Foreword
Environmental, social and governance (ESG) related topics are reshaping business
operations, performance measurement, and risk management, introducing both
new challenges and opportunities. It’s within this context that we are pleased tolaunch KPMG’s inaugural ESG Assurance Maturity Index, developed to help informcompanies, investors and wider stakeholders on the current landscape. It comesat a pivotal time, as companies globally undertake a critical journey to prepare for
new ESG regulatory requirements.

Most companies are already doing some reportingon ESG topics, primarily on a voluntary basis. But
now the rules and market demands are changing,
and what was once done at a company’s
discretion is now becoming mandatory andsubject to independent third-party assurance.
Time is of the essence as sustainability reporting
frameworks come into force.1
To gain investor and stakeholder confidence andmitigate the risk of greenwashing, ESG reporting
should be subject to a level of scrutiny
comparable to the financial information that users
depend on. This means that companies need toinvest in and improve data quality by applying
disclosure control and risk frameworks akin to
those used in financial reporting.
The impending regulatory requirements areunquestionably driving the urgency to become
ready for ESG assurance, but that is just part ofthe story. As our Index and research show, thepotential benefits to becoming assurance ready go
beyond mere compliance. Stakeholders frominvestors to employees to society as a wholewant to know more about how companies areoperating in a sustainable way. This has been the

Larry Bradley
Global Head of Audit
KPMG International1

impetus for the regulatory action but assuring ESG
data can more broadly contribute to a company’s
reputation. The rigor and processes required toobtain ESG assurance can improve operations
through accurate insights for decision-making, risk
management and efficiency gains.
The KPMG ESG Assurance Maturity Index andassociated research are designed to offer a pathforward and provide a roadmap with guidance onareas to focus on, and the steps to take tobecome ready for ESG assurance.
KPMG professionals are right there on the journeywith you. We are operationalizing ESG across ourglobal organization to ensure our KPMG firms’
ESG assurance work is performed to the sameconsistent level of rigor and quality as our financial
audit activities and benefits from the sameadvanced technology platform. We recognize thatyour stakeholders are broader than just investors,
and as auditors it is the responsibility of KPMG
firms’ to serve the public interest and keep the
public’s trust.
We hope you gain fresh insights from our Index.

Mike Shannon
Global Head of ESG Assurance
KPMG International

KPMG has extensive insights on all the developments in sustainability reporting: ESG Reporting — KPMG Global

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Table of contents
05
Executive summary

06
ESG assurance: The beginning of the road09
What’s driving the ESG assurance imperative?

10
Benefits of assuring ESG data go far beyond compliance

12
Challenges persist as companies prepare for ESG assurance

14
Five steps to help you become ready for ESG assurance
1. Determine applicable ESG reporting standards
2. Build robust ESG governance and develop the right skills
3. Identify the applicable ESG disclosures and data requirements
across functions
4. Digitize ESG data processes and ensure high quality data
5. Work with the value chain to collect ESG information21
Preparing for ESG assurance — how to move forward

22
Glossary

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About KPMG’s ESG Assurance Maturity Index
KPMG surveyed senior executives
and board members with ESG
reporting and assurance knowledge at

750 companies
across industries, global
regions, with a mean revenue of
US$15.6B.

The KPMG ESG Assurance Maturity Index is composed ofFive pillars

designed to help companies
measure progress in eachof these areas:(1) governance, (2) skills, (3) data management, (4) digitaltechnology, and (5) value chain*.

Each pillar is supported by one or more questions from the survey. The scores from each question within a pillar
were averaged to arrive at the overall score for the pillar. The pillar scores were then weighted as follows:

Governance

SkillsDatamanagement

0.25

0.25

0.25

Digitaltechnology

Valuechain*

0.15

0.10

The Index, measured on a basis of 0−100, examines the progress companies have made in these areas togauge the relative maturity of a company’s ESG reporting program in order to assess its assurance readiness.
Based on their rankings, companies are classified as

Leaders

Advancers

Beginners(the top 25 percentile)(the next 50 percentile)(the bottom 25th percentile)thth

Research was conducted between April — June 2023.
*Survey respondents were originally asked about ‘supply chain’ but as this area develops, supply chain is
now being thought of as ‘value chain’ so we have updated our language to align with current terminology.

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Executive summary
66%

Only 25%of respondents say their firms
must now report ESG data or
will be required to soon.

of companies feel they have the ESG
policies, skills, and systems in place to beready for ESG assurance.

