Corporate carbon reporting needs overhaul: KPMG | KPMG | SG

Corporate carbon reporting needs overhaul: KPMG

Corporate carbon reporting needs overhaul: KPMG

More companies now report on corporate responsibility in ASPAC than in any other region

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Carbon reporting from the world’s largest companies lacks consistency, making it almost impossible for stakeholders to compare one company’s performance easily and accurately with another’s.

The latest edition of the KPMG Survey of Corporate Responsibility (CR) Reporting reviewed the carbon information published by the world’s largest 250 companies in annual financial and CR reports.

It found that although 4 out of 5 of the companies discuss carbon in these reports, the type and quality of information published varies dramatically. For example: 

  • Only half of the 250 companies – 53 percent – state carbon reduction targets. Of these, two thirds provide no rationale to explain why those targets were selected.
  • While a majority of reporting companies report on emissions from their own operations (84 percent) and from purchased power (79 percent), only half report on emissions in their supply chains. Even fewer – 7 percent – included information on emissions resulting from the use and disposal of their products and services. 
  • Around half, or 51 percent of the companies that do discuss carbon in their company reports refer readers to further detailed information in alternative sources such as the Carbon Disclosure Project (CDP) database for investors1 . The other half does not. 

Ian Hong, Partner at KPMG in Singapore said: “All stakeholders should be able to obtain high-quality, comparable information on a company’s carbon performance quickly from the company’s annual financial or corporate responsibility reports. However, this is not the case now.”

Calling for clearer global reporting guidelines on carbon, he added: “There is clear room for improvement and global reporting guidelines on carbon could help to address this problem. It should not be left to companies alone to figure this out. Industry bodies, regulators, standard setters, investors and others all have a role to play.”

KPMG’s CR survey follows a recent proposal to the G20 by the Financial Stability Board for a task force to develop consistent climate-related disclosures for companies to help lenders, insurers, investors and other stakeholders to understand material risks2. The Climate Standards Disclosure Board has also introduced a voluntary framework aimed at helping companies include investor-relevant climate information in mainstream financial reporting3

Consequently, the KPMG study includes guidelines on data, targets and communication that member firms believe companies should follow when publishing carbon information in annual financial and corporate responsibility reports. 

 

Global trends in corporate responsibility reporting

In addition, the KPMG survey also includes a view of global trends in CR reporting based on analysis of reporting by 4,500 companies across 45 countries, including Singapore. 

It shows that the rate of CR reporting is now higher in Asia Pacific than it is in Europe or the Americas, with 79 percent of companies in Asia Pacific reporting on CR.

The highest rates of CR reporting are now found in emerging economies such as India, Indonesia, Malaysia and South Africa. These high rates are often driven by regulation, either from governments or stock exchanges.

The research also shows that it is now standard business practice to include CR information in the annual financial report – more than half (56 percent) of the 4,500 companies studied did so.

Other key findings: 

  • 1 in 5 large companies in high carbon sectors such as mining, construction and chemicals does not report on carbon in its annual financial or corporate responsibility reports 
  • European companies have a higher quality of reporting than companies elsewhere in the world 
  • Companies in the transport & leisure sector produce the highest quality reporting by sector, and oil & gas companies the lowest 
  • Only half the companies that report on carbon in their annual financial or corporate responsibility reports explain how cutting carbon benefits their business

 

Singapore trends in corporate responsibility reporting

In Singapore, the take-up rate of voluntary sustainability reporting had been slow since the release of the Singapore Exchange’s (SGX) “Guide to Sustainability Reporting for Listed Companies” in 2011 (the SGX Guide). There has only been a small growth in CR (4%)4 in the largest 100 companies in Singapore between 2013 and 2015 after the initial spurt from the release of the SGX Guide in 2011. 

From KPMG’s interactions with listed companies in Singapore, most of them do not see the benefits of CR reporting. The main inhibitors are the additional costs required to change internal systems as well as the lack of in-house capacity and capabilities to embark on the CR reporting journey.

What might come as a surprise to these listed companies is a key finding in a piece of research performed by KPMG in Singapore on reporting non-financial indicators over a fifteen-year period – Asian companies that ranked well in the global and Asian sustainability rankings, consistently outperformed a control group basket of companies (similar in size and industry) that did not report on sustainability. This sends a signal that investors do reward companies who report on non-financial indicators. 

This is consistent with SGX’s sentiments as they have received requests from many investors for Singapore’s listed companies to report on their sustainability strategies . Such reporting is important to investors as it demonstrates the business’ ability to mitigate risks and take opportunities in areas beyond financial performance. 

1 Source: https://www.cdp.net/en-US/Pages/About-Us.aspx Retrieved 30 November 2015
2 Source: http://www.financialstabilityboard.org/wp-content/uploads/Disclosure-task-force-on-climate-related-risks.pdf Retrieved 17 November 2015
3 Source: http://www.cdsb.net/what-we-do/reporting-frameworks/climate-change Retrieved 19 November 2015
4 Source: /cn/en/issuesandinsights/articlespublications/pages/kpmg-survey-of-corporate-responsibility-reporting-2015-o-201511.aspx Retrieved 30 November 2015 

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