KPMG's recent research reveals that nearly one-third of companies feel ready to have their ESG data independently assured. However, this figure remains virtually unchanged from nine months ago, signaling slow progress despite imminent regulatory deadlines.

The latest findings from KPMG’s annual ESG Assurance Maturity Index underscore the growing divide between companies leading in ESG assurance readiness and those still in the early stages.

Key Highlights

• 29% of Companies Ready: Nearly one-third of companies feel prepared for independent ESG data assurance, a slight increase from 25% nine months ago.

• Widening Gap: The divide between Leaders in ESG assurance readiness and Beginners has increased, with Leaders showing a 6% rise in their average score.

• Geographic and Revenue Insights: France leads in ESG assurance readiness, followed by Germany and Japan. Companies with revenues over $100 billion score significantly higher in readiness.

• Benefits Beyond Compliance: Key benefits of ESG assurance readiness include greater market share (56%), decreased costs (48%), and new business models (46%).

• Increasing Assurance Levels: Nearly two-thirds (63%) of organizations obtain limited assurance over disclosures, with a growing number receiving reasonable assurance.

• Skills and Resources Challenge: Acquiring sufficient internal skills and expertise is the most widely cited challenge, with over half of companies planning to hire externally.

• Supply Chain Focus: Leaders are increasingly demanding ESG data from suppliers, with robust requirements rising from 28% to 42% over the past year.

• Urgent Action Needed: With regulatory deadlines approaching, companies must accelerate their ESG assurance preparations to meet evolving requirements.

Key Findings from KPMG’s ESG Assurance Maturity Index

According to KPMG, 29% of companies now feel they possess the necessary ESG policies, skills, and systems for independent ESG data assurance. This is a slight increase from 25% nine months ago. The report categorizes companies into three groups based on their readiness: Leaders (29%), Advancers (46%), and Beginners (26%).

Widening Gap Between Leaders and Beginners

While some progress has been made, with a 6% rise in the average score for Leaders and a 3% increase for Advancers, the gap between these groups and Beginners has widened. The average score for Beginners has fallen by 6%, highlighting the need for concerted action among these companies.

Larry Bradley, Global Head of Audit at KPMG International, commented,

Geographic and Revenue-Based Insights

Geographically, France leads with an average score of 52.4, followed closely by Germany (52.3) and Japan (50.2). Companies with higher revenues tend to be more advanced in their ESG assurance preparations. For instance, companies with revenues over $100 billion have a score of 69.5, while those with revenues under $5 billion score 39.3.

Benefits of ESG Assurance Readiness

The report outlines that the benefits of being ready for ESG assurance extend beyond compliance. Key benefits include greater market share (56%), decreased costs (48%), and the development of new business models (46%).

Leaders in ESG assurance have reported significant improvements across various metrics, such as decreased costs, better product/service quality, reduced business risks, improved staff engagement, better credit ratings, and expanded market share.

Assurance Levels and Future Challenges

Currently, nearly two-thirds (63%) of organizations obtain limited assurance over some or all of their disclosures, and just over half (52%) receive reasonable assurance over critical KPIs. These figures have increased from last year, indicating growing confidence in ESG data assurance processes.

However, only 9% of companies do not obtain any external assurance, a number expected to decrease as regulatory requirements tighten.

Skills and Resources: The Biggest Challenge

A significant challenge highlighted by the research is the acquisition and maintenance of sufficient internal skills and expertise. This challenge is cited by 44% of respondents, spanning Leaders, Advancers, and Beginners.

Over half of the companies (54%) plan to hire externally to meet these needs, with the proportion rising to 59% among Leaders.

Increasing Focus on Supply Chains

With supplier data being crucial for ESG metrics, particularly Scope 3 carbon emissions, companies are increasingly demanding more from their suppliers. Among Leaders, 42% now place robust, product-specific requirements on suppliers, up from 28% in 2023.

Additionally, more Leaders are requesting suppliers to provide ESG data and integrate ESG screening into supplier onboarding processes.

Time for Action

Mike Shannon, Global Head of ESG Assurance KPMG International, emphasizes the urgency of the situation:

As companies navigate the complexities of ESG assurance, it is clear that while some progress has been made, significant efforts are still required to meet regulatory requirements and achieve full ESG reporting and assurance maturity.

We invite you to join our vibrant ESG community, a collective force driving positive change. This is your opportunity to be part of a dynamic network where knowledge, best practices, and innovative ideas are shared freely, empowering you to make impactful decisions.

Together, we can amplify our efforts to shape a sustainable future.

Join us and become a catalyst in the global movement towards a more equitable, environmentally responsible, and socially conscious business landscape.

🌍 Subscribe Now and Join the ESG Community