65%

Of those least readyfor ESG assurance,
say it is challenging to balance
ESG assurance goals withthe profit expectations ofshareholders.

of leaders see digital tools
as key to being ready toobtain ESG assurance.

58%

Only 27%

Only 26%of companies have robust policies
and procedures to support thedevelopment of their ESG disclosures.

of companies have a clear
audit trail to support their
non-financial information.

Five steps to help you become Benefits of having yourready for ESG assurance
ESG data assured*
1.

Determine applicable ESG reporting
standards

2.

Build robust ESG governance anddevelop the right skills

3.

Identify the applicable ESG disclosures anddata requirements across functions

4.

Digitize ESG data processes and ensurehigh quality data

5.

Work with the value chain to collect
ESG information

Greater market
share

Improved
profitability

56%

54%

Reducedinterventions

Better decision
making52%

52%

Greaterinnovation

Stronger
reputation

49%

47%

Greatershareholder value

Reduced
costs

46%

44%

*Benefits cited by Leaders in the KPMG ESG Assurance Maturity Index
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ESG assurance: The
beginning of the road75%
of companies surveyed are in early stages of
ESG maturity and therefore, less ready for
ESG Assurance.
The KPMG ESG Assurance Maturity Index foundthat the majority of companies are still at the
beginning of their ESG assurance journey and not
ready to have all of their ESG data independently
assured. While the top 25 percent of companies
surveyed are characterized as “Leaders”, this is verymuch a relative designation. Leaders in the research
are those that have achieved an average Index scoreof 64.8 (on a scale of 0–100) while Advancers saw
an average score of 45.4, with 30.5 being the
average score for Beginners. The research showsthat although Leaders are more advanced in
becoming ESG assurance ready, for the most part
they still have a lot of work to do.
Beginners Advancers

0

30.5

45.4

The correlation between company size and ESG
assurance maturity is evident, with larger
companies showing greater integration ofsustainability into their day-to-day operations. The
largest firms, with revenues exceeding US$10B,
achieved an average score of 56.3, notably higher
than US$5–10B companies (45.3) and thoseunder US$5B (41.7). Publicly traded companies,
on average, displayed higher ESG assurance
maturity than privately held companies, withscores of 48.5 and 43.3.
On an average basis the Index shows only amoderate difference in maturity according toindustry. However, larger differences amongindustries emerge when viewed by thepercentage of Leaders in each, as shown in
Figure 1, Energy and Natural Resources, as well
as Asset Management & Real Estate firms have a
33 percent share of Leaders compared with just
14 percent of Life Sciences and Healthcareorganizations, for example.

Leaders100

64.8

Assurance requirements are here. Soon, third-party assurance
will no longer be a nice to have; it will be table stakes. While
there are some larger companies that have been working to get
ESG assurance ready, most companies haven’t built out muchof the infrastructure that they need to have their ESG data
assured. Now is the time for companies to establish theirprocesses and become assurance ready.
Maura Hodge
ESG Audit Leader, KPMG in the US
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Figure 1: Index score and percent of Leaders by industry

33%
50.7

29%

30%

49.1

48.8

33%

32%

27%
47.7

47.5

18%

22%
47.0

46.0

14%

44.6

42.4

Energy &NaturalResources

Manufacturing

Banking

Consumer& Retail

Insurance

Index score

Where a company is headquartered has a bearing on
their assurance readiness. Companies in North
America average the highest maturity score followedby Europe, Asia Pacific and Latin America.
By country, ESG assurance readiness of companies
is relatively close between the highest-ranking
countries — France (50.4), Japan (50.0) and theUS (49.4) and the lowest-ranking — Brazil (43.1) andChina (43.0).
However, when examined by the percentage of
Leaders, wider differences are evident. Thirty-eightpercent of firms in Japan are Leaders, comparedwith just 18 percent in Canada, the UK and Brazil,
for example.

Asset
Management/
Real Estate

Infrastructures

Technology& Telecommunications

Life
Sciences &Healthcare% of Leaders

Figure 2: Maturity score byheadquarters region
North America

Asia Pacific

EuropeLatin America

48.3 45.8
46.8 43.1

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Figure 3: Maturity score and percentage of Leaders by country

32%
50.4

38%
50.0

31%
49.4

31%
18%

47.5

46.9

21%
45.3

FranceJapan

US

Netherlands

CanadaIndex score

Japan emerged as a leading country in the Index,
attributed to several key factors. Japanesecompanies have traditionally placed a higher
emphasis on generating societal and stakeholder
value compared to their counterparts. This mindset
is evident in their issuance of integrated reports andtheir significant representation among Taskforce of
Climate Related Financial Disclosures (TCFD)
adopters worldwide.
Additionally, Japanese public companies must
incorporate sustainability information into a2

Germany

18%

22%

44.9

44.5

UK

Australia

18%

22%

43.1

43.0

BrazilChina% of Leaders

dedicated section of their annual securities report,
effective beginning fiscal years ended March 31,
2023.2 This action by Japan‘s Financial Services
Agency signals an aim to implement nationalsustainability reporting standards in line with IFRS
Sustainability Disclosure Standards. Thisdevelopment has sparked discussions on
assurance of ESG information, prompting
companies to actively seek ways to bolster thecredibility of their sustainability data while
improving their disclosure approaches.

