David Pace, a Partner at KPMG Malta, has encouraged companies to show greater transparency in their reporting of Environment, Social and Governance (ESG) standards to have a clearer indication of where further progress is needed.

The Head of Advisory commented following the publication of the latest edition of KPMG International's Survey of Sustainability Reporting, which is produced every two years. The survey, which was first published in 1993, aims to shine a light on how the world’s largest companies are responding to and reporting on their response to the climate crisis and wider social issues. This year’s edition provides analysis of the sustainability and ESG reports from 5,800 companies across 58 countries and jurisdictions. The findings released show that there is still a disconnect between the urgency of addressing climate change and social equity.

However, the latest findings also indicate that sustainability reporting has grown steadily, with almost all of the world’s top 250 companies – referred to as the G250 – are providing some form of sustainability reporting, with 96 per cent of them reporting on sustainability or ESG matters.

Additionally, there has been a steady and consistent increase in reporting from the N100 – the top 100 companies in each country or jurisdiction analysed – with 79 per cent now doing so. 10 years ago, only around two-thirds of the group of companies provided sustainability reports.

Despite this, KPMG International added that Maltese companies seem to be lagging behind the global trend presented in the survey. However, there are some promising developments, including reporting by 22 companies under the Malta ESG Platform. It added that transparent ESG reporting and action will be "crucial" if Maltese companies are to remain relevant to international business and align with the broader values of Malta's residents.

“KPMG’s 2022 Survey of Sustainability Reporting reveals regulation is making a difference,” KPMG Malta ESG Lead Rachel Decelis said.

KPMG Malta ESG Lead Rachel Decelis

“My view is that regulation is critical to provide guidance and direction to companies and help drive cultural change. Business leaders have accepted they have a responsibility and role to play in helping to slow and potentially avert the unfolding crisis,” she added.

She remarked that “what’s needed more than ever” is for governments to provide “globally consistent standards”, and for the world’s major companies to make a collective effort to “report on all aspects of ESG, recognising the clear links between the environment and wider social equality issues”.

“We should start to see some progress over the coming year as organisations like the International Sustainability Standards Board (ISSB) roll out new global standards for reporting and as the Corporate Sustainability Reporting Directive (CSRD) comes into effect,” Mr Pace stated.

However, he added that “companies shouldn’t wait to be told”, as leadership from the top is “essential”. “Many major organisations are responding with proactive action that should be applauded. We’re seeing far greater action on gender equality, pay equity and community impact assessments,” he said.

KPMG Malta Partner, Head of Advisory David Pace

“It’s time for organisations to be transparent in their reporting to highlight what they’ve achieved and hold themselves to account on areas where further progress is required,” Mr Pace concluded.

This year’s report also highlighted some further challenges the world’s major companies are facing on reporting on ESG. Among the thousands of reports analysed, less than half of the world’s largest companies provided reporting on social components, such as modern slavery, diversity, inclusion and equity, among others, despite an increasing awareness of the link between the climate crisis and social inequality. Simultaneously, less than half of the companies disclosed their governance risks – these include corruption, bribery and anti-corruption, anti-competitive behaviour or political contributions.

KPMG International remarked that new ESG requirements are driving a different perspective and set of conversations in boardrooms, driving business leaders to stretch their thinking and ensure that they are making strategic decisions that take climate and broader ESG considerations more into account.

The report also outlined the tangible ways businesses can invest in sustainability reporting, with these being: understanding stakeholder expectations; incorporating materiality assessments into reporting; aligning reporting to mandatory or voluntary frameworks; investing in quality non-financial data management; understanding the impact of climate change and social issues on business.

The pressure on businesses to report on non-financial data is “only expected to grow as regulations evolve,” it said, before adding that by acting now, companies are able to make “informed choices to drive the change that is much needed to be a good corporate citizen in today’s world”.

The full report can be found by clicking here.