Australian companies lagging in corporate responsibility reporting

The performance of Australia's large and mid-cap companies in corporate responsibility reporting has fallen in the last two years and needs to improve in key areas, according to KPMG's latest survey of 4,900 companies in 49 countries and regions.

The report found that national reporting rates were driven by regulation, stock exchanges and investor pressure. The United Kingdom led the field with a 99% rate of CR reporting, driven largely by investor and shareholder demand and by regulatory requirement to carry out climate change-related disclosure in Securities and Exchange Commission (SEC) filings.

Australia ranked 27th, with a 4% fall from 81% in 2015 to 77% in 2017.

The survey, the tenth since the series began in 1993, provides a detailed look at global trends in CR reporting and insights for business leaders, company boards, and CR and sustainability professionals.

Key overall findings are:

  • CR reporting is standard practice for large and mid-cap companies around the world, with around 75% of the 4,900 companies issuing CR reports.

  • A majority of companies do not acknowledge climate change as a financial risk in their annual reports; Of the minority that do acknowledge climate risk, very few attempt to quantify or model the business value at stake.

  • A solid majority of reports from the world's largest companies (G250) now disclose targets to cut their carbon emissions: the percentage in 2017 stands at 67% compared with 58% in 2015. Yet, most of these firms do not relate their own targets to the climate goals being set by national governments, regional authorities or the UN, such as The Paris Agreement which commits countries to limit global warming to well below 2°C.

According to the report's lead author, Adrian King, Australia’s top entities (75 companies, 15 public sector organisations and 10 superannuation funds) are failing in two key aspects of corporate responsibility reporting: firstly they lag the world average in acknowledging human rights as a business issue, and secondly less than half recognise climate change as a financial risk.

On climate change reporting, there is limited activity in Australia, despite increasing regulatory exhortation. Earlier this year prudential regulator APRA warned that climate change risks must be regarded as a risk management issue for business, as many of these risks are financial in nature and are foreseeable, material and actionable. Yet only 41 of the 100 Australian-based organisations surveyed currently acknowledge climate change as a financial risk in their reporting – although this is not inconsistent with global levels.

The results are impacted by the timing of reporting in Australia (i.e. June versus December year ends) and KPMG expects that there will be a significant increase in activity and disclosures in relation to climate risk in the next reporting cycle.

“Many of the 30 June 2017 annual reports released in the last few weeks are demonstrating that entities are starting to get up to speed with this fast-evolving and relatively new framework.”

KPMG expects to see many more companies setting carbon reduction strategies linked to national, regional or global climate goals and communicating those strategies in their corporate responsibility reporting.

The report, The Road Ahead: The KPMG Survey of Corporate Responsibility Reporting 2017, is available here

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