Japan introduces mandatory ESG disclosures for public companies‘, Morgan Lewis, December 22, 2022.

As sustainability-related information isincreasingly integrated into financial analysis
of investors, companies should seriously
consider how to ensure sufficient data
quality. This should also improve the qualityof the compass that management would relyon, in driving the journey of sustainability
transformation.
Tomokazu Sekiguchi
Partner, Head of Department of Professional Practice,
Disclosure
KPMG in Japan

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What’s driving the ESG
assurance imperative?
Two-thirdsof the business leaders surveyed said
their companies must report ESG data
now or will soon be required to do so;
the percentage is even higher,
78 percent, for listed companies.

There are a number of drivers leading companies
to report and increasingly assure their ESG data,but regulatory pressure is clearly number one.
Two-thirds of the business leaders surveyed said
their companies must report ESG data now or willsoon be required to do so; the percentage is evenhigher, 78 percent, for listed companies. At thesame time, a solid majority, 64 percent, say they
are feeling regulatory pressure to obtain assurance
over their ESG disclosures. The higher acompany’s revenue, the more likely that it will be
required to report ESG data.

Not surprisingly, more publicly listed companies
will be required to report ESG data compared to
privately-held ones, yet the results of the survey
indicate that obtaining assurance on ESG
information is quickly moving from a competitive
advantage to a stakeholder expectation, making it
de facto mandatory, even when regulations might
not require it.

ESG reporting andassurance frameworks
are changing so
significantly, evencompanies that are
mature and have been
doing assurance in someareas are unlikely to say
they are truly ready for
ESG assurance.
Neil Morris
Global Head, Assurance and
ESG Methodology
KPMG International

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Benefits of assuring ESG data
can go far beyond compliance

Forward-thinking
companies approach ESG assurance notmerely as a box-checking exercise, but
as a way to create value for theirorganization.

With increasing regulatory requirements, being
assurance ready can be viewed as table stakes,
but done right, it can also yield significant
business benefits. Preparing for the rigor of theassurance process means producing higher
quality data and information. It can identify gaps
and areas where processes can be improved, withpotential ways to gain efficiencies in collecting
and reporting data.
Assured ESG data helps to give companies greater
credibility with investors and all stakeholders
potentially increasing brand loyalty, which once lostcan be difficult and expensive to win back. Morethan half of all respondents (54 percent) and47 percent of CEOs and board members lookbeyond just compliance and see gaining greater
market share as a potential benefit, attracting
ethically minded customers and investors seeking toalign their values with their choices. A range of otherpotential benefits highlighted in our research are
increased customer satisfaction (46 percent) and,greater innovation (49 percent), with a significant
number, 44 percent, also citing decreased costs(e.g. operational costs), investment/asset
optimization, and stronger reputation.

Leaders in the Index, who are further along theassurance journey, see potential benefits in having
their non-financial data assured where Beginners
do not yet fully appreciate all the opportunities.
Over half of Leaders, 54 percent, see theopportunity to improve profitability, by, forexample, resource optimization and waste
reduction, while just 22 percent of Beginners see
this potential benefit. A similar percentage of
Leaders, 52 percent, see improved decision
making as a benefit of becoming ESG assurance
ready, compared to 30 percent of Beginners.

