Corporate responsibility risk needs to be better linked to remuneration, says KPMG

The KPMG Survey of Corporate Responsibility Reporting indicates that while many larger companies acknowledge corporate responsibility risk such as climate change, they do not incentivise executives to manage these risks effectively.

Three quarters (75 per cent) of the world’s 250 largest companies (G250) 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 10 (10 per cent) that reports on CR clearly link CR performance to remuneration, suggesting that many companies are failing to incentivise their executives to manage these risks effectively. 

The survey also found that only five per cent of G250 reporting companies quantify and report the potential impacts of environmental and social risks on financial performance.

Yvo de Boer, KPMG’s global chairman of climate change and sustainability services, said: ‘Environmental and social risks can affect 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.’

The KPMG Survey of Corporate Responsibility Reporting 2013 is published primarily for business leaders, company boards and CR and sustainability professionals and provides a snapshot of current global trends in CR reporting 

This year, the survey, which has been regularly published since 1993, covered 41 countries and 4,100 companies across 15 industry sectors.