Top Aussie companies are catching on to the growing ESG reporting trend, but most are doing so without substantial targets or pathways to action, according to a new report by financial services giant PwC.
The annual analysis of ESG reporting on the ASX 200 showed 87 per cent of companies delivered “substantial meaningful” ESG reporting — up 29 per cent from the year before.
However, it also revealed a concerning lack of detailed targets to go along with the lofty ambitions.
On the issue of climate change, only 36 per cent of companies assessed had a net-zero target, while just four per cent articulated carbon-negative plans and goals.
Also, despite the high number of companies publishing ESG reports, well over half did not include short, medium and long-term goals.
PwC Australia, ESG assurance lead Matthew Lunn said, without “measurable and assurable” key performance indicators and science-based targets, companies could be seen to be “ESG washing, or greenwashing”.
“There is an important delineation between reporting ESG information and executing on an integrated ESG strategy,” Mr Lunn explained.
“It’s essential that companies are setting transparent and meaningful targets based on the strategies they disclose.”
According to the report, Australian companies’ eagerness to publish ESG reports stemmed from a desire to keep pace with changes overseas.
“While the Australian regulatory environment might be perceived as one with minimal ESG reporting obligations, changes around the globe are increasingly impacting Australian companies, particularly those who operate in territories with more sophisticated regulatory systems,” Mr Lunn said.
“We’re witnessing enormous investor-driven demand for information about a company’s commitment to ESG activities.”
According to the report the more sophisticated expectations and education of stakeholders was being driven by global responses to crises such as the COVID-19 pandemic and climate change.
The report also identified proper ESG governance as essential to achieving progress, requiring boards to regularly assess whether their members are suitably skilled to navigate these issues.
Linking targets to management remuneration and long-term incentives — as is the case with other strategy related metrics — was one way Mr Lunn said companies could ensure responsibility and more effective reporting on issues ranging from climate change, risk management, human resources and diversity and inclusion.
“A strategy without a plan, a timeframe and measurable targets to be held accountable against is not a strategy, but merely a statement of ambition,” he said.
“Short, medium and long-term plans are needed to ensure progress is made against a company’s ESG strategies with targets and KPIs in order to make progress measurable.”