HFS Highlight: KPMG Climate Accounting Infrastructure expands the sustainability proposition

Service providers are rapidly developing sustainability services and embedding them in their portfolios, but, despite this, the sustainability services ecosystem remains fragmented and undefined. As global sustainability reporting requirements tighten – enterprises will look towards providers who can tie reporting with the breadth of their service needs. KPMG is moving one step closer to a holistic sustainability services offering with its Climate Accounting Infrastructure (CAI) – adding to its advisory and broader services – to benchmark enterprise sustainability, master their climate data, and take enterprises on tailored pathways towards decarbonization and broader sustainability goals.

Data is key – and so is the measuring, monitoring, reporting, and continuous improvement of enterprise sustainability

Enterprise sustainability reporting requirements vary across the globe, and tracking sustainability performance alongside enterprise goals and strategies is fundamental to facilitating decisions and managing risks. It will underpin decisions and fuel the wider actions enterprises need to take around sustainability – from optimization and efficiency gains all the way through to offsetting and buying carbon credits, it will even validate the effects of these measures. Unfortunately, some enterprises think it’s good enough just to report and disclose, many enterprises are even guilty of “greenwashing”, which is when they provide a false impression that their products and services are more environmentally friendly. There’s optimism that the new Biden administration will make sustainability a core part of the future – and drive this globally – but this does mean that any enterprise not already on a roadmap to decarbonizing, and sorting out its broader environmental, social, or governance (ESG) portfolio is in for a rough time if they don’t start quickly.

Without the strategy, methods, and tools for collecting and using sustainability data many enterprises will fail to reach their sustainability goals across their ESG factors – and it all means nothing if they don’t have the necessary data to prove their sustainability efforts. Clearly, continuous monitoring and reporting are vital, which means countless vendors are bringing forward their own solutions.

KPMG’s Climate Accounting Infrastructure (CAI) seeks to create provable measurements, monitoring, and reporting for enterprise sustainability goals

 So, we now know that it’s crucial that businesses making sustainability claims are backing it up with the necessary decisions and investments. This sparked the idea for KPMG’s CAI, which seeks to help enterprises accurately measure their greenhouse gas emissions and broader sustainability criteria. To do this, CAI leverages the Internet of Things (IoT) to collect emissions data, renewable energy generation data and offset data from the points of generation, and stores it on a blockchain – allowing companies to verify their claims with the transparency and immutability provided by that blockchain. CAI will also collect, store and analyze large quantities of environmental data (from third parties as well as enterprises and their ecosystems), and use it in combination with a company’s own data to deploy AI/ML predictive and risk models. It’s capabilities are outlined in Exhibit 1.

KPMG recognized that enterprises need a partner that can provide a holistic set of technology and services, which means alongside CAI, it can also integrate consulting and strategy services, as well as, crucially, external benchmarking for its clients to compare themselves effectively with their peers. The offering even allows enterprise to automate their reporting to different global entities – a significant time and cost-saver for enterprises. Moving forward, KPMG hope to leverage CAI to tackle emissions in its client’s supply chains, by integrating data and/or services clients currently have in either AWS or Azure clouds, or deploying on either cloud provider. KPMG aren’t just preaching this to their clients, but they’re also looking to leverage this themselves, proving their belief in their CAI offering.

KPMG outlines two leading use-cases for CAI – and the benefits extend far beyond climate reporting

While reporting might be the clear and immediate selling point of KPMG’s CAI, it’s not the only advantage. Enterprises can also leverage the new level of insight that CAI can provide in combination with analytics and other tools, to identify areas, for example, to improve their bottom lines by eliminating excessive energy use, or improve inefficient process. As well as this, we already know that there’s a market for “green” and “sustainable” products and services, and consumers and businesses are willing to pay a premium for them, so enterprises successfully leveraging CAI can offer customers a level of trust that their competitors cannot.

When we connected with KPMG to discuss their CAI offering, they outlined two of their priority sectors:

• Energy (Oil and Gas): KPMG’s CAI could help oil and gas firms accurately capture, measure and verify their emissions with ease and meet ever-changing regulatory demands. Pressure from investors and the public, combined with new ways of looking at emissions footprint and data management, means that trade is beginning to differentiate around sustainability: for example, natural gas with lower methane emissions is allowing customers to say they’re working towards net-zero. But companies need an increased level of confidence in that footprint. Sensors, high-level satellites, and other technologies can capture and verify data – compared against other public sources through CAI – and for example certify a gas or oil well’s footprint – using the data to prove and disprove industry and enterprise sustainability. Enhanced ESG reporting is also a goal for legal teams – when legal cases around climate change can be made with more certainty.
• Enterprise Real Estate: Businesses with a large real estate portfolio are often asked to be transparent about their emissions by customers and regulators, and their sustainability practices can impact the valuation of a portfolio. By leveraging CAI, they can collect reliable real-time data from their buildings and use it to meet transparency demands, avoiding large fines, while also optimizing the purchasing of renewable energy credits and carbon offset measures.

The Bottom Line: Sustainability services are here to stay, and KPMG’s CAI is a clear statement of intent – service providers need to serious or get left behind.

Enterprises know they need to do things differently, and it’s crucial that service providers arm themselves with offerings that will change how clients measure, monitor and improve their sustainability efforts. KPMG’s CAI is a clear statement of intent, adding to its existing services and advisory expertise, it’s a holistic offering that sets the benchmark for other providers to follow.