For the past 20 years, international accounting firm KPMG has been tracking the evolution of Corporate Sustainability Reports, and now finds that a large majority of the world’s biggest companies produce annual reports.
Of the world’s largest 250 companies, 95% publish annual reports – that’s pretty impressive!
In 2008, 74% of the largest US companies (by revenue) produced reports, now that figure has reached 86%. Worldwide, reporting stands at 71%.
The biggest gain is in the Asia Pacific region – whereas just 49% of companies reported in 2011, that’s risen to 71% in the past two years.
"Companies should no longer ask whether or not they should publish a CR report, even in the absence of regulatory requirements to do so. That debate is over," says John Hickox, who heads Climate Change & Sustainability for KPMG Americas. "Companies that do not publish these reports need to ask themselves whether it benefits them to keep swimming against the tide."
And the trend toward using third party audits of sustainability reports is also growing, with 59% of the largest 250 companies doing so.
"We are seeing more companies moving to deeper integration of corporate responsibility (CR) into their business strategy and management processes," says KPMG Partner Bruce Piller. "It makes sense that senior management is increasingly looking to third party assurance as a way to provide external confidence in CR information and demonstrating that the company is as serious about reporting CR data as it is about its financial information."
While in the past, climate change and other environmental issues were cited as "risks" to corporate performance, now they are about equal with "opportunities" they see. 80% report they have a strategy to manage the risks and opportunities, says KPMG.
What opportunities do they see?
• Innovation in the form of new products and services (72%)
• Prospect of strengthened brands and corporate reputation (51%)
• Larger market share (36%)
• Abililty to cut costs (30%)
• Greater access to capital/ improved shareholder value (12%).
What risks do they see?
• Reputational risk (53%)
• Regulatory risk (48%)
• Competitive risk (45%)
• Physical risk (38%)
• Social risk (36%)
• Legal risk (21%)
Quality of Reporting Has a Ways to Go
In terms of the quality of reporting, however, corporations still don’t score very high – KPMG gave the largest 250 corporations an average score of 59 out of a possible 100 points. US companies score slighly lower at 54 for "demonstrating a superior understanding of the impact of social and environmental issues on their business, and reporting on their strategy, performance and interaction with stakeholders."
The Electronics/Computers, Mining, and Pharmaceuticals sectors produce the highest quality CR reports with average scores of 75, 70 and 70, respectively. The Oil/Gas, Trade/Retail, Metals, Engineering/Manufacturing, and Construction/Building Materials sectors score below the global average, with report quality scores of 55, 55, 48 and 46, respectively.
The highest scores are for reporting on performance targets and sustainability indicators (68) and materiality (66). Companies score lowest for reporting on the supply chain (46), governance (53) and stakeholder engagement (53).
The Global Reporting Initiative (GRI) remains the most widely used voluntary reporting framework, far exceeding the use of national standards and other guidelines. Of the largest 250 companies, 82% use GRI.
Importantly, companies also say they plan to integrate sustainability reports with financial reports over the next five years, guided by GRI standards. That’s long been the goal of GRI – to elevate sustainability information to the same level as financial information and to get it seen by all stakeholders.
"What encourages me most about the findings of this year’s survey are the signs that many of the world’s largest companies are using the process of CR reporting to bring CR and sustainability right to the heart of their business strategy, where it belongs," says Yvo de Boer, KPMG’s Global Chairman, Climate & Sustainability Services.
So far, sustainability reports are a world apart from financial reports. At least 75% of US publicly traded companies flaunt the Securities and Exchange Commission (SEC) requirement that they discuss climate change risks associated with their business in their annual reports. Only 27% even mention climate change.
Read "KPMG International Survey of Corporate Responsibility Reporting" for 2013: