ESG Reporting:

A lever for
Transformation
People can be the key to
unlocking ESG Value Creation
 ESG Reporting: A Whole Organisation Opportunity 2

Whole organisation ownership and participation in the

ESG agenda is the key to unlocking ESG Value Creation
The context
The prominence of ESG reporting regulations has led to
it becoming a strong feature of the sustainability agenda
for many businesses. With a host of both mandatory
reporting regimes, and voluntary frameworks impacting
businesses, the focus of efforts to improve a businesses’
sustainability could quickly turn into a compliance
challenge.

Our recommended approach

The temptation to consider ESG reporting as a matter of
compliance is high, however in our view rather than an
obligation to comply with, organisations should use ESG
reporting as a catalyst for transformation and a lever to
engage the whole organisation in the delivery. The topics
typically covered are those that have potential to deliver
significant business value.
Taking the Corporate Sustainability Reporting Directive
(CSRD) as an example; by adopting an approach that
considers this as a blueprint to drive and achieve a
strategy for a sustainable business, organisations will
achieve greater return on their efforts than viewing it as a
regulatory compliance obligation or a ‘readiness’ exercise.
Either way huge change will be required for most
businesses.

The benefits
Organisations that choose to use CSRD as a mechanism
The importance of people and culture
to drive real change within their organisations, can gain Engaging the workforce and putting the right foundations
tangible benefits. KPMG’s CEO outlook, noted that of in place as the regulatory timeframes close in, will require
the business leaders surveyed, 70% agreed that ESG a more fundamental shift In mindset and full engagement
programmes have improved their financial performance, of the business. Considering ESG through the people lens
up from 37% in the previous survey with key benefits can be one of the major accelerants to unlocking value
including; creation from sustainability efforts. Tangible results can
be better achieved (and can therefore be reported upon)
reduced cost of capital;
through an engaged workforce that can see, feel and are
improved resilience of assets; and able to contribute to the success, in a transformed culture
enhanced employee and customer retention. of ESG Excellence.

Never has it been more important for organisations to be a catalyst for positive change.
Corporate sustainability should not be regarded as a simple compliance exercise - it should
be part of everything an organisation does. The time is now for organisations to rethink
their purpose, using ESG is a lever in reimagining culture. Behaviours are what will ultimately
drive the biggest change in an organisation’s impact on not only the climate but biodiversity,
human rights, inclusion and diversity, and the ethics of how business is conducted”
Conor McCarthy

© 2023 KPMG, an Irish partnership and a member firm of the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee. All rights reserved.
 ESG Reporting: A Whole Organisation Opportunity 3

Making Transformative Change Happen

The far reaching disclosure requirements of CSRD and other ESG reporting frameworks will
require change that extends beyond the finance function, to the level of organisational impact
associated with significant business transformation. For many organisations, change will be
required across core operational and support functions that assume responsibility for:

Operations & Compliance & Skills, talent Technology Resource

Supply chains governance & capacity & data management

Ultimately, core elements of process and technology will need to be updated to achieve ongoing compliance
with the directives, along with the associated costs, however, the greatest opportunity for transformative
change will be achieved through an organisation’s people. To deliver this change effectively, there are some
priority elements that can be considered ‘table stakes’:

01 02 03 04
A simple, compelling Leadership alignment: Constant dialogue: Educate your
Vision: Anchor your In our experience, There is a difference teams: Employees
efforts in a compelling transformative change between engagement may struggle to
and strong vision on progresses most and communication, as make the connection
sustainability. Your vision effectively where true engagement involves between ESG and
for your ESG ambitions leaders are aligned dialogue. Organisations their role. In addition
should be rooted firmly on the ‘end game’. need to provide clear to dialogue, ESG
in your strategy, with a Without true alignment opportunities for training programmes
need for understanding of the leadership, the feedback which are will help them uncover
and ownership both choices to be made to offered and undertaken in ‘the why’ required
at senior levels and unlock true value will an authentic way. In our for transformative
cascaded throughout the be compromised. Test view the tipping point for change and ultimately
organisation. This is best this alignment before any culture change is that enhance their active
achieved when this vision you begin, and consider 20% of the workforce are participation.
is visual and simplified and linking leadership influencers and will need
resonates at all levels of remuneration to the to truly believe in the
the business. outcomes, to progress change.
your transformation with
an increased level of
assurance.

