Only 25 Percent of Companies Are Ready for Audits of ESG Data

Stricter E.U. and U.S. rules are being introduced to help companies make climate-related disclosures, replacing a patchwork of voluntary private sector practices. However, only 25 percent of companies globally are ready to have their environmental, social, and governance (ESG) data audited just months before new E.U. and U.S. regulations kick in, according to a new KPMG report.

The Road to Readiness: KPMG’s Assurance Maturity Index 2023 reveals that 75 percent of senior executives and board members at the 750 companies surveyed feel they have a long way to go before they’re ready to meet the new ESG regulatory requirements.

Just 52 percent of respondents surveyed obtain some level of external assurance over their ESG disclosures. Of those, only a fraction obtain reasonable assurance (14 percent) or limited assurance (16 percent) over all of the ESG disclosures that will be required under incoming regulations.

Being ESG assurance-ready means identifying the relevant regulatory framework and having the right metrics with robust systems, processes, controls, and governance for collecting and managing the data.

The KMPG report identifies five critical steps that leading companies are taking to become ESG assurance-ready:

1. Determine applicable ESG reporting standards.
2. Build a robust ESG governance program and develop the right skills.
3. Identify the applicable ESG disclosures and necessary data requirements.
4. Digitize ESG data processes and ensure high-quality data.
5. Work with the value chain to collect ESG information.

KPMG found that larger companies are better prepared for auditing than smaller ones. Among the countries surveyed, France, Japan, and the United States were ranked highest, with Brazil and China ranked worst.