Many Chinese firms are skipping step 1 when it comes to ESG disclosures, says KPMG study of materiality assessments
- Chinese companies trail behind their global peers in performing the assessments, which should precede any disclosures, KPMG says
- Materiality assessments are ‘the cornerstone of ESG reporting, as well as the starting point for making valid disclosures’, the firm says in a report
Many Chinese companies are making disclosures about environment, social and governance (ESG) issues without first performing crucial assessments that should precede any such disclosures to ensure their relevance, according to a study by KPMG.
The firm said Chinese companies trail behind their global peers in performing so-called materiality assessments, which allow a company to decide which issues require disclosure by first determining which issues are the most important to the company itself, its investors and other stakeholders.
Only 64 per cent of the top 100 companies by revenue in China that have published ESG reports have performed such assessments, according to KPMG, versus 75 per cent among 5,800 companies in 58 jurisdictions that filed such reports, the accounting and consulting firm said.
“Further progress is needed,” KPMG said in a report published this month. “Materiality assessments are considered the cornerstone of ESG reporting, as well as the starting point for making valid disclosures.”
Regular engagement with key stakeholders is important for companies to keep up to date on ESG issues, which are evolving at a much faster pace than other operational issues, said Patrick Chu Man-wai, head of ESG reporting and assurance at KPMG China.