Companies should set ‘audacious’ ESG targets and restructure accordingly, say Big Four bosses

Senior leaders from the Big Four accountancy firms have called on companies to adopt “audacious” ESG targets and implement “organisational change at the governance, strategy, risk management and performance management levels” to achieve those goals.

The statement, issued yesterday, was co-signed by EY CEO Carmine Di Sibio, Deloitte CEO Punit Renjen, KPMG CEO Bill Thomas and PwC Chairman Robert Moritz.

It follows the publication last year of ESG disclosure guidelines by the firms in collaboration with the World Economic Forum (WEF). 

According to the accountancy firms, companies need to start embedding ESG into their strategies and focus on disclosure of  “meaningful ESG performance information” to raise the quality of ESG reporting in line with financial reporting.

Prolonging this will increase compliance costs and reporting complexity for companies who will need to abide by sustainability reporting rules in the future, they said.

The statement comes weeks after G7 finance ministers formally backed the use of mandatory climate-related financial disclosures aligned to the TCFD recommendations. 

Domestically,  the US Securities and Exchange Commission is due to propose ESG disclosure rules by end-2021, while large EU companies need to comply with the first phase of EU Taxonomy reporting from next year. Large listed companies in the EU already have to disclose information on environmental and social matters under the Non-Financial Reporting Directive, set to be revamped into a new Corporate Sustainability Reporting Directive in coming years which will include more detailed reporting requirements and cover an extended scope of companies.  Similarly, the UK is consulting on TCFD-aligned reporting rules which will be applied from 2021.

In their previous collaboration, the WEF and the Big Four developed a series of so-called Stakeholder Capitalism Metrics – drawn from existing sustainability reporting standards – as a guide for corporate reporting. In today’s statement, they said these metrics, “which include TCFD, can be a starting point for companies to prepare for these changes by performing due diligence and implementing or refining reporting processes”.

But last year’s effort has been received with some skepticism, with commentators describing it as “essentially a cocktail of metrics borrowed from the arduous work by other initiatives” and a distraction from similar projects being undertaken by global accounting standard-setters.

Last month, PwC announced a major ESG push which included plans to hire 100,000 new employees at a cost of $12bn, while KPMG has launched a new ESG service called KPMG Impact.