A new report by KPMG has found that there is a ‘clear disconnect between strategy and execution’ on sustainability investments at many businesses.
KPMG’s survey, Addressing the Strategy Execution Gap in Sustainability Reporting, found that most firms are committed to investing in environmental, social, and governance (ESG) capabilities over the next three years, to meet reporting requirements and stakeholder demands.
However, business leaders are in many cases unable to integrate sustainability into their broader business goals as a result of the strategy-execution gap, as well as being unable to leverage sustainability as a mechanism for driving financial value.
‘Accurate reporting’
“Timely and accurate reporting of sustainability information is key for businesses to meet regulatory reporting guidelines,” commented KPMG U.S. ESG audit leader Maura Hodge.
“However, compliance alone should not dictate an organisation’s strategy – focusing on the core elements of ESG that will drive financial value over the long-term is paramount.”
Increased investment
Among the core findings of KPMG’s report are that 90% of business leaders plan to increase their ESG investment over the next three years, with 83% believing themselves to be ahead of their peers concerning sustainability reporting.
However, several challenges are also identified – more than a fifth (21%) of organisations say that they face difficulties in measuring return on investment when it comes to sustainability, while 14% claim an ‘insufficient understanding’ of its value drivers.
In addition, 47% still use spreadsheets to aggregate their data when it comes to sustainability reporting, while just 18% are currently seeking third-party assurance to enhance the credibility and transparency of their reporting.
Many firms are betting on artificial intelligence and machine learning as tools to help them improve their sustainability reporting, with more than half (58%) saying that they planned to use these to improve data analysis and consolidation.
However, KPMG U.S. climate data and technology leader Tegan Keele warned that artificial intelligence and machine learning should not be seen as a “silver bullet for sustainability reporting or for setting a strategy that adds value to the business.
“Judgment calls like which data to use, which sources to collect the data from and the type of controls that need to be in place require a cohesive strategy that should be driven by the organisation and informed by the technology rather than driven by it.”
Structural challenges
The report also highlights structural challenges that obstruct the integration of strategy into broader business objectives. The top two barriers identified include insufficient resources or capacity for effective collaboration (44%) and internal silos along with limited communication between departments (41%).
It notes that just a third (33%) of organisations have outlined plans for significant restructuring to align sustainability goals with business strategy. Some 43% are considering minor adjustments or adaptations in the near future.
You can find the full report here.
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