By: Maura Hodge, KPMG US Sustainability Leader

The first wave of European Sustainability Reporting Standards (ESRS) reports is revealing critical insights that extend far beyond regulatory compliance. KPMG’s new “Real-time ESRS: FAST 50” analysis examines 50 early sustainability statements published in January and February 2025, uncovering significant learnings that apply to all companies navigating the evolving ESG reporting landscape.

The Double Materiality Challenge

As the ESRS required consideration of double materiality principles, we have a first glimpse into how companies evaluate impact and financial materiality together. Our analysis revealed striking disparities between identified impacts versus financial risks or opportunities. In fact, 28% of companies with just 1-5 risks identified over four times as many negative impacts. Similarly, 16% of companies that identified no opportunities still reported over three times as many positive impacts. These findings raise important questions about how organizations perceive the relationship between their sustainability impacts and financial materiality.

In my experience the data suggests many organizations still view sustainability impacts as separate from financial materiality, rather than recognizing how deeply interconnected they are. This separation hinders companies from fully integrating sustainability into strategic decision-making and risk management.

Beyond Data: Telling Your Sustainability Story

While companies have invested heavily in developing reporting processes, our analysis shows many struggled to craft a coherent narrative that linked their sustainability impacts, risks and opportunities (IROs) to business strategy. The sheer complexity of ESRS implementation often overwhelmed attempts to communicate a company’s sustainability journey effectively.

This observation resonates with my experience advising organizations on ESG reporting. Companies that start from data without first establishing a clear strategic vision for how they view sustainability often produce reports that lack cohesion and fail to resonate with stakeholders. In contrast, organizations that begin with their strategic priorities and then determine what metrics best measure progress tend to produce more compelling and credible sustainability communications.

Five Key Lessons for Better ESG Reporting

Based on KPMG’s analysis, here are five critical actions every organization should consider, whether reporting under international standards or even for voluntary purposes:

1. Tailor stakeholder engagement strategies
Our research confirms that passive methods like questionnaires often yield limited insights. Companies that invested in direct interviews or focus groups with stakeholders who understood double materiality concepts gained significantly more valuable input. Consider stakeholders’ level of familiarity with sustainability concepts when designing engagement approaches. Be sure to engage others in the organization who are already performing external stakeholder outreach.

2. Leverage climate reporting maturity
Most companies demonstrated greater comfort with climate disclosures compared to other environmental or social topics. Some 86% disclosed information about scenario analysis, and 62% had net-zero targets. This foundation provides an opportunity to extend similar rigor to other material topics, applying lessons learned from climate reporting.

3. Balance quantitative metrics with strategic narrative
While the European Commission’s Omnibus proposals aim to prioritize quantitative datapoints over narrative text, our analysis suggests effective reporting requires both. Companies that clearly articulated how their policies drove actions, which in turn supported targets and ultimately produced measurable results, delivered more meaningful sustainability statements.

4. Optimize for both human and machine readability
We found that visual elements, highly effective for human readers, often challenged AI analysis tools. As investors and stakeholders increasingly use automated systems to analyze sustainability data, companies should design disclosures with both audiences in mind. Consider adding clear legends, consistent formatting, and structured tables to enhance machine readability.

5. Focus on the strategic connection
The most striking gap in many reports was the weak connection between material IROs and business strategy. Companies often relegated strategy discussion to a single section rather than demonstrating how sustainability considerations inform core business decisions. A more integrated approach would strengthen both reporting quality and strategic thinking.

The Opportunity Beyond Compliance

While much attention has focused on simplifying ESRS requirements through the European Commission’s Omnibus proposals, our analysis reveals that effective sustainability reporting transcends regulatory compliance. The companies that will distinguish themselves are those that view reporting as a strategic exercise rather than a compliance burden.

For global organizations navigating sustainability reporting requirements from multiple jurisdictions, these insights offer valuable guidance. The principles of stakeholder engagement, strategic integration, and balanced narrative apply universally, regardless of which standards govern disclosure.

The first wave of ESRS reporting demonstrates that sustainability disclosure is evolving from a specialized compliance exercise into a core business practice that requires cross-functional collaboration and executive leadership. Organizations that recognize this shift early will not only produce better reports but will likely make better-informed strategic decisions that enhance long-term value creation.

As sustainability reporting continues to mature, the focus should shift from simply getting the data right to telling a meaningful story about how your organization creates value while addressing environmental and social challenges. That’s the true measure of reporting excellence – and it’s attainable regardless of which regulatory framework you follow.

About the author:

Maura Hodge is KPMG’s Sustainability Leader in the US. The views expressed are her own based on KPMG’s “Real-time ESRS: FAST 50” report analyzing the early implementation of European Sustainability Reporting Standards.