The road ahead The KPMG Survey of Corporate Responsibility Reporting 2017 kpmg.com
The 10 th edition of KPMG s survey analyzes reporting from a record 4,900 companies in 49 countries. The survey spotlights four major emerging trends within CR reporting: Reporting on the UN Sustainable Development Goals (SDGs) Reporting on carbon reduction targets Reporting on climate-related financial risk Reporting on human rights 2
Research samples: the N100 and G250 N100 The N100 refers to a worldwide sample of 4,900 companies comprising the top 100 companies by revenue in each of the 49 countries researched in this study. G250 The G250 refers to the world s 250 largest companies by revenue based on the Fortune 500 ranking of 2016. 3
KPMG has been tracking quantitative global trends in corporate responsibility reporting since 1993. 4
This survey finds N100 companies continue to catch up steadily with the G250. Growth in global CR reporting rates since 1993 100 93% 90 80 70 60 64% 83% 95% 64% 93% 92% 93% 71% 73% 72% Underlying trend 75% 50 40 30 20 10 0 53% 45% 41% 35% 24% 18% 18% 12% 1993 1996 1999 2002 2005 2008 2011 2013 2015 2017 N100 G250 Base: 1765 N100 companies that report carbon reduction targets, 156 G250 companies that report carbon reduction targets Note: The underlying trend of 75 percent applies when looking at the same sample of countries in 2015 and 2017. The overall N100 rate in 2017 is 72 percent due to the inclusion of 5 new countries with relatively low reporting rates in the 2017 research. Source: KPMG Survey of Corporate Responsibility Reporting 2017
CR reporting in the Americas region has risen by an impressive 6 percentage points in the last two years. It is the region with the highest reporting rate in 2017 83% 78% 77% 52% Americas Asia Pacific 2017 Europe Middle East & Africa 77% 79% 74% 53% Americas Asia Pacific 2015 Europe Middle East & Africa Base: 4900 N100 companies Note: The underlying trends of 78 percent for Asia Pacific and 77 percent for Europe apply when looking at the same sample of countries in both 2015 and 2017. The overall Asia Pacific regional rate in 2017 is 77 percent and the overall European regional rate in 2017 is 73 percent due to the inclusion of new countries with relatively low reporting rates in the 2017 research. Source: KPMG Survey of Corporate Responsibility Reporting 2017 6
The survey finds the mixed picture across Europe continues. The divergence between Western and Eastern Europe observed in 2015 remains. CR reporting rates: Western Europe vs Eastern Europe 90 80 70 60 50 40 30 20 10 79% 82% 61% 65% 2015 2017 0 Western Europe Eastern Europe Base: 2,400 N100 companies in Europe Note: The underlying trend of 82 percent applies when looking at the same sample of countries in 2015 and 2017. The overall Western Europe rate in 2017 is 75 percent due to the inclusion of 3 new countries with relatively low reporting rates in the 2017 research. Source: KPMG Survey of Corporate Responsibility Reporting 7
9 countries now have CR reporting rates of over 90%. Top countries are from Europe, ASPAC, the Americas and Africa. 99% 99% 99% 97% 94% UK Japan India Malaysia France 94% 92% 92% 90% Denmark South Africa US Mexico Source: KPMG Survey of Corporate Responsibility Reporting 2017
Companies that include CR information in annual financial reports More than ¾ of the world s biggest companies now integrate financial and non-financial data in their annual financial reports, suggesting they believe CR information is relevant for investors 2015 2017 56% N100 65% G250 60% 78% Base: 4,900 N100 companies and 250 G250 companies Note: The underlying trend of 60 percent applies when looking at the same sample of countries in 2015 and 2017. The overall N100 rate in 2017 is 57 percent due to the inclusion of 5 new countries with relatively low reporting rates in the 2017 research. Source: KPMG Survey of Corporate Responsibility Reporting 2017
Integrated Reporting has taken off in Japan, Brazil, Mexico and Spain Actual number of "Integrated Reports": top countries +2 +21 +9-1 +16 +16 88 90 21 21 42 27 36 27 26 6 22 5 21 South Africa Japan Spain The Netherlands Brazil Mexico 2015 2017 Base: 4,900 N100 companies Note: 2015 Integrated reporting rate restated for South Africa Source: KPMG Survey of Corporate Responsibility Reporting 2017 10
Assurance of CR data has more than doubled among the G250 in the last 12 years indicating that the largest companies see value in promoting the reliability of this information. Growth in independent assurance of CR information 46% 40% 30% 59% 63% 67% 2005 2008 2011 2013 2015 2017 N100 G250 33% 39% 38% 38% 42% 45% Base: 3,543 N100 companies that report on CR, 233 G250 companies that report on CR Source: KPMG Survey of Corporate Responsibility Reporting 2017
Emerging topics
In September 2015, the UN adopted the Sustainable Development Goals (SDGs), a set of 17 goals to end poverty, protect the planet, and ensure prosperity for all. KPMG s survey analyzed how many companies make a connection between their corporate responsibility activities and the SDGs. 2017 KPMG Advisory Ltd., Ltd., a a Hungarian limited limited liability liability company company and a member and a member firm of the firm KPMG of the network KPMG of network independent of independent member firms member affiliated firms with affiliated KPMG International with KPMG Cooperative International ( KPMG Cooperative International ), ( KPMG a Swiss International ), entity. a Swiss entity. 13
