Retail sector leads on climate reporting
Retailers have emerged as leaders when it comes to disclosing climate targets, trailing only the technology, media and telecommunications sector in transparency, according to a KPMG report on corporate sustainability reporting.
Why it matters: As shareholders push for more ESG disclosure, companies are investing in startups tracking that data throughout their operations and through the more difficult-to-monitor supply chain.
What they're saying: "We're seeing a lot of investment now in the implementation of process and controls and technologies to be able to improve the quality of that data," Maura Hodge, KPMG's ESG audit leader, tells Axios.
- Companies are pushing to make the data “investor grade,” she says, and prove the statements and the claims that they're making.
By the numbers: Retail stood out among the 250 largest companies by revenue globally.
- About 88% of retail companies disclosed carbon targets, compared with 89% by the TMT sector and 83% by oil and gas.
Zoom in: While reputational risk is driving disclosure for most retailers, access to capital plays a large part, Hodge says.
- Especially when companies want to tap parts of the bond market that are linked to sustainability targets, she adds.
- “We see companies entering into or just attaching some of their regular credit agreements, their revolvers, things like that, and having their interest rates tied to their commitments and their targets,” Hodge says.
- Investors are also making decisions based on a company’s performance or the targets that they set around environmental and climate issues, Hodge says.
Zoom out: Getting to 100% disclosure in the retail sector is difficult, Hodge says, because of the sheer volume of data that needs to be collected in order to set those targets.
- Retailers have large real estate footprints, supply chains and output.
- Hodge says this seriously complicates calculating the industry's Scope 3 emissions, or indirect emissions that stem from customers using the company’s products or from suppliers making those products.
Context: Only 2% of companies have visibility into their supply chains beyond their most direct suppliers, according to the consultancy, McKinsey.
State of play: As the industry calls for greater ESG transparency, several technology solutions tracking sustainability practices and the supply chain have garnered funding in recent months.
- ESG Book, one of the largest sustainability data-tracking sites, raised $35 million in Series B funding in June.
- Circulor, a British startup that maps supply chains for greener production, raised $25 million in Series B funding in the same month.
- HowGood, a sustainability data platform, has raised a $12.5 million funding round led by impact investor Titan Grove.