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Less than 30% of firms worldwide feel ready for independent ESG audit: KPMG

Nicole Lim
Nicole Lim • 3 min read
Less than 30% of firms worldwide feel ready for independent ESG audit: KPMG
This percentage is “virtually unchanged” from the 25% surveyed nine months ago, says KPMG. Photo: Unsplash
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Less than 30% of companies globally feel ready to have their environmental, social and governance (ESG) data independently evaluated, “virtually unchanged” from the 25% surveyed nine months ago, according to research by KMPG. 

Released on June 13, the findings come at a time where regulatory deadlines for reporting ESG standards are fast approaching. 

Listed companies and large non-listed companies in Singapore may be required to report climate-related disclosures by FY2025 and FY2027 respectively. The criteria for large non-listed companies in Singapore refer to firms that have an annual revenue of at least $1 billion.

KPMG’s annual ESG Assurance Maturity Index is based on responses from 1,000 senior executives and board members globally across industries and companies of different revenue size.

It found that among companies preparing to meet ESG reporting requirements, there are three categories — leaders (29%), advancers (46%) and beginners (26%).

While the number of companies in the category “leader” has increased, the gap between “leaders” and “beginners” has also widened. 

See also: Backlash against ESG seen in sharp decline of fund launches

The report found that the higher a company’s revenue, the more likely it is to be advanced in its ESG assurance preparations. 

At companies with revenues of over US$100 billion ($134.95 billion), the score peaks at 69.5 (on a 0-100 scale), while for those with revenues under US$5 billion it is 39.3. 

Geographically, France tops the scores (52.4) as it did in 2023, while Germany has moved up strongly to second place (52.3) and Japan is third (50.2). 

See also: ‘Climate pragmatism’ risks further politicisation of green agenda: Bank of Singapore

Benefits of becoming ready for ESG assurance go far beyond mere compliance — with key expected benefits including greater market share (56%), decreased costs (48%) and new business models (46%).

The biggest challenge cited by responses was obtaining and maintaining sufficient internal skills and expertise, given that so many businesses are looking for the same skill sets at the same time and also that the skills required are very specialised, says KPMG. 

It found that over half of companies (54%) say they are planning to hire externally as a result – and indeed amongst leaders the proportion is higher still, at 59%. This suggests that the further businesses advance in the process, the more skills requirements they discover they will need in order to reach full ESG reporting and assurance maturity.

Meanwhile, companies are increasingly demanding their suppliers to disclose robust, product specific requirements, part of scope three emission disclosures. 

Larry Bradley, Global Head of Audit at KPMG, says: “Getting ready for ESG assurance is a journey — and companies are finding that, the further they get in that journey, the more there is to do and learn.”

The goal-line is continually evolving, he adds. “That is why progress may appear slow, even though many companies have truly been taking significant steps. This effort will pay off — boards are increasing their focus on it and leaders are reporting a growing range of benefits as the discipline involved in getting ready for ESG assurance permeates across systems, processes, controls and governance."

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