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Executives Embrace ESG for Business Growth, but Compliance Challenges Loom, KPMG Survey Finds

ESGExecutives Embrace ESG for Business Growth, but Compliance Challenges Loom, KPMG Survey Finds

Companies are increasingly looking to make their ESG (Environmental, Social, and Governance) strategies contribute positively to various aspects of their business, including M&A opportunities, new products, talent retention, and customer loyalty. However, a recent survey by KPMG reveals that many executives are concerned about the complexity of and changes in sustainability regulations. Only about a quarter of those surveyed expressed confidence in meeting ESG reporting requirements across multiple jurisdictions.

The survey, called the “KPMG U.S. ESG Survey,” involved over 200 business leaders responsible for their companies’ ESG strategies in organizations with more than $1 billion in revenue across different industries. While the majority of respondents were from North American-based companies (92%), 67% mentioned they would need to report on ESG matters in three or four jurisdictions.

The survey also highlighted that business leaders see a growing alignment between their sustainability and corporate strategies, with 43% stating that their environmental goals are now more closely integrated with their business objectives compared to five years ago. Larger companies, with over 10,000 employees, were particularly strong in this alignment, with 66% reporting closer integration.

Executives identified various areas where ESG adds value to their businesses, including M&A effectiveness (41%), access to new capital sources (35%), and customer retention (34%). Looking ahead, they anticipate creating value in attracting new customers (40%), talent recruitment and retention (37%), increased revenue through premium pricing (37%), and lower capital costs (38%).

Despite economic uncertainty, a significant number of business leaders (55%) actually increased their focus on ESG activities, while only around a quarter scaled back, contrary to earlier predictions. This highlights the growing recognition of the competitive advantage and opportunities associated with sustainability efforts.

Interestingly, the survey found that the most significant pressure to enhance transparency in sustainability efforts came from supply chain partners (88%), followed closely by employees (82%), institutional investors (81%), and customers (81%). Regulatory bodies were a source of pressure for 80% of respondents. However, despite increasing pressure, only half of those surveyed (53%) expressed some confidence in meeting sustainability reporting requirements in the U.S., and only a quarter felt confident about meeting future ESG reporting requirements in the U.S., EU, and other regions.

The challenges reported in meeting ESG reporting requirements included timely environmental data reporting for 10K filings (50%), the cost of resources and talent to manage reporting (46%), investment in data collection, management, and reporting (46%), aligning sustainability strategies with reporting requirements (45%), and measuring Scope 3 emissions (which did not rank in the top 5 challenges). Overall, business leaders are urged to align their reporting approaches with their business strategies to stay competitive and avoid falling behind as ESG requirements evolve.

By FCCT Editorial Team

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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