by Bill Thomas*
2021 doesn’t yet feel that much different from 2020. Infection rates are spiking, healthcare systems are buckling, and people are suffering. This will be another difficult year but what will distinguish this year from last, isn’t just the hope and promise of a vaccine – which is certainly welcome – it is the recognized sense of urgency across all sectors of society to put things on the right track for future generations.
The pandemic has magnified and accelerated many faults across society that need to be addressed. Climate change. Racial injustice. Economic inequality. Rising unemployment. It’s a daunting list of distinct but interrelated issues that require big thinking and swift action, especially from the business world. A humble but potent answer starts with implementing unified, transparent and comparable Environmental, Social and Governance (ESG) metrics. These will help us measure progress as we build towards a better, sustainable future and help make business more answerable to the many stakeholders that demand and deserve a say.
ESG is here to stay
Like so many business trends that were accelerated and prioritized by the pandemic, the corporate world’s embrace of ESG has been an important and welcome development. It has taken time, but more and more companies and importantly investors see worth in using ESG metrics to measure their total value, and to measure the sustainability and societal impact of a company. In fact, early adopters were rewarded during a tragic and incredibly volatile year; companies with better ESG ratings were in a better position than others in 2020.
What gets measured, gets managed
However, we only get the needed scale if everyone is reporting on the same issues in the same way. Businesses and organizations want and need to measure performance but are looking for consistency. Stakeholders too want to understand performance. It is only by measuring on common standards that we will we be able to deliver a meaningful, quantifiable impact – just as we do with financial results. The idea is not complex, but just as was the case nearly 50 years ago, setting a consistent set of standards for reporting is not easy. Luckily for us, we aren’t starting from scratch. We can get it done, and working together, we can get it done soon.
The recommended metrics that KPMG, other members of the Big 4, working with the World Economic Forum and fellow International Business Council members helped advance are taken from existing ESG standards and practices (like SASB, GRI and TCFD) – they are not a new standard or framework. Through broad consultation, the project team identified some of the highest priority ESG topics that companies can voluntarily use as a baseline and include within their mainstream reporting on business performance. All of that will lead to a better understanding of value for investors and, in turn, more freedom for leadership to manage their business for the long term.
Perfect can’t get in the way of good
In a perfect world, universal ESG-focussed metrics that are unified, transparent and comparable would already hold the same sway as GAAP or IFRS, but we aren’t there yet. It will take time for governmental agencies and others to fully adopt a system. But their time will come.
For many companies, I appreciate that it may be difficult, and costly to provide the data. It’s another requirement on already stretched resources, and not all businesses will be able to report against all the metrics straight away – KPMG included. Some do not have a perfect ESG footprint or even the perfect data set, so there may be some reluctance to put the data you have out there. This is undoubtedly going to be an imperfect journey but getting started today, following the metrics I mention above or similar, may save time and money in the long run – especially if it can help performance in a year like 2020.
At KPMG, for the first time we have brought together our firm’s ESG commitments under one umbrella in Our Impact Plan. It’s a start, hardly perfect, and was a challenge, but I am proud we did it. We learned more about our organization, and we have started to outline a roadmap of how we can change for the better and how we will measure our progress in meeting our commitments – all things that can help move the needle and contribute to solutions to the societal issues we all face.
If 2020 was the year of the pandemic, let’s make 2021 the year we build a better world – together, for better.
*Chairman and Chief Executive Officer, KPMG International
**first published in: www.weforum.org
By: N. Peter Kramer