KPMG s survey shows that the SDGs have resonated strongly with businesses worldwide in less than two years since their launch. Around four in ten CR reports from both N100 and G250 companies make a connection between the company's CR activities and the SDGs. Number of companies that connect their CR activities to the SDGs N100 G250 39% 43% Base: 3,543 N100 companies that report on CR, 233 G250 companies that report on CR Source: KPMG Survey of Corporate Responsibility Reporting 2017 2017 KPMG Advisory Ltd., Ltd., a a Hungarian limited limited liability liability company company and a member and a member firm of the firm KPMG of the network KPMG of network independent of independent member firms member affiliated firms with affiliated KPMG International with KPMG Cooperative International ( KPMG Cooperative International ), ( KPMG a Swiss International ), entity. a Swiss entity. 14
There are only three countries where a majority of the top 100 companies reference the SDGs in their CR reporting. All the top 10 are European or Latin American countries. World s top 10 countries for connecting CR activity with the SDGs 60 58 51 47 47 Sweden Portugal Mexico France Netherlands 46 46 44 43 41 Finland Spain Colombia UK Italy Base: 4,900 N100 companies Source: KPMG Survey of Corporate Responsibility Reporting 2017 15
SDG maturity matrix 100% 90% Number of companies that score Top/Med/Low/0 for each of the 3 categories Top score (3/3) 80% 70% 60% 50% 40% 30% Medium score (2/3) Low score (1/3) 20% 10% 0% Understanding Prioritization Monitoring Performance No score (0/3) Source: KPMG Survey of Corporate Responsibility Reporting 2017 16
SDGs prioritised as most relevant to business 60% 50% 40% 30% 20% 10% 0% 13 8 3 12 5 4 7 9 11 10 6 17 16 1 15 2 14 All Source: KPMG Survey of Corporate Responsibility Reporting 2017 17
Business case of the SDGs Only 8% Italy Business case example: report clearly on the business case specifically for taking action on the SDGs UK The SDGs offer business an unprecedented economic opportunity. Spain Germany India Pursuing these Goals could deliver valuable market opportunities, unlocking economic growth of up to $12 trillion and creating 380 million jobs, according to estimates from the Business & Sustainable Development Commission Source: KPMG Survey of Corporate Responsibility Reporting 2017 18
Impact of business activities on any of the SDGs 73% explain the impact of the business on the SDGs 97% companies ONLY describe the positive impacts they have on the SDGs not the negative. Source: KPMG Survey of Corporate Responsibility Reporting 2017 19
Impact examples SDG1: Together with our bottling partners, providing jobs to over 700,000 people globally SDG8: Our activities create jobs, use local suppliers and support local businesses. We contribute to economic growth by paying taxes and royalties to local governments. Our projects create demand for a range of goods and services, such as construction. We assess those we work with to ensure they adhere to principles supporting the eradication of forced labour and modern slavery and the protection of labour rights. We have social investment projects to help create opportunities for individuals. 20
KPMG reviewed reports to see how many companies disclose targets to cut their carbon emissions. Analysts also checked to see if companies linked their targets to any external climate goals such as The Paris Agreement 2ºC goal. 2017 KPMG Advisory Ltd., Ltd., a a Hungarian limited limited liability liability company company and a member and a member firm of the firm KPMG of the network KPMG of network independent of independent member firms member affiliated firms with affiliated KPMG International with KPMG Cooperative International ( KPMG Cooperative International ), ( KPMG a Swiss International ), entity. a Swiss entity. 21
A solid majority of the world s largest companies (G250) now disclose targets to cut their carbon emissions. Among the N100, the survey shows that 50 percent of reporting companies set carbon reduction targets G250 companies that set carbon reduction targets 2015 2017 58% G250 67% Base: 233 G250 companies that report on CR Source: KPMG Survey of Corporate Responsibility Reporting 2017 22
Most carbon targets are not linked to greater climate goals Companies linking their carbon reduction targets to national, regional or global goals 63% 69% 23% 23% 6% 2% 7% 6% Linked to global 2 o target (Paris Agreement Linked to regional targets (e.g. EU targets) Linked to national targets (NDCs/INDCs) Not linked to any other targets N100 G250 Base: 1765 N100 companies that report carbon reduction targets, 156 G250 companies that report carbon reduction targets Source: KPMG Survey of Corporate Responsibility Reporting 2017 23
KPMG analysts studied companies annual financial reports to understand how many acknowledge that climate change poses a financial risk to their business. 24
Only 28 percent of N100 companies currently acknowledge the financial risk of climate change in their annual reports. Among the world s 250 largest companies (G250), a higher 48 percent acknowledge the risk. Companies that acknowledge the financial risk of climate change in their annual reports 72% No N100 28% Yes 52% No G250 48% Yes Base: 4,900 N100 companies and 250 G250 companies Source: KPMG Survey of Corporate Responsibility Reporting 2017 25
