Investor pressure, public and regulatory scrutiny and pandemic-related impacts push companies to take greater steps towards transparency
A new KPMG Global report finds that reporting on sustainability is on the rise in Canada. The vast majority (92 per cent) of Canada's top 100 companies report on environmental, social, and governance (ESG) performance – an increase of 10 per cent in the last three years, and many (74 per cent) include sustainability-related information in their annual reports – a jump of 25 per cent since 2017.
Yet, while Canadian companies significantly outperform the global peer benchmark on both measures, Canada is still catching up in some areas including in seeking third-party assurance on their disclosures. Currently only 43 per cent of reporting companies seek assurance – although that number has risen sharply from 20 per cent in 2017.
"2020 has been a significant watershed moment for Canadian companies when it comes to reporting on ESG," says Bill Murphy, Head of Sustainability & Impact Services, KPMG in Canada. "The pandemic, pressure from institutional investors and Canadians at large, and the momentum towards developing universal standards have combined to create an expectation that companies provide substantive disclosures regarding their sustainability performance. An important next step is for companies to seek assurance to build credibility and trust among their many stakeholders."
The KPMG Survey of Sustainability Reporting 2020, identifies clear trends on the corporate reporting of sustainability performance, as measured against the top 100 companies from 52 countries worldwide. The report is the 11th edition in the series since it began in 1993 and the most extensive to date.
(Quantifiable) actions speak louder than words alone
This growing corporate focus on ESG performance is consistent with the findings of KPMG's latest CEO Outlook Report where Canadian CEOs ranked climate change and the environment at the top of their risk agendas in each of the last two years.
Canadian companies receive top marks for turning their attention to reporting on ESG. But, expectations are mounting for greater transparency, clarity and consistency in their reporting, the report finds. While almost two-thirds (62 per cent) acknowledge climate change as a financial risk, Canadian organizations haven't yet taken the additional step to quantify the potential financial impact of those risks (3 per cent). And, only a third (36 per cent) report in line with TCFD recommendations.
"Tone at the top is essential, but what gets measured gets managed," says Roopa Davé, Partner, Sustainability & Impact Services, KPMG in Canada. "Canada's businesses have more work to do to increase transparency and credibility by reporting on their progress in achieving their ESG goals and meeting the growing expectations of their stakeholders. Companies that do it right will be better positioned to manage the risks to their business and ensure access to capital, while staying relevant with consumers and attracting top talent."
Universal standards closer than ever, but companies can't afford to wait
Part of the challenge for companies has been the lack of universal standards for how to measure and report on ESG. However, change is coming. The International Financial Reporting Standards (IFRS) Foundation is already taking steps towards more comprehensive reporting through the establishment of an International Sustainability Standards Board. The call for universal standards has also triggered renewed convergence efforts by existing sustainability frameworks and standards organizations, including GRI, TCFD, International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB).
"A convergence of ESG reporting standards is critical, but it is also a complex undertaking given that the existing frameworks and standards target a divergent range of audiences and objectives," says Mr. Murphy. "But it is essential we sort this out so we level the playing field to provide a clearer path for companies, and ensure that investors, agencies, regulators, and the public can better understand how sustainability performance impacts a company's overall value creation."
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About KPMG in Canada
KPMG LLP, an Audit, Tax and Advisory firm (home.kpmg/ca) is a limited liability partnership, established under the laws of Ontario, and the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG has more than 7,000 professionals/employees in over 40 locations across Canada serving private- and public-sector clients. KPMG is consistently recognized as an employer of choice and one of the best places to work in the country.
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For more information, please contact:
Senior Manager, Strategic Communications
KPMG in Canada
(416) 777- 8992
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