There has been a worldwide surge in the number of regulations and other instruments that require or encourage organizations to report on their environmental, social and governance (ESG) performance, according to the latest edition of the Carrots & Sticks report published today.Carrots & Sticks is published by KPMG International, the GRI, the UN Environment Programme (UNEP) and the Centre for Corporate Governance in Africa at the University of Stellenbosch Business School, South Africa.
The 2016 research identified almost 400 regulations, guidelines, codes-of-conduct, frameworks and other reporting instruments – both mandatory and voluntary - across 64 countries. The previous research in 2013 identified 180 instruments across 44 countries.
Wim Bartels, KPMG’s Global Head of Sustainability Reporting & Assurance and a lead author of the report said: “The underlying trend is clearly up over the last 3 years. The average number of reporting instruments per country we studied has shot up by about 50 percent since 2013.”
“This suggests that markets increasingly expect businesses to report consistent and comparable information not only on their financial performance but also on material aspects of their non-financial performance.”
“The key drivers behind this growth include regulatory growth particularly in Europe, Asia Pacific and Latin America, the rise of ‘comply or explain’ reporting approaches and increasing activity by financial market regulators and stock exchanges.”
Government regulation accounts for the largest proportion of sustainability reporting instruments worldwide. Governments in over 80 percent of the countries with instruments researched in Carrots & Sticks have introduced some form of regulation that requires or encourages non-financial/ESG reporting.
Mandatory instruments dominate, accounting for around two thirds of the instruments identified, and one in ten reporting instruments adopts a ‘comply or explain’ approach.
The research also revealed a high level of activity from stock exchanges and financial market regulators in issuing non-financial reporting guidelines and other instruments. They are responsible for around one third of all the reporting instruments identified in the research.
KPMG and the other project partners have also launched a searchable online database that provides details of all the reporting instruments identified during the research. The database is publicly accessible at www.carrotsandsticks.net.
The 2016 edition is the fourth in the series of Carrots & Sticks reports and the tenth anniversary edition; the first report was published in 2006.
Commenting on the results, Mr Bartels said: “It is promising that it is now the norm in so many countries for companies to be required or encouraged to report non-financial information. However, with so many reporting instruments out there, there is a risk of overlap and duplication. An important next step is for the bodies that issue reporting instruments to focus on coordination and harmonization.”
For more information and to download a copy of the report visit our Carrots & sticks report page.
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