More than 60% of companies across all industry sectors are reporting on corporate responsibility

More than 60% of companies across all industry sectors are reporting on corporate responsibility

Companies need to go beyond statistics and instead explore how to assess and communicate the impact their work on environmental and social issues such as climate change, water scarcity and human rights are having, a new report has found.

More than 60% of companies across all industry sectors are reporting on corporate responsibility (CR), according to the 'KPMG Survey of Corporate Responsibility Reporting 2017.' The retail sector, in particular, has shown an increase in reporting for CR, but is lagging at 58% with some way to go to catch up with the others.

In terms of geography, CR reporting in the Americas region has risen by 6 percentage points to 83% in the last two years. As a result, it has overtaken the Asia Pacific region (78%) to become the leading region for CR reporting globally. Europe is currently at 77%, and the Middle East & Africa 52%.

Yet while companies are increasing their reporting on corporate responsibility issues, KPMG believes the need for this information to be integrated into annual reports as a way of calculating financial risk will become crucial.

"There was a time when corporate responsibility information was considered strictly "non-financial" and not relevant to include in annual financial reports," says José Luis Blasco, global head, KPMG sustainability services. "The corporate responsibility report as we know it today was born from those beliefs. But times are changing."

According to KPMG, governments and stock exchanges across the world - from Latin America to Japan, the US and the EU, to India and Taiwan - are bringing in new layers of regulation for environmental, social and governance (ESG) disclosure.

"My message to business here, is to expect more of the same," Blasco adds. "Countries that do not yet have reporting regulation are likely to introduce it. Those that have it are likely to strengthen it.

"Business leaders need to ensure their organisations are in touch with global reporting trends and in a good position to anticipate and respond to change. As demands for disclosure continue to grow, firms need to ensure they have up-to-date and efficient systems in place to collect, analyse and disclose the necessary ESG information and that they are able to convince regulators, investors and others of the reliability of that information."

According to the report, more than three quarters of the world's largest 250 companies now include at least some "non-financial" information in their annual financial reports, with conventional lines between "financial" and "non-financial" not only beginning to blur, but in some cases are breaking down completely.

Financial stakeholders – including investors, lenders and insurers – are wanting to know what impacts the business is having on society and the environment, and how this could impact business performance in the future.

"Environmental and social issues such as climate change, water scarcity and human rights will increasingly be seen as financial rather than non-financial issues. Companies will be expected to be transparent not only about their own performance on these topics, but also about the financial risks and opportunities they face from them and the likely effects on the business's value creation in both the short and long term.

"My message here is directed at chief financial officers: the merging of financial and "non-financial" reporting will accelerate quickly in the next few years and it is the finance teams that will be expected to deliver the disclosures. The first step to effective disclosure is for finance teams to gain a sound understanding of the material environmental and social issues that have potential to affect the company's financial performance. Increased dialogue and collaboration between the finance and sustainability functions will be critical."