There is an initial cost to
becoming ESG assurance
ready, but one of the potential
benefits is that it allows thecompany to show how they
will operate not only
profitably in the long-term,
but also sustainably, in amuch more credible way.
George Richards
Partner
Head of ESG Reporting and Assurance
KPMG in the UK

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Figure 4. Areas where leaders and beginners see benefits in having their ESG
data assured.
Greater market share/expanded client base

56%

46%
Improved profitability

54%

22%
Improved decision-making

52%

30%
Greater innovation/new business models

49%
43%
Stronger reputation

40%

47%

Greater shareholder value/attracting investors

15%
Leader

46%

Beginner

Road to readiness | 11
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Challenges persist as companies
prepare for ESG assurance
Of the 56 percent of firms that are reporting ESG
data in the public domain, 93 percent are doingsome level of external assurance. Yet, of those,just a fraction are obtaining reasonable assurance(14 percent) or limited assurance (16 percent)over all of their ESG disclosures that will be
required under incoming regulations, signalingthat there is still more progress to be made on
their ESG assurance maturity journey.
The Index reveals that companies areexperiencing a range of challenges in preparing
for ESG assurance. These hurdles run the gamut,
from lack of skills and insufficient budgets tounclear, evolving regulations and inadequate
digital solutions and data access.
On average, beginners cite between four and fivemain challenges; leaders report fewer, about three
to four. However, some hurdles grow as companies
become more mature in ESG assurance.

For instance, as leaders strive to do better, they
become more aware of weaknesses in supplier
ESG practices and gaps in current metrics.

ESG assurance contributes totransparency and helps
reduce the risk ofunintentional green or social
washing.
Sarah Bagnon-Szkoda
Partner in charge
ESG Department of Professional Practice
KPMG in France

Figure 5. Top six challenges in preparing for ESG assurance

44%

42%

High initialcosts/
inefficientbudgetInadequate
supplier ESG
performance

44%

39%

Lack of internal
skills andexperience

Insufficient IT/
digital solutions

42%

Lack of clarity/
evolving
regulations

36%

Lack of clear
metrics/
measurement
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Data collection and reporting are lagging
In order to be ready for assurance, a company needs
to be in control of its data. Collecting and reporting
required data is one of the main hurdles for mostcompanies. There are typically inconsistencies in
how data is gathered and reported acrossorganizations, with companies needing to makeestimates to fill in the gaps. The extensive datarequirements of the forthcoming EU regulations will
require reporting not only on environmental criteria,
but also on a broad range of social factors, including
diversity and inclusion, working conditions andhealth, putting further pressure on companies.
Unlike financial data, which typically resides in a
relatively small number of interconnected systems,
ESG data may need to be collected from a plethoraof disparate systems that have not been designed
to interact with each other. For example, there
could be a standalone system for measuring carbon
emissions that doesn’t support social or health andsafety metrics. So, a metric such as carbon
emissions per headcount or hours worked can’t bedetermined easily.
Our research identified several areas wherecompanies are lacking with respect to data capture.
Just over half of companies capture data on scope
1 and 2 greenhouse gas (GHG) emissions and waste,
and only 36 percent of companies are capturing
scope 3 GHG emission data.
Fewer than half say their companies capture data onother ESG performance metrics, including impact ofworkforce diversity and inclusion employee
retention, and pay equity. The lack of data capture onthese social metrics suggests that many companies
have yet to fully integrate these considerations into
their business strategies. This disconnect highlights
the gap between societal expectations and corporate
actions. To bridge this gap, companies need totransparently collect and report data on diversity,
retention, and pay equity, demonstrating theircommitment to addressing these vital social issues.

Only

40%
of those doing testing are doing
comprehensive yearly testing.

As awareness of the importance of climate risks andother ESG metrics grows and as regulatory andmarket pressures increase, more companies arelikely to prioritize and improve their data collection.
And for many in the coming years, these metrics will
be required for companies not only to report on, butalso to get assured.
Data quality-checking is also lacking
Just as it is essential to collect the right data, it isequally important to ensure the quality of the data.
Our research finds that necessary quality-checking
falls short for many companies. Close to half,
44 percent, of companies surveyed rely on the staff
manager preparing the ESG data, that person’s line
manager, or the manager of the report to check theaccuracy of the data.
Of the 56 percent of firms reporting ESG data in the
public domain, 53 percent test their process andcontrols for ESG data on a rotating basis, and far
fewer, 22 percent, do annual testing of process andcontrols over all performance metrics. And whilebanking is the leading industry in this regard, only
40 percent of those doing testing are doing
comprehensive yearly testing.
Despite the challenges, many companies recognizethat assurance enhances credibility and transparency,
instilling trust among stakeholders, investors,
customers, and regulatory bodies. This fortified trustis critical in an era where ethical and sustainable
practices are integral to business success.

Figure 6: Percentage based on companies doing testing
How controls are tested

All

Industry highIndustry low

Process and controls are tested over high-risk
performance metrics only.

25%

43% Manufacturing

18% Infrastructure

53%

70% Asset
Management& Real Estate;Consumer & Retail

20% Banking

40% Banking

10% Asset
Management& Real EstateConsumer & Retail

Process and controls are tested on a rotatingbasis, including high risk performance metrics
each year.
Process and controls are tested over all
performance metrics every year.