© 2023 KPMG, an Irish partnership and a member firm of the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee. All rights reserved.
 ESG Reporting: A Whole Organisation Opportunity 4

Corporate Sustainability Reporting Directive – a snapshot

FY24
Reporting in
FY25
Reporting in
FY26
Reporting in
FY27
Reporting in
FY28
Reporting in
2025 2026 2027 2028 2029

Certain large companies

(large1 PIEs >500 employees)

Other large1 companies

Listed SMEs3,4 Option to opt out for two years

(except micro-undertakings2)

Non-EU parents3

1
Large companies are those that, on the balance sheet date, exceed two of the following three riteria (including EU and non-EU
subsidiaries): 250 employees, net revenue of EUR 40m or total assets of EUR 20m
2
Exemptions apply, for example, for micro-undertakings (companies that do not exceed two of the following three criteria
(including EU and non- EU subsidiaries): 10 employees, net revenue of EUR 700,000 or total assets of EUR 350,000 and for
certain debt listings.
3
Separate standards will be developed for SMEs and non-EU parent companies.
4
Small and non-complex institutions and captive insurers are treated like listed SMEs(the option to opt out until 2028 does not
apply unless they also meet the definition of an SME).

Overall requirements: General disclosures: Topic-specific disclosures:

Inclusion in the Annual Report Business model, strategy and policies Environmental
External (limited) assurance KPIs and targets (forward looking information) (incl. EU Taxonomy) Social
(as from FY2024) Company and sustainability governance Governance
Reporting principles Double materiality assessment and due diligence Sector-specific
Format and timing Risk and opportunity management standards

The scale of the challenge

In Ireland, KPMG’s Survey of Sustainability Reporting 2022*, showed
that 95% of N100 businesses surveyed engage in sustainability Most transformation efforts
reporting, with only 58% issuing reports that are specific to Ireland. fail due to an insufficient
Whilst this is encouraging it demonstrate that Irish businesses can focus on the areas that really
achieve greater value from their sustainability efforts. embed the right behaviours.
It comes as no surprise that,
Meaningful transformation through people according to the United Nations,
40% to 70% of a sustainability
Businesses can be forgiven for focusing their efforts on the strategies
and metrics to be put in place, however it cannot be overlooked that transformation will need to focus
an organisation’s people are the key, both to making change happen, on behaviours. In our experience
and, making it stick. Businesses will not achieve sustainable benefits a structured approach to culture
by taking a siloed approach. Leveraging all elements of the people change can help to guide a coherent
agenda throughout transformation ensures that the people experience set of organisational actions which
is at the core of any change effort. - maximising capability, retaining will drive the behaviours required
talent, optimising performance and unlocking ESG value creation. In for transformative change.
our view there are key interventions you can make in order to truly
leverage the organisational impact
* N100: Worldwide sample of the top 100 companies by revenue in 58 countries, territories and jurisdictions

© 2023 KPMG, an Irish partnership and a member firm of the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee. All rights reserved.
 ESG Reporting: A Whole Organisation Opportunity 5

Leveraging the Organisational Impact

Management systems to structure
implementation
Putting the right management systems in place
for Sustainability, is important to prevent the initial
‘enthusiasm’ for transformation dwindling. The right
systems will embed new ways of working that support
the longevity of the change. This will also enable the
business to get the balance right between monitoring/
measuring performance and truly driving improvement
across the sustainability agenda and the business itself.

