Malaysia among global leaders in sustainability reporting, finds KPMG survey
PETALING JAYA, 15 December 2020 — KPMG International’s Survey of Sustainability Reporting 2020 found 80% of the world’s 250 largest companies now report on sustainability, while sustainability reporting in Asia Pacific has grown by 6 percentage points since 2017 to 84%.
Malaysia is seen to be among the global leaders driving the trend with 99% of the top 100 companies in the country publishing sustainability reports. This ranks Malaysia second in the region behind Japan (100%) and ahead of India (98%), Taiwan (93%) and Australia (92%). Furthermore, 97% of top 100 companies in Malaysia include sustainability information in their annual reports.
KPMG’s global survey reviewed corporate reporting from 5,200 companies ─ the top 100 companies by revenue in 52 different countries and jurisdictions, including Malaysia. It provides a detailed look at global trends in sustainability reporting and offers insights for business leaders, company boards and sustainability professionals. The survey also serves as a guide to investors, asset managers and ratings agencies who now factor sustainability or Environmental, Social and Governance (ESG) information into their assessment of corporate performance and risk.
Commenting on the results, Kasturi Nathan, Head of Governance and Sustainability at KPMG in Malaysia, said: “While Malaysia’s high inclusion rate of sustainability data in annual reporting is driven by Bursa Malaysia, we see this active participation from Malaysian top companies to be an encouraging sign, which sets the tone and example for other jurisdictions to follow. In fact, we’ve observed a growing understanding amongst Malaysian boards and companies on the importance of operating in a responsible manner and the impact of ESG issues on society and economic sustainability which directly corelates to long-term financial performance and corporate value.”
Based on a study of disclosures among the Top 200 companies in Malaysia, Kasturi noted that a majority of companies have recognised governance and social risks as material risks. This is likely down to the fact that these matters are increasingly recognised as components of business resiliency, impacting company operations and business continuity.
However, despite Malaysia’s good progress in reporting rates, Kasturi also pointed out areas of improvement for Malaysian companies to focus on, specifically on the perception that ESG-related risks are limited to compliance and reporting.
She explained, “For instance, the management of environmental matters such as water, waste, energy, air and GHG emissions is often viewed as compliance against environmental regulations. These matters are not integrated into strategy and business operations, nor identified against risks and opportunities and measured for both input and output for sustainable production and impact on financial implications.”
“Globally, about 40% of companies acknowledge the risk of climate change in their financial reporting, which is an increase from 28% in 2017. With the current development and business environment, issues such as climate change should be recognised at a more strategic level, considering its impact on supply chain/ product innovation and responsibility, all of which would eventually impact the sustainability of the business,” Kasturi added.
Further key findings from the KPMG Survey of Sustainability Reporting 2020 include:
- Among the world’s 250 largest companies, the underlying trend for third-party assurance of sustainability data is 71%, which shows that third-party assurance of sustainability information in corporate reporting is now a major business practice worldwide.
- More than two-thirds (69%) of reporting companies now connect their business activities with the UN Sustainable development Goals (SDGs) in their corporate reporting, but few (14%) disclose how they contribute to the global problems the SDGs seek to solve. Furthermore, SDG reporting is found to be mostly unbalanced and often disconnected from business goals.
- The SDGs most often prioritized by businesses worldwide are SDG 8 (Decent Work and Economic Growth), SDG 13 (Climate Action), and SDG 12 (Responsible Consumption & Production).
- Less than one-quarter (23%) of companies worldwide at risk from the loss of biodiversity are currently disclosing that risk in their corporate reporting. This is despite repeated warnings about destruction of ecosystems and potentially dire consequences for people and the economy.
- “The low reporting rate on biodiversity risk could be explained by the fact that many companies currently lack a sophisticated understanding of how biodiversity-related risk could affect their business. They also lack access to tools and methodologies to help them model and disclose the risk impacts. The first step to address this lack is for companies to analyse to what extent their supply chains are highly dependent on nature and ecosystem services,” advised Kasturi.
Kasturi concludes, “Our global survey makes it increasingly apparent that risk is the new lens through which to consider sustainability or ESG. This is especially true in the new reality as business leaders are pressured to secure long-term growth and concurrently manage the economic effects of the COVID-19 pandemic, which has not eased its grip. That said, the state and depth of sustainability reporting is encouraging, and it shows that companies have shifted from purely profit objectives to also consider their purpose in society.”
About the survey
This research was conducted in 2020 by climate change and sustainability professionals at KPMG firms. They reviewed corporate reporting from the 5,200 largest companies by revenue across 52 different countries and jurisdictions including the world’s 250 largest companies as defined by the Fortune Global 500 ranking for 2019. Reporting reviewed included annual financial or integrated reports, sustainability reports, stand-alone reports and company websites published between 1 July 2019 and 30 June 2020. This is the 11th edition of the KPMG Survey of Sustainability Reporting which was first published in 1993.
This research has been conducted by KPMG IMPACT, a newly established initiative of KPMG firms. KPMG IMPACT brings together professionals and subject matter experts from across KPMG’s global organization to support the delivery of the United Nations Sustainable Development Goals (SDGs).
Visit www.kpmg.com.my/IMPACT for more information.
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