22%

Road to readiness | 13
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Five steps to help you become
ready for ESG assurance
Becoming ESG assurance-ready requires a multi-dimensional approach. An effective strategy includes anumber of key components. These are the first important steps to address on your ESG assurance journey:

1.

Determine applicable ESG
reporting standards

2.

Build robust ESG governance anddevelop the right skills

3.

Identify the applicable ESG disclosuresand data requirements across functions

4.

Digitize ESG data processes andensure high quality data

5.

Work with the value chain tocollect ESG information

1.

Determine applicable ESG
reporting standards

Sustainability reporting is developing quickly, with new
requirements from the International Sustainability
Standards Board (ISSB) and EU, and proposals fromthe US. The aim of the ISSBTM Standards is to create a
global baseline for investor-focused sustainability
reporting that local jurisdictions can build on.
There is commonality among the requirements,
however, there are also areas where they are notaligned. For multi-nationals and others needing toapply multiple frameworks, the challenges will bemagnified if the requirements are not compatible.
KPMG has guidance on some of the practicalchallenges you may encounter as you prepare for the
new sustainability reporting standards. Comparing
sustainability reporting requirements — KPMG Global.

Road to readiness | 14
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2.

Build robust ESG governance and develop the right skills

Board and CEO engagement is critical to ensurethat data and processes are robust and ready forassurance. For most companies, the ESG agenda
has become a priority for CEOs, essential toattracting the best people, and in ensuring thebudget, systems and processes required.
Meanwhile, for boards of directors, especially withlarge listed companies, increasing ESG reporting
and assurance requirements are demanding theirattention.

Digging a little deeper, the research reveals there
still can be challenges at the board and CEO level,with Leaders in assurance readiness holding a clear
advantage. Over half of Leaders (54 percent), saytheir board is knowledgeable about their company’s
ESG assurance issues, compared to 27 percent ofAdvancers/Beginners. A slightly lower percentage
of Leaders, 39 percent, say ESG transparency is a
top priority for their C-suite and board, comparedwith 23 percent of non-leader respondents.

As expected, ESG is on the board agenda for
about three-quarters of companies surveyed
overall. This includes, reviewing ESG data, taking
ESG actions, monitoring ESG performance, andidentifying ESG risks/opportunities. The Leaders
have even greater board engagement, exceeding
80 percent in all of these areas.

Leaders are also doing a better job of getting
shareholders on-board with ESG assurance efforts. An
impressive 82 percent of Leaders don’t think achieving
ESG assurance goals while meeting shareholder profit
expectations is a challenge. By comparison, 51 percentof CEOs and board members surveyed at companies
that are less ready for assurance say it is challenging tobalance their ESG assurance goals with profit
expectations of shareholders.

Where CEO and board sign-off is required, it inherently
enhances the comprehensiveness and precision of ESG data.
This step is pivotal in achieving readiness for assurance —when you‘re in a position for your CEO and board to provide
their endorsement, you‘re also better prepared for yourassurer to sign-off.
Sebastian Soares
Partner, Assurance Leader, KPMG in Brazil and South America region
Figure 7: C-Suite and board views on ESG assurance
LeaderAdvancers/
Beginners

Our board of directors is knowledgeable about the ESG assurance
issues facing the organization.

54%

27%

ESG transparency is a top priority for our C-Suite and board of
directors.

39%

23%

It is challenging to achieve ESG assurance goals while meetingshareholder profit expectations.

18%

51%

Road to readiness | 15
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Having a team with the right skills is critical
The CEO and board play a pivotal role in cultivating
an ESG-focused culture, setting clear goals, andcommunicating their significance throughout theorganization. Even so, the personnel demands of
becoming assurance ready bring a unique set ofchallenges. Generally, the underlying ESG data
owners will have operational roles within thebusiness, while the reporting process will beowned by the finance function.
There is a significant advantage to have people
with the skill set to prepare financial informationand statements and manage an audit. At the sametime, they will need to have a depth ofunderstanding to navigate the ESG content andmetrics they are trying to assure.
Our research found the vast majority (82 percent)of Leader companies have completed or are at
mid-implementation in setting up a team to
manage ESG metrics and disclosures, compared tojust 31 percent of those considered Advancers or
Beginners.
Leaders are also ahead in providing ESG training totheir staff, but many have more to do. Over half
(54 percent) of Leaders provide regular training
throughout the year, compared to 34 percent ofAdvancers and Beginners, while less than a third
make the training compulsory with testing, still far
more than the 7 percent of non-Leaders.

