India, UK and Japan Lead The World In Human Rights Disclosure: KPMG Survey

On 13th October, KPMG released its Survey of Corporate Responsibility Reporting for 2017, in which it “provides a detailed look at global trends in CR reporting and insights for business leaders, company boards, and CR and sustainability professionals. It is designed to offer guidance on good practice to corporate professionals who assess and prepare their own organization's CR reporting.”

The four emerging trends the survey spotlights on CR reporting are reporting on climate-related financial risk, reporting on the UN Sustainable Development Goals (SDGs), reporting on human rights and reporting on carbon reduction targets. The survey sees statistics quoted for two different research samples: the N100 and the G250. 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 the study. The G250 refers to the world’s 250 largest companies by revenue based on the Fortune 500 ranking of 2016.

Some of the key findings of the study are as follows-

• CR reporting is standard practice for large and mid-cap companies around the world. Around three-quarters of the 4,900 companies studied in the survey issue CR reports.
• Most of the world’s biggest companies now integrate financial and non-financial data in their annual financial reports (78 percent), suggesting they believe CR information is relevant for investors.
• All industry sectors show a healthy rate of CR reporting: every sector has a reporting rate of 60% or more.
• Latin America has seen a surge in CR reporting in the last two years, driven by regulation, foreign investor demand and the need to build and protect public trust
• Integrated Reporting has taken off in Japan, Brazil, Mexico and Spain.
• Assurance of CR data has more than doubled among the G250 in the last 12years (now 67 percent of reports), indicating that the largest companies see value in promoting the reliability of this information. Assurance is also increasing at a steady rate among N100 companies.
• GRI remains the most popular framework for CR reporting. Around two-thirds of reports analyzed in the survey apply the GRI G4 Guidelines or Standards.
• The survey confirms that a majority of companies do not acknowledge climate change as a financial risk in their annual reports.
• The SDGs have resonated strongly with businesses worldwide in less than two years since their launch. Many already connect their CR activities to the SDGs.
• Human rights is firmly on the agenda as a global business issue. A clear majority of CR reports now acknowledge the issue of human rights: around three-quarters of the N100 (73 percent) and nine out of ten (90 percent) in the G250.
• 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%.

“The one-quarter of N100 companies in this year’s survey that are not reporting ignore sustainability at their peril. If they want to remain in business in the long term, they need to start thinking about it immediately. The first step is to start reporting internally. By considering the issues we’re facing globally and understanding how they could affect business models – both positively and negatively – these companies can adapt accordingly. If they don’t act, it’s unlikely they will remain in business”, said Ian Mackintosh, Chair, Corporate Reporting Dialogue at KPMG.

“Investors and other financial stakeholders are increasingly aware that environmental, social and governance (ESG) issues, previously considered “nonfinancial”, are relevant to the financial performance and long-term value creation potential of a business”, said Bill O’Mara, Global Head of Audit, KPMG International.

“The next challenge for business is to come through with meaningful contributions to the global effort to achieve the SDGs. Reporting needs to evolve so that it can quantify, verify and effectively communicate what impact companies are actually having on the goals”, said Tomas Otterström, Partner, Sustainability Services, KPMG in Finland and KPMG in Sweden.

The ten countries where companies are most likely to discuss human rights in their CR reporting are in Western Europe, Latin America and Asia Pacific. India, the UK and Japan lead the world, and all three countries have some regulation in place mandating or encouraging human rights disclosure. “The recent ratification by India of International Labour Organization (ILO) Conventions 138 and 182 clearly indicates the importance of human rights to the country. From a corporate reporting point of view, the Business Responsibility Report (BRR), an annual disclosure mandated by the Securities and Exchange Board of India (SEBI), requires the top 500 listed companies to report on nine core principles, one of which focuses on human rights. This mandate can be credited as the driver for most of India's top 100 companies proactively disclosing their performance on human rights practices while also substantiating the same through existing policies and mechanisms”, said Santhosh Jayaram, Partner, Sustainability Services, KPMG in India.

A solid majority of the world’s largest companies (G250) now disclose targets to cut their carbon emissions: the percentage in 2017 stands at 67 percent of reporting companies up from 58 percent in 2015. Among the N100, the survey shows that 50 percent of reporting companies set carbon reduction targets. “Public scrutiny of companies’ carbon emissions has ratcheted up since the adoption of The Paris Agreement on Climate Change in 2015. Under the agreement, almost every country in the world has committed to play an active part in keeping the global temperature rise to 2°C or less above pre-industrial levels”, said Adrian King, KPMG Global Sustainability Reporting & Assurance Leader and Partner, KPMG Australia.