According to a KPMG International survey, Corporate Responsibility (CR) reporting has become a well-established practice in the United States. The KPMG International Survey of Corporate Responsibility Reporting 2013 found that among the top 100 U.S. companies by revenue, 86 percent now formally report on their CR efforts, compared to 83 percent in 2011 and 74 percent in 2008.
Globally, the CR reporting rate was 71 percent, up from 64 percent in 2011 (the survey is conducted every other year). Of the world’s largest 250 companies (the G250), 93 percent now publish a CR report.
"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," said John R. Hickox, KPMG’s Americas leader for Climate Change & Sustainability (CC&S). "Companies that do not publish CR reports need to ask themselves whether it benefits them to keep swimming against the tide."
CR Reporting Rates and Assurance: Top Regions
The Americas was the leading CR reporting region due largely to increased participation in Latin America, with 76 percent of companies there now reporting on CR. In the Asia Pacific region, 71percent report on their CR activities, up from 49 percent in 2011, reflecting the largest regional increase over the last two years.
Fifty-nine percent of the G250 are now opting for CR report assurance, up from 46 percent in 2011. These companies are motivated by a number of factors, including a need to demonstrate credibility with external stakeholders, meet the requirements of sustainability indices, and gain support internally through more reliable data and a clearer understanding of CR issues.
“We are seeing more companies moving to deeper integration of CR into their business strategy and management processes,” said 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.”
CR Opportunities and Risks
In their CR reports, G250 companies frequently identify a social and/or environmental change impacting their business, with climate change, material resource scarcity, energy and fuel cited most commonly. Eight in 10 report that they have a strategy to manage the risks and opportunities associated with these changes, while approximately half of U.S. companies report on their CR strategy.
Companies see more opportunities than risks associated with social and environmental change. Eighty-seven percent of the G250 identified commercial opportunities whereas 81 percent identified business risks.
The most commonly cited opportunity is innovation of new products and services (72 percent), followed by the opportunity to strengthen brands and corporate reputation (51 percent), improve market position/grow market share (36 percent), and cut costs (30 percent).
Just 12 percent see social and environmental change as an opportunity to access capital or improve shareholder value.
“Companies should no longer see corporate sustainability as solely a moral issue, and instead opportunistically view it as a way for their organization to improve their brand and mitigate risk to their core business functions,” said Hickox. “A growing number of investors are accepting that environmental and social factors could put company value at stake, and that there are ways to mitigate and maximize the financial impacts associated with those risks and opportunities.”
Fifty-three percent of G250 companies cited reputational risk as the most common type of business risk, followed by regulatory risk (48 percent), competitive risk (45 percent), physical risk (38 percent), social risks (36 percent) and legal risks (21 percent). Just five percent of G250 CR reports include information on the financial value at stake as a result of environmental and social risk.
Quality of CR Reporting
The KPMG study also focused on the quality of CR reports, evaluating companies 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. Of the G250 companies that publish a report, the average quality score was 59 out of a possible 100. U.S. companies trailed slightly behind the global score with a score of 54.
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 scored below the global average, with report quality scores of 55, 55, 48 and 46, respectively.
The highest average scores for quality were reporting on performance targets and indicators for sustainability (68) and materiality (66). Companies scored lowest for quality of their reporting on suppliers and the value chain (46), governance (53) and stakeholder engagement (53).
GRI Becoming the De Facto Standard
The survey shows that the Global Reporting Initiative (GRI) remains the most widely used voluntary reporting framework, far exceeding the use of national standards and other guidelines.
Among the G250 companies, the use of GRI increased to 82 percent in 2013 from 78 percent in
2011. Companies also said their CR reporting will become more integrated with financial reporting over the next five years, and that this integration will be guided by GRI standards.
“Regulation is an increasingly important driver of growth in CR reporting, but frameworks such as the GRI and voluntary guidance from regulators and stock exchanges are also driving up reporting rates,” said Piller. “Including CR data into a company’s public profile enhances the transparency that stakeholders are demanding today.”
About the Survey
The 2013 edition of the KPMG International Survey of Corporate Responsibility Reporting marks 20 years since the first survey was published in 1993. The research covers the top 100 companies by revenue in 41 countries, totaling 4,100 companies. KPMG’s research also assessed the quality of G250 CR reports against seven key criteria (strategy, risk and opportunity; materiality; target setting and indicators; suppliers and the value chain; stakeholder engagement; governance; and transparency and balance). Twenty-seven percent of the G250 companies are headquartered in the U.S.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 152,000 professionals, including more than 8,600 partners, in 156 countries.