Companies that are mostsuccessful in becoming ESG
assurance ready are thosethat get everyone in thecompany on board with themission, creating a culturethat appreciates thecompany’s impact on theenvironment and society andthe value that ESG reporting
can bring.
Ubbo van Zessen
Partner
Head of ESG
KPMG in the Netherlands

Figure 8: Frequency of staff ESG training
ESG training frequency for staff

LeaderAdvancers/
Beginners

Never

-

1%

Ad hoc2%

7%

Annually

15%

52%

Regularly throughout the year

54%

34%

Regular compulsory training with testing

29%

6%

Road to readiness | 16
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3.

Identify the applicable ESG
disclosures and data requirements
across functions

Data management is crucial to becoming ESG
assurance ready. There are three main components:• Identifying the material topics and the right metrics• Implementing processes to collect the data
• Putting controls in place to ensure data quality
As outlined on page 14, the first step in capturing theright ESG data for assurance is determining theapplicable reporting requirements and thendetermining what the right metrics are for yourbusiness. Metrics need to be clearly defined anddocumented. Performing a materiality assessment
will help define KPIs and ESG metrics, so that there
can be an assurance opinion that the metrics havebeen measured and reported in accordance with yourreporting criteria.
Companies obtaining assurance under the EU
reporting requirements should perform materiality
assessments for two dimensions (Double
materiality) — financial and impact; and assure
disclosures in either dimension. For example, under‘impact’, the assessment would include a
company’s upstream and downstream value chain,with materiality assessed based on severity andlikelihood of the impact. While ‘financial’ materiality
will require disclosure of sustainability-related
matters that (may) trigger material financial effects
on a company, with materiality assessed based on
the likelihood and (potential) size of the financial
affect. In the case of financial materiality, theassessment will not be limited to matters within thecompany’s control.
Most companies in our research have made progressin defining key performance indicators and collecting
and reporting KPI data both internally and externally,
but Leaders stand out, with more than90 percent making moderate or significant progressin these areas.
For capturing data, nearly half, 45 percent, of Leadersrecognize the value of having a custom ESG reporting
management system, compared to just 9 percent of
Beginners and Advancers. For the majority,

45%
of Leaders recognize the value of having acustom ESG reporting management system.

56 percent of all companies have an integrated
governance, risk, and compliance (GRC) system thatcombines ESG matters and ensures they are
managed together with performance updates andpresented to management.
Building effective processes and controls
To obtain ESG assurance, whether limited orreasonable, it’s essential to have robust dataprocesses, controls and systems. This ensurescompanies can prevent the need to restate data fromone reporting period to another. It also safeguards
against regulatory scrutiny and perceptions of
misleading claims (greenwashing). Leaders are wellahead of others in this regard.
On average, Leaders ranked higher for progress onprocesses and controls for ESG data. Most notably,
Leaders rank more than three times higher than other
respondents for having process and controls
documented, in place and tested for environmental
data; with similar leadership for governance data andsocial data.
However, as our research suggests, the vast majority
of companies may still have more to do to create
systematic processes for data collection, validation,and verification. Standardizing procedures acrossdepartments, utilizing digital technology andmaintaining a centralized documentation repository,
while conducting regular tests to ensure data
accuracy will become even more critical for somecompanies due to greater regulatory requirements orother stakeholder pressures.
As the regulatory landscape continues to evolve,
companies will also need to continually enhance andrefine their data management practices across all
ESG dimensions.

Figure 9: Most advanced process and control stage for ESG data

Process and controls
documented, in place and tested

LeaderAdvancers/
Beginners

Environment

50%

14%

Governance

52%

19%

Social45%

16%Road to readiness | 17

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The first thing we see as companies become assurance readyis the quality of their data improves significantly. Thisultimately leads to better business decisions and a more
informed strategy, which can be used to strengthen therelationship with all relevant stakeholders and potentiallyreduce financing cost.
Oliver Geier
Partner
KPMG in Germany

Implementing strong internal controls and conducting regularreviews of ESG data can help companies proactively identify andaddress any issues, such as with accuracy and completeness,helping ensure the integrity of their reporting and readinessfor assurance.
Farah BundealiPartner and National Leader
ESG Assurance
KPMG in Canada

Road to readiness | 18
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4.

