CR risk not sufficiently tied to exec pay, says KPMG

Whie most large companies acknowledge risks from environmental and social “megaforces” like climate change, few link corporate responsibility to executive remuneration, finds a new report from business consultancy KPMG.

“Environmental and social risks can impact the supply chain, productivity, financial performance, reputation and brand value. So it is disappointing to see that so many companies still shy away from quantifying these risks in financial terms and few factor in the management of these risks into executive remuneration,” commented Yvo de Boer, KPMG’s Global Chairman, Climate Change & Sustainability Services.

Three quarters of the world’s 250 largest companies researched by KPMG acknowledge risks to their business from environmental and social “megaforces”, such as resource scarcity and climate change, in corporate responsibility (CR) reports. Yet only one in ten that reports on CR clearly links CR performance to remuneration, suggesting that many companies are failing to incentivise their executives to manage these risks effectively.

The findings from the eighth KPMG Survey of Corporate Responsibility Reporting also reveal that only 5% of G250 reporting companies quantify and report the potential impact of environmental and social risks on financial performance.
According to the KPMG survey results, financial quantification of environmental and social risks is most prevalent in the financial and oil & gas sectors.

The survey also shows that CR reporting is now a mainstream business activity all over the world practiced by 71% of the 4100 companies studied across 41 countries. The greatest growth in CR reporting has been in the Asia Pacific region where the average CR reporting rate has increased from 49% two years ago to 71% in the 2013 survey.

You can read the report in full here

Picture courtesy: © Ronalds Stikans | Dreamstime.com