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Many companies need to improve their measurement of risks in hitting sustainability goals, says PwC.
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Global ESG standards ‘a stretch target for ASX200’
24 October 2022
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ASX200 companies have lifted their game on environmental, social, and governance (ESG) reporting over the past three years but will have to go further to hit international standards, according to analysis by PwC Australia.
Many organisations still needed to improve their financial disclosures of the risks and opportunities, said assurance leader at PwC Australia Kristin Stubbins.
“Significant progress has been made in measuring climate and sustainability performance, with half of the companies in our analysis including some disclosure of Scope 3 emissions,” she said.
“Overall, the ASX200 showed year-on-year improvements in reporting on their sustainability strategies and identifying material topics, however, many companies are still working up the maturity curve in setting specific targets in these areas and developing disclosures that measure progress against targets.”
One key area for improvement involved quantifying the financial impacts of risks and opportunities to meet the proposed goals of the International Sustainability Standards Board (ISSB).
PwC’s analysis revealed that most ESG reporting focused on the impact of the company on the economy, environment, and people, rather than the financial impact on the company’s value.
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Among ASX200 companies PwC found a 13 per cent increase in those disclosing a net zero commitment and almost a quarter disclosing climate change competencies of the board.
The analysis also revealed an increase in the understanding, measurement and reporting of emissions, with almost half disclosing Scope 3 emissions in some form.
“Material Scope 3 impacts will vary by industry and business model, but for companies, a large amount of emissions occur upstream via suppliers and raw materials, or downstream through use and disposal of products,” said Ms Stubbins.
“Given its far-reaching impact, every area of the business could be affected, from supply chain and product development to reporting and marketing.”
“While companies are making good first efforts in reporting Scope 3 emissions, these are often excluded from the scope of external assurance. We expect this to change over time as the quality and availability of underlying data improves.”
PwC also revealed that one-third of companies had an indigeneous reconciliation plan endorsed by Reconciliation Australia, compared to just 24 per cent in 2021.
In addition, there was a 30 per cent increase in the number of companies disclosing a gender diversity policy that included targets and reports against performance, with over three-quarters of ASX200 companies now divulging.
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