Digitize ESG data processes andensure high quality data

Data collection is central to becoming ESG
assurance ready. The higher the quality of the data
and the more granular it is, the richer the insights
and better-informed decisions that can be made.
Companies are used to collecting detailed data on
financial performance and metrics, but collecting
non-financial data brings additional layers ofcomplexity. With diverse sets of metrics ranging
from greenhouse gas emissions to gender diversity
there are typically inconsistencies and gaps in theway data is gathered across the organization.
Digital solutions can be valuable in addressing the datacollection task, and virtually all, 96 percent, of the
Leaders in our Index say they are at mid/full
implementation of ESG data capture systems, morethan double that of Beginners and Advancers.
The majority of Leaders, 66 percent, agree digital
tools are key to being ready to obtain ESG assurance,compared to 38 percent of the Advancers and
Beginners. Perhaps surprisingly though, CEOs andboard members are less convinced that these tools
are essential — just 37 percent say they are key tohelping them be ready for ESG assurance. Thisskepticism could stem from a lack of understandingof the specific benefits, concerns about costs, orperceptions that traditional methods are sufficient.
One of the ways to raise the maturity level for
non-financial data collection is integrating nonfinancial data capture with financial reporting
systems. It can be a challenge with the very
different types of information and systems in place,but the benefits can be significant.
The survey finds 87 percent of Leaders haveattained mid/full integration of their ESG datasystems with financial reporting systems,
compared to just 35 percent of other firms.

74%
of respondents in our researchacknowledged they lack a clear audit trail tosubstantiate non-financial ESG information.

Maintaining supporting documentation foraudit trails
Having a robust audit trail is essential to being
assurance ready — it is what ensures thereliability and transparency of reported data.
Three-quarters, 74 percent, of respondents in our
research acknowledged they lack a clear audit
trail to substantiate non-financial ESG information.
The audit trail provides essential evidence that
traces the sources of data and how specificinformation was ascertained in the reporting
process. It encompasses structured andunstructured, quantitative, and qualitative data.
With potentially hundreds of ESG data points
getting reported and assured, achieving a clear
audit trail is complex and demands a concerted
effort from organizations. This involves integrating
ESG considerations into core business
operations, implementing rigorous data collection
and management systems, and fostering aculture of accountability from top to bottom. By
addressing this gap, companies can not only
enhance their readiness for assurance but also
demonstrate their genuine dedication tosustainable and responsible practices, earning thetrust and confidence of stakeholders in an era
where values and accountability hold moreweight than ever before.

Integrating non-financial with financial data capture systems
gives you the benefit of consistent financial controls over yournon-financial information. We recommend using existing
financial reporting tools to the full extent possible, extending
them to encompass non-financial reporting.
Patrick Chu
Partner, Head of ESG Reporting and Assurance
KPMG China

Road to readiness | 19
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5.

Work with the value chain to collect ESG information

As companies grapple to get a better handle on their
ESG data, getting data from their value chain can beespecially challenging. It is a major issue as in manycases, the majority of a company’s carbon footprint
is coming from indirect emissions across the value
chain. There are also likely to be other sustainability
and social information from suppliers that companies
need to take into account.
Obtaining high-quality information from suppliers will
only become more critical as regulations increasingly
force companies to have their suppliers aligned.
Leaders are further along in working with their
suppliers. More than half, 55 percent, say they haveestablished broad contractual ESG requirements fortheir suppliers, while about a third, 28 percent haverobust, product-specific contractual requirements.
The majority of Leaders, 61 percent, ask suppliers tofeed ESG data into their data platform.
We also expect to see increased use of alternatives,
such as product and invoice based ESG indicators, asa way to bypass issues with capturing supplier data,
but this may not ultimately meet regulatory
requirements.
Suppliers may not feel the same level of urgency ifthey are operating in a different regulatoryenvironment. They may also be challenged to provide
information that meets the requirements of a varietyof frameworks used by their customers. Even so,
expect pressure on supplier to ratchet up to provide
information required in timely manner.

Obtaining ESG data fromsuppliers on a timely basis
has become part of the
procurement process.
Companies that are thinking
strategically are asking how
they can help customers meettheir ESG goals — capturing
the right data is adifferentiator.
Daniel Camilleri
Partner, KPMG Australia