Of those companies that do acknowledge climate change as a financial risk in their financial reporting, a relatively high proportion provide some narrative description of the potential impacts. Very few, however, are currently quantifying the potential impact of those risks. Companies describing, quantifying or modelling climate risk in financial reports N100 G250 63% 76% 33% 18% 2% 2% 2% 3% Provide a narrative description of potential impacts Quantify potential risks in financial terms Model potential impacts using scenario analysis Acknowledge financial risk of climate change but do not describe the potential impacts Base: 1,386 N100 companies & 119 G250 companies that acknowledge climate change as a financial risk in their annual report Source: KPMG Survey of Corporate Responsibility Reporting 2017 Note: Numbers do not add up to exactly 100 due to rounding 26
In 2011, the UN endorsed the Guiding Principles on Business & Human Rights. Six years on, KPMG analyzed reports to see how many companies are acknowledging human rights as an issue for their business 27
CR reports that acknowledge human rights as an issue for the business The results show the human rights is firmly on the agenda as a global business issue. Almost three quarters of N100 CR reports and nine out of ten G250 reports acknowledge the issue. 73% 90% Base: 3,543 N100 companies that report on CR, 233 G250 companies that report on CR Source: KPMG Survey of Corporate Responsibility Reporting 2017 28
Reporting trends in Hungary
Sustainability reporting has been declined, proportion of local reports slightly increased in 2017 compared to 2015 Source: KPMG International CR Reporting Survey 2017 30
Leading industries issue mainly global reports resulting in lower level of local community engagement and transparency Source: KPMG International CR Reporting Survey 2017 31
GRI as de-facto standard for sustainability reporting GRI as reporting standard is applied by the majority of leading companies but higher level of compliance to the latest Standards is to be ensured Source: KPMG International CR Reporting Survey 2017 32
Big 4 Firms dominate sustainability reporting assurance Local reports need to catch up on assurance to increase credibility: global reports have a 3 times higher assurance rate than local reports Source: KPMG International CR Reporting Survey 2017 33
SDGs are poorly reflected in local reports Source: KPMG International CR Reporting Survey 2017 34
Sustainability targets and results are usually not included in local reports Source: KPMG International CR Reporting Survey 2017 35
To find out more download the report at www.kpmg.com/crreporting Email us at: istvan.szabo@kpmg.hu
KPMG Sustainability Services The Journey 37
Panel discussion
ALTEO sustainability reporting 2007-2014: sustainability is our core business, internal data available from operations SDG drive comes from strategy no report Acquisition of Sinergy in 2015 and IPO in 2016 need for formal report More complex processes Need for data unification Financial and non-financial reports are really became public (transparency, branding) The report is based on GRI G4 Reporting Guidelines Project Team of external and internal resources/experts Commitment of the management/ceo External professional with content proposals and methodology GRI Aspects and Indicators on the basis of Materiality Analysis Successfully audited and has been recognized by Green Frog Award The Report is being provided to our Key Stakeholders and has been published on our web site and on the ALTEO s Stock Exchange section Integrated Report financial and non-financial in 2019
Safety first in the chemical industry Work health and safety o o By 2030 we reduce the number of events resulting from improper wearing of personal protective equipment by 40%. We will reduce the lost time injury rate by 25% within 5 years. by 50% by 2030. 40
Most relevant SDG-s for KPMG in Hungary Economic value creation: - Transparency through our audit services - Efficiency through our tax and advisory services Social value creation: - Education related advisory and IT services - Learning&development programs to employees - Education programs to university students (dual trainings, competitions) - Lectures, mentoring and donation Economic and social value creation: - Rural development related services - Equal rights in HR policies - Mentor programs Environmental, economic and social value creation: - Renewable energy and energy efficiency advisory - Global Energy Centre of excellence Social value creation: - Cooperation with chambers, professional organizations, universities, etc. Economic value creation: - Infrastructure, technology developments - Major project advisory Economic and social value creation: - Ethics&compliance - EU&gov. &NGO work - Risk consulting solutions (IA, SDD)
SDG IN MOL GROUP AND IN OIL AND GAS SECTOR FIRST HSE REPORT OF MOL IN 1997 INTEGRATED REPORT SINCE 2009 3 BUSINESSES, 40+ SUBSIDIARIES, 100+ INDICATORS REASONABLE ASSURANCE FOR SELECTED INDICATORS REFERENCE TO SDGS IN REPORT SINCE 2017 IPIECA: MAPPING THE OIL AND GAS INDUSTRY TO THE SUSTAINABLE DEVELOPMENT GOALS: AN ATLAS 44
Attila Ságodi Partner KPMG Tanácsadó Kft. 1134 Budapest, Váci út 31. T: +36 1 887 6611 M: +36 70 333 1466 E: Attila.Sagodi@kpmg.hu István Szabó Senior manager KPMG Tanácsadó Kft. 1134 Budapest, Váci út 31. T: +36 1 887 7278 M: +36 70 370 1812 E: Istvan.Szabo@kpmg.hu KPMG on social media KPMG app 2017 KPMG Advisory Ltd., a Hungarian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. The KPMG name and logo are registered trademarks of KPMG International.