Operating rhythm: Introducing, daily operating

rhythm routines such as team stand-ups as part of the
management system, is highly effective in embedding
the desired changes and behaviours. Akin to the success
seen for similar routines for the drive of operational
excellence or pursuit of safety goals, these interventions
can accelerate the leap from mere compliance with the
reporting frameworks to unlocking the potential value.
As simple first step, beginning operational meetings
with a sustainability agenda item, can create on onus on
teams to actively deliver the impact, rather than waiting
for the end of a CSRD reporting period, to scramble to The ESG agenda should be at the forefront of how
produce the metrics. you do business
With the comprehensive remit of ESG reporting, businesses
Investment in Skills and Roles: investment by will do well to apply deliberate interventions to how they
businesses will be required – to build the capability operate, in order to maximise the value of the effort that
across new specialist knowledge areas. For many, will be required. Key questions for organisations to consider
achieving this will mean supplementing internal include:
training for staff and upskilling of existing teams, with Will the structures within the business enable a smooth
onboarding of new sustainability skills. Consideration pathway from commitments to reporting on progress?
should be given to onboard the skill types that best Have we equipped leadership to support and lead the
align with the areas of highest impact identified in gap change?
analysis and double materiality exercises performed Where will the responsibilities align, to ensure adequate
in the early part of the reporting preparation journey. ownership?
This can mean onboarding skills not traditionally found
Are the right skills and capabilities in place and how do
within the business including climate specialists, carbon
we build and maintain knowledge?
accountants, human rights specialists or biodiversity
knowledge. Onboarding such specialist skills Will our governance structures be effective and are
requires understanding the full value chain impact and our business processes going to enable our staff to
opportunity that access to these new skills can provide. contribute in a meaningful way to sustainability?
This can logically be delivered in line with existing Clients are realising that designing the best-fit target
(or required) workforce planning approach, however, operating model that enables their businesses to address
like many of today’s business challenges, it can be the capabilities and requirements for ESG Reporting whilst
better achieved through the use of workforce planning maintaining the focus on their growth aspirations is a critical
technology, to accelerate the impact. step in getting the right things done.

A recent KPMG survey found that over 50% of

Millennials and Gen Z value ESG commitments
A management system that links high level from their employers and a growing number of
them are considered “climate quitters” – people
strategy to the daily tangible actions of seeking environmentally friendly companies and
teams is a key accelerator in unlocking leaving their jobs to join them. To engage the
value from your ESG efforts.“ workforce of the future, businesses will require a
meaningful focus on sustainability.
Allison Davis

© 2023 KPMG, an Irish partnership and a member firm of the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee. All rights reserved.
 ESG Reporting: A Whole Organisation Opportunity 6

How can KPMG help

Sustainability reporting is a rapidly evolving field, with CSRD providing the greatest
clarity and obligations for businesses operating in Ireland and Europe. Regulations and
standards being adopted by worldwide exchanges, investors and stakeholders will
further extend the requirements for businesses on the global stage. The range of ESG
metrics is vast and varies by sector, size and complexity. The opportunity to leverage
these obligations to truly create a sustainable business are immense.
Transforming a business to create a organisation in which acting in the interest of sustainability becomes ‘the way
things are done around here’, will require specific and deliberate action by businesses.

KPMG in Ireland is at the forefront of

sustainability transformation. We can support
clients with navigating the landscape of ESG
reporting, building the vision and strategy
for sustainability for your organisation and
supporting you to deliver the associated actions
and plan, ensuring that your people are engaged
throughout the journey.

Our support is enabling our clients to unlock the

true potential of ESG for their businesses and
drive true long-lasting value to not only their own
businesses, but to investors, stakeholders and
wider society as a whole.

We can help you:

Build your ESG vision

Equip your leaders with the knowledge,

skills and behaviours required, to lead
from the front

Develop the right strategies, metrics,

targets and policies to ensure CSRD
obligations are met

Engage with your value chain and wider

communities

Ensure that ESG is embedded across all

aspects of your employee lifecycle

Develop, manage and implement your

transformation plan

© 2023 KPMG, an Irish partnership and a member firm of the KPMG global organization of independent member firms affiliated with
KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Finally:
ESG reporting and the required business effort to achieve compliance will be hugely significant for
businesses in the coming years It will fundamentally change how a business is run, with the potential to;

Create business value and a competitive edge;

Allow businesses to make better strategic and operational decisions.
Encourage a culture of transparency and invoke the trust of stakeholders and customers; and
Provide a meaningful and attractive business for current and future employees;
For those that get it right, the benefits of seizing the opportunity that ESG reporting provides to truly
achieve sustainability transformation will be substantial. At KPMG we are looking forward to engaging
with our clients to achieve that goal.

If you are ready to begin your approach to ESG reporting, or have already begun your
journey and seek to increase the potential value for your business, please reach out to a
member of our team.

Contact

Patrick Farrell Conor McCarthy

Partner Partner
Head of ESG Consulting Head of People and Change
e: [email protected] e: [email protected]

Allison Davis Susan Moylan

Director Associate Director
ESG Consulting ESG Consulting
e: [email protected] e: [email protected]

Russell Smyth Shane O’Reilly

Partner MD Sustainable Futures
Head of KPMG Sustainable Futures ESG Strategy
e: [email protected] e: [email protected]

kpmg.ie
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Produced by: KPMG’s Creative Services. Publication Date: October 2023. (9651)