International study reveals low scores in human rights and climate disclosures.
Australia’s top companies are failing in key aspects of corporate responsibility (CR) reporting – they lag the world average in acknowledging human rights as a business issue, while less than half recognise climate change as a financial risk in their annual reports.
The findings are contained in KPMG International’s biennial survey of CR and sustainability reporting by nearly 5000 companies worldwide, KPMG Survey of Corporate Responsibility Reporting 2017, published today. The study of the top 100 organisations in each of 49 countries shows a small (2 percent) increase in global reporting levels, but a plateauing of Australian reporting levels since 2015.
The 100 Australian entities surveyed (the largest 100 by revenue) comprised 75 companies, 15 public sector organisations and 10 superannuation funds.
On human rights, Australia’s top 100 entities are behind their counterparts overseas, with only 55 percent acknowledging human rights as an issue for their business in their CR reports. This compares to almost nine out of ten (89 percent) CR reporters in the top global group of organisations (G250), and nearly three quarters (72 percent) among the top 100 organisations in equivalent countries (N100).
Of those Australian entities that acknowledge human rights as an issue, 79 percent disclose a human rights policy. This is positive, as a human rights policy is a fundamental building block of corporate action on human rights. However only 40 percent refer to the UN Guiding Principles on Business and Human Rights which indicates that organisations are still coming to terms with how international standards should shape their policies and practices.
Gary Wingrove, KPMG Australia CEO, said: “Publicly reporting on human rights is an indicator that a company has started considering rights related risks. The results from KPMG’s survey suggest that, with some notable exceptions, Australian corporates are behind their global peers. It is important that they move to catch up by assessing and acting upon human rights risks – and then tell their investors, consumers and affected stakeholders about their progress.”
Richard Boele, Partner, KPMG Banarra, Human Rights and Social Impact Services, an expert on the modern slavery issue, added: “Human rights will soon rise up the corporate risk list when legislation is introduced in Australia – modelled on the UK law – over the next few months which will require public disclosure of business efforts to eradicate forced labour and other related practices in their operations and supply chains.”
“Directors should be aware that board approval and a director’s signature are likely to be required for public ‘modern slavery statements’. Boards will need to sufficiently understand their human rights risk and the effectiveness of their current policies and processes in order to confidently report.”
On climate change reporting, there is limited activity in Australia, despite increasing regulatory exhortation.
Adrian King, KPMG Global Leader for Sustainability Reporting and Assurance, said: “Earlier this year, prudential regulator APRA warned that climate change risks must be regarded as a risk management issue for business, as many of these risks are financial in nature and are foreseeable, material and actionable. Only 40 percent of the top 100 companies currently acknowledge climate change as a financial risk in their financial reporting, although this is not inconsistent with global levels.”
However, there are some mitigating factors behind this, Mr King believes.
Adrian King said: “We expect these results are impacted by the timing of reporting in Australia (i.e. June vs December year ends) and that there will be a significant increase in activity and disclosures in relation to climate risk in the next reporting cycle as entities get up to speed with this fast evolving and relatively new framework. Many of the 30 June 2017 annual reports released in the last few weeks are already demonstrating this.”
The report finds that of those 40 percent, a relatively high proportion provide some narrative description of the potential impacts. Very few, however, are currently quantifying the potential impact of those risks in financial terms or modelling it using scenario analysis or other methodologies as the Financial Stability Board Task Force on Climate-related Financial Disclosures (TCFD) recommends.
KPMG has published The KPMG Survey of Corporate Responsibility Reporting since 1993. The 2017 survey is the 10th edition. Professionals at 49 KPMG member firms carried out thousands of hours of research for this survey. They reviewed annual financial and corporate responsibility reporting by the largest 100 companies, by revenue, in their own country.
Research sources included PDF and printed reports as well as web-only content published between 1 July 2016 and 30 June 2017. If a company did not report during this period, reporting from 2015 was reviewed. However, no reporting published prior to June 2015 was included in the research for this survey. The survey findings are based on analysis of publicly available information only, and no information was submitted directly by companies to KPMG member firms. The survey refers to two research samples:
The N100 – the largest 100 companies in each of 49 countries: 4,900 companies in total.
Professionals at KPMG member firms identified the N100 in their country based on a recognised national source, or where a ranking was not available or was incomplete, by market capitalisation or another appropriate measure. All company ownership structures were included in the research: publicly-listed and state, private and family-owned.
The G250 – the largest 250 companies in the world.
The G250 was identified as the top 250 companies listed in the Fortune Global 500 ranking for 2016. The G250 is for the most part a subset of the N100 research sample. 7 companies in the G250 sample are not included in the N100.1. Angola.
The 49 countries that participated in the 2017 survey were as follows:
11. Czech Republic
27. New Zealand
38. South Africa
39. South Korea
45. The Netherlands
47. United Arab Emirates
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