KPMG meets CSRD Our story (so far)

KPMG N.V. Integrated report 2023/2024

Our CEO about CSRD

Read the full message from our CEO in our integrated report

We welcome the introduction of CSRD, which requires more companies to report on their sustainability impact, risks, and opportunities – and how they are managed – in a more extensive, standardized, and comparable way.

This year’s CSRD implementation marks an important step forward in our reporting, pushing us to scrutinize our own sustainability performance, how we track it, and how we communicate transparently about progress and areas for improvement. Using our experience and the challenges we faced, we aim to guide our clients by setting a strong example through our reporting practices.”

Stephanie Hottenhuis
CEO, KPMG N.V.

There is a new feature on the corporate reporting landscape: the European Union (EU)’s Corporate Sustainability Reporting Directive (CSRD) (new window). Pending the transposition of CSRD into Dutch legislation, mandatory compliance with the Directive, and the associated European Sustainability Reporting Standards (ESRS), is expected to be phased in from 2024 – requiring many companies in the Netherlands and beyond to grapple with the world’s most stringent disclosure requirements on environmental, social, and governance (ESG) topics.

CSRD poses a new and daunting challenge for organizations, including many of our clients at KPMG N.V. As demand for our support on CSRD-compliant reporting rises, we are committed not only to ensuring we are equipped to meet clients’ needs and increase public trust in sustainability disclosures, but also to setting a strong example through our own reporting practices.

Accordingly, December 2024 saw us publish our first-ever sustainability statement prepared in accordance with the first set of ESRS adopted by the EU, within our Integrated report 2023/2024 (new window). We chose to do this voluntarily, reporting under limited assurance two years before KPMG N.V. is legally required to, pending the transposition of the CSRD into Dutch legislation. With more than 30 years of sustainability experience behind us, we are determined to continue leading the way for our clients and our industry when it comes to transparency on our ESG performance.

Here, we share insights into our journey as a CSRD frontrunner and some valuable lessons learned along the way.

CSRD insights & learnings

Establishing ownership and expertise

At KPMG N.V., our Sustainability Advisory team gave us the advantage of in-house ESG knowledge to harness in our inaugural sustainability statement. But CSRD and the ESRS are still new to everyone, so when it comes to creating a compliant sustainability statement, who takes the lead? Who should be consulted for expert input? And who has the final say?

One of the biggest challenges we faced in our first year of CSRD reporting was ensuring the right people were involved at the right time – and then managing everyone’s questions and opinions.

Do:

Do involve the financial department early in the project, since your financial reporting experts are responsible for the sustainability statement.The statement is embedded in the management report and connected with the financial statements. Financial governance is key, even during this non-financial reporting challenge.

Do engage the experts: invest in CSRD training and development for key in-house stakeholders and bring in external support and advice.

Don't:

Don’t let too many cooks into the kitchen. Although – or perhaps because – the sustainability statement needs the knowledge and expertise of many different people in your organization, it helps to designate a core group to drive the process, provide updates, and take ownership of (parts of) the project.

Getting to grips with double materiality

At the heart of CSRD compliance is a double materiality assessment (DMA): the process used to identify and prioritize the sustainability topics that are material for (and must therefore be reported on by) the organization. As the name suggests, the DMA requires companies to adopt a dual perspective, considering the financial materiality (outside-in) and the impact materiality (inside-out) of a given E, S, or G topic.

For us, the most important lesson from the DMA was the importance of understanding and defining each sustainability matter, as this helps when addressing the CSRD reporting requirements and prevents questions during implementation. Be aware that this is not a quick fix, but a time-consuming process. We relied heavily on the guidance of our Sustainability Advisory team in understanding the different (sub-)topics and their impact and scope.

Do:

Do start as soon as possible and engage all relevant stakeholders early on.

Do review what your peers are doing in their DMAs, which can support you in feeding yours. There’s lots to learn from early adopters, and doing so can help you challenge your own initial DMA in the implementation phase.

