Once seen as a regulatory formality, Environmental, Social, and Governance (ESG) assurance is fast becoming a core strategy for earning trust, unlocking value, and future-proofing business, according to the latest research from KPMG.

The professional service firm’s latest ESG Assurance Maturity Index found that the first wave of firms complying with the EU’s sweeping Corporate Sustainability Reporting Directive (CSRD) framework are seeing tangible gains after meeting the new requirements.

The study found that 60% expect a greater market share or an expanded client base, while more than 54% anticipate improved profitability. Added to that, 52% believe it will strengthen their reputation, and almost half expect greater shareholder value alongside reduced costs.

After surveying more than 1,300 senior executives and board members with ESG reporting duties, KPMG identified three distinct categories of ESG assurance maturity, with firms being either ‘leaders’, ‘advancers’ or ‘beginners’.

Leaders in particular show strong board and tech momentum, with 95% of their boards actively identifying ESG risks and opportunities, and 89% are taking ESG-related actions. 

According to KPMG, leaders are also the most likely to adopt digital tools to meet ESG compliance rules, with the take-up of cloud tech (83%), ESG platforms (50%), dashboards (53%) and focused AI tools (16%) all increasing over the last three years.

Even among those leading, however, operational gaps persist. KPMG found that only 5% of these companies have ESG targets fully broken down into all operational functions, monitored and incentivised, highlighting a major opportunity for improvement.

While last year’s report found financial services at the forefront of ESG assurance, likely driven by the rapid changes being introduced across the EU and UK, this year shows more of a convergence, with telecoms, technology, financial services, manufacturing and consumer retail sectors catching up.

However, for many companies, there is still room to improve. Amid geopolitical headwinds and a shifting regulatory agenda, this year’s Index shows the overall readiness score of respondents has dipped, from 47.7 to 46.9. 

Even now, two years since KPMG’s initial survey, 76% of businesses remain in the early or mid-stages of ESG maturity.

Recommended reading

• FinTech Scotland Launches ESG Innovation Challenge
• Boards Increasingly Aware of Risks Posed by Ignoring ESG
• ESG A Top Priority for Cloud Migration Projects

This lag can in large part be explained by the rising complexity of reporting requirements, cited by more than half (51%) of companies as a critical barrier, up from 41% last year.

That, coupled with what are perceived as unclear, evolving requirements (49%), the costs associated with compliance (33%), and inadequate access to data (46%), are all standing in the way of progress, with each one presenting a bigger challenge than in 2024.

“The overall lack of progress in operationalising targets is worrying,” said Neil Morris, global head of assurance and ESG methodology at KPMG International.

“It is important that sustainability goals drive true strategic change in the way that businesses operate, rather than just becoming a framework for reporting.”