global baseline of sustainability standards that would give investors the information they need to make effective decisions, supporting efficient and effective capital markets. At the same time, the European Union is preparing to introduce its own requirements, known as the Corporate Sustainability Reporting Directive (CSRD).

Brussels may be the birthplace of CSRD, but it will have far-reaching consequences internationally, potentially affecting approximately 50,000 businesses operating in the EU, including EU subsidiaries of non-EU parents, who will have to meet the final European Sustainability Reporting Standards (ESRS), which set out the details of what must be reported as part of the CSRD.

These are not the only new developments. For example, the US Securities and Exchange Commission’s proposed climate rule is also pending, and multiple other jurisdictions are also introducing new requirements.

The new reporting requirements are expected to be a step change in volume and breadth. Impacted companies will need to assess the materiality of the various requirements and build and execute a plan to gather and report relevant data — or potentially face significant consequences.

Read the full comment in ESG Clarity’s March 2023 digital magazine.