Road to readiness | 20
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Preparing for ESG assurance —how to move forward
This is a pivotal time for companies as they
undertake their journey to prepare for ESG
assurance. Regardless of the level of assurance, it
doesn’t alleviate any of the responsibilities to reportaccurate information; Limited assurance doesn‘tequate to limited reporting; accuracy remains
paramount.
The KPMG ESG Assurance Maturity Index offers
a framework for assessing your position in the
ESG assurance maturity journey and charting apath forward.
As the research reveals, the challenges are diverse
for those championing ESG assurance in theirorganizations — from costs and expertise gaps toregulatory ambiguity and supplier ESG performance.
Even so, the Leaders, typically larger companies,
are more likely to have a business strategy thatrevolves around a sustainability perspective. They
see ESG assurance as an opportunity, more thanjust a compliance requirement. The challenges are
more acute of course for companies ranked as
Beginners in becoming ESG assurance ready. The
key for those companies is to get started now.
Doing a materiality assessment to identify relevant
sustainability metrics for your business andstakeholders is a great place to start. This anchors
your ESG strategy, reporting focus, and assurance
targets. Peer benchmarking offers insights, while anassurance map can help you prioritize metrics,
identify gaps in the data and in determining what dataneeds to be fed into decisions the board is making.
To be ready for assurance, you will need to ensurethat your ESG disclosures will meet preconditions forassurance. This means having suitable criteria foryour disclosures. Having sufficient evidence in termsof data, that is of appropriate quality to allow yourauditor or assurance provider to form an assurance
conclusion. With meticulous preparation, clear
communication strategies, and collaboration among

stakeholders, you can establish a robust foundation
for the assurance process, ensuring the accuracy andtransparency of your ESG data and reporting forexternal validation.
The KPMG Ready for Assurance service can help
you navigate the complexities of ESG assurance
and to be ready for new regulatory requirements.

There is great value inassessing the preconditions
prior to an assurance
engagement taking place.
This means ensuring you
have identified the rightframework, selected the right
metrics and have robust
processes for collecting andaggregating the data. Having
the preconditions satisfied
now, in advance of the 2024
reporting cycle can be a huge
step in meeting the coming
requirements and help set
businesses up for success.
Mike Shannon
Global Head of ESG Assurance
KPMG International

Road to readiness | 21
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Glossary
Audit trail: A step-by-step record by which
accounting, trade details, or other financial andnon-financial data can be traced to their source.
ESG (Environment, social and governance):
represents a set of criteria that companies use toevaluate and communicate their performance in key
areas beyond traditional financial metrics.
Greenhouse gas (GHG) emissions: Scope 1:
Covers emissions from sources that an organization
owns or controls directly.
Greenhouse gas (GHG) emissions: Scope 2:
Covers emissions that a company causes indirectly
and come from where the energy it purchases anduses is produced.
Greenhouse gas (GHG) emissions: Scope 3: Allemissions not covered in scope 1 and 2, created by
a company’s value chain.
Limited assurance: A level of assurance at an
acceptable level that, based on professional
judgement, is meaningful for the intended users. It
results in a negative conclusion (i.e. ‘nothing hascome to our attention to indicate that the
information is materially misstated.

Materiality assessment: An assessment to help
identify a company’s most material issues anddetermine what should be reported. The processincludes reaching out to internal and external
stakeholders for input.
Non-financial reporting: the process of disclosing
information about a company‘s ESG performance,
impacts, and initiatives in addition to its financial
data.
Reasonable assurance: Expressing reasonableassurance requires the assurance provider to obtainsufficient appropriate evidence to conclude that thesustainability-related information prepared, in allmaterial respects, in accordance with the applicable
reporting criteria (positive conclusion).
Sustainability: the practice of conducting businessin a way that meets the needs of the present
without compromising the ability of future
generations to meet their own needs.

Road to readiness | 22
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Contact us
KPMG International
Mike Shannon
mshannon@kpmg.com

BrazilSebastian Soares
ssoares@kpmg.com.br

Germany
Oliver Geierogeier@kpmg.com

Neil Morris
neil.morris@kpmg.co.uk

CanadaFarah Bundeali
fbundeali@kpmg.ca

Japan
Tomokazu Sekiguichi
tomokazu.sekiguchi@jp.kpmg.com

China
Patrick Chu
patrick.chu@kpmg.com

Netherlands
Ubbo van Zessen
vanzessen.ubbo@kpmg.nl

Europe, Middle East, Africa
Dirk Berkemeyer
dberkemeyer@kpmg.com

United Kingdom
George Richards
george.richards@kpmg.co.uk

FranceSarah Bagnon-Szkoda
sbagnon@kpmg.fr

United States
Maura Hodge
mhodge@kpmg.com

AmericasJohn Depman
jdepman@kpmg.com
Asia PacificNicola Buddee
nbuddee1@kpmg.com.au
Australia
Daniel Camilleri
dcamilleri@kpmg.com.au

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Publication name: Road to readiness
Publication number: 138990-G
Publication date: October 2023