KPMG Analyzes European Companies' ESRS Responses: "Lack of Linkage Between Business Strategy and Disclosure"

Analysis of Sustainability Reports of 50 Companies under ESRS

KPMG, a global accounting and consulting firm, announced on April 21 that it has published a report titled "ESG Disclosure Implications Based on Analysis of ESRS (European Sustainability Reporting Standards) Reports from 50 Leading European Companies." The report analyzes the sustainability reports of 50 major European companies.

This report designates the 50 companies that submitted their sustainability reports the earliest?between January and February 2025?under the European Union's new ESG disclosure standard, ESRS, as the "FAST 50." It provides an in-depth analysis of their initial response strategies and the level of disclosure.

According to the report, the FAST 50 companies are responding to the complex ESG disclosure requirements in various ways, including utilizing climate-related disclosure information and implementing tailored stakeholder engagement during double materiality assessments.

For climate-related disclosures, the FAST 50 companies were found to already be implementing climate disclosures based on TCFD (Task Force on Climate-related Financial Disclosures) and the GHG (Greenhouse Gas) Protocol. Among these, 62% have set net-zero targets. In addition, 86% disclosed scenario analysis information that includes both physical and transition risks, and most integrated this information into their corporate strategies.

In double materiality assessments, the need for customized stakeholder engagement strategies that consider stakeholders' technical expertise and experience was emphasized. The most common stage for external stakeholder participation in the double materiality assessment process was "potential IRO (Impact, Risk, Opportunity) identification" (60%), followed by "determination of significant IROs" (48%). On the other hand, the report pointed out the need for clearer guidelines and interpretations for double materiality assessments, and specifically called for further research on financial materiality assessments.

The lack of clear linkage between business strategies and disclosure content was also identified as a key area for improvement. While it is essential to effectively communicate a company's ESG narrative by connecting governance, strategy, risk management, targets, and metrics?the core elements of sustainability disclosure?some companies' disclosures lacked consistency, making it difficult to clearly demonstrate their sustainability performance.

ESRS is gaining attention as a core standard in the global ESG disclosure framework, alongside the disclosure standards of the ISSB (International Sustainability Standards Board) under the IFRS (International Financial Reporting Standards) Foundation. In Korea, the introduction of the KSSB standard, based on ISSB standards, is currently under discussion. This report is expected to serve as an important reference for domestic and international companies as they seek future response strategies.

Recently, the European Commission announced the Omnibus Package amendment, revealing plans to simplify ESRS disclosure items and restructure disclosure information to focus on quantitative data. These changes are expected to have a significant impact on how companies structure their sustainability reporting frameworks going forward.

Son Min, Executive Director in charge of ESG disclosure and assurance at Samjong KPMG, stated, "The ESRS disclosure trends among EU companies can provide meaningful insights for Korean companies as they develop strategies to respond to the Omnibus Package." He added, "Since climate-related disclosures already have accumulated discussions and implementation cases, the scope of future changes to disclosure standards is expected to be relatively limited." He further emphasized, "To effectively communicate a company's ESG strategy and story, it is necessary to continuously seek the optimal report structure."

This report was conducted on a diverse range of companies headquartered in the European Economic Area (EEA), without bias toward any particular industry or country. More in-depth analysis and case studies are planned for future editions.

Meanwhile, since its establishment in 2008 as the first of its kind in the industry, the Samjong KPMG ESG Business Group has provided integrated ESG services in various fields?including ESG management strategies, M&A (due diligence), assurance, and bond issuance?with a team of over 150 experts. In the ESG disclosure sector, the group offers one-stop services ranging from developing response strategies for each disclosure metric and data standardization, to building related IT systems and establishing low-carbon strategies to enhance disclosure performance.