Don't:

Don’t think the DMA is set in stone: prepare to take on new insights in future years. After all, the DMA relates to the sustainability statement of the reporting year in question. Sustainability and/or business changes should be reflected in future DMAs and sustainability statements.

Gathering and understanding the data

Even though, as a professional services firm, KPMG N.V. has a relatively small environmental footprint, mapping all the data points required for our sustainability statement was a significant undertaking. Like all companies in their first year of CSRD compliance, we started by building our disclosures. Enriching existing sustainability reporting and disclosures in line with the ESRS requirements was a challenge that provided insight on what could be improved in our organization, processes, and data. Even though most of our sustainability matters relate to our own workforce, we found providing information on all data points in line with the specific ESRS disclosure requirements to be a significant undertaking. The first year was a manual process that we will automate in the years to come.

The process forced us to look critically at any gaps in our policies, actions, and targets – as well as at how we measure them. This was a useful exercise, prompting us to consider our vision on a particular topic and our strategy for realizing our ambitions.

Do:

Do look carefully at all material data points and consider how to structure your disclosures to ensure the information flows clearly through your report. Evaluate the process after publishing your first CSRD report to reflect on quick wins for next year.

Do make use of guidance from the European Financial Reporting Advisory Group (EFRAG), as this can be a great help in interpretating the requirements, resolving questions, and making decisions.

Do remember that not every data point is material: even at the requirement level, you need to decide on materiality of information. Of course, this requires a thorough understanding not only of the regulation but also of your organization.

Do keep in mind that the metrics in the ESRS may deviate from your existing metrics, because of either a different methodology or a different definition. It’s important to decide on how you interpret the requirements and to discuss this with your auditor to ensure and prepare for assurance in time.

Do keep track of all decisions and documentation – this is critical for ensuring a robust audit trail. Remember, one aim of the CSRD report is to ensure your data can be compared with that of other companies.

Don't:

Don’t underestimate the scale of the challenge – start as soon as possible.

Don’t hesitate to bring in an external advisor if your internal teams need support.

Putting pen to paper

It is important to remember that the sustainability statement is not a marketing brochure but an audited and regulated disclosure. After all, the goal of CSRD is to drive the sustainability transformation by informing stakeholders on the sustainability performance of the organization in a consistent, transparent, and comparable way.

Drafting a sustainability statement that met the disclosure requirements while still being a clear and readable document was a new challenge – but one that we embraced. Our reporting team worked hard to gain the buy-in of all internal stakeholders, prepare them to provide performance results in good time, and – crucially – manage their expectations around the more factual “feel” of the statement.

Do:

Do be vulnerable: report openly and transparently on areas for improvement, not just on positive progress.

Do get internal stakeholders on board – both with the need to comply with the ESRS requirements and with the purpose of the sustainability statement.

Do record any learnings and action points that could make next year’s drafting process easier.

Do embrace the insights that this regulation will bring you. Once the statement is ready, you’ll have a much clearer view on your sustainability performance – so you can identify where there’s room for improvement and any internal and/or external reporting that’s no longer serving you or your stakeholders.

Gaining the stamp of approval

Once transposed into Dutch law, CSRD will require limited assurance on the sustainability statement. We opted for voluntary limited assurance from our external auditor. As soon as the obligation for assurance sets in, it is essential to make sure you collect auditable documentation that supports the reported datapoints.

At KPMG N.V., we found the first year’s documentation process – which we approached by writing in-depth position papers for our sustainability matters – to be a major undertaking in terms of time and complexity. Nevertheless, it was also a valuable resource for both our internal teams and our auditors, supporting everyone when it came to reviewing, editing, documentation, and assurance.

Do

Do engage your external auditor as soon as possible.

Do thoroughly document all decisions and evidence backing up your disclosures.

Your trusted CSRD partner

At KPMG N.V., we understand that CSRD can be a demanding prospect – which is why we are committed to using our own experience to help our clients overcome the challenges the process can bring. From the first steps to the final sign-off, our Sustainability advisors (new window) and specialist ESG auditors (new window) have the experience, expertise, and perspectives your organization needs to successfully navigate the CSRD journey.