KPMG guide helps audit committees oversee ESG reporting risks

KPMG’s Board Leadership Centre in Canada organizes its ESG guide for audit committees around three issues: applicable sustainability reporting standards, climate-related impacts on financial statements and internal controls, and ESG external assurance. For audit and advisory teams, ESG is no longer something to park with the sustainability team and revisit at year-end.

What audit committees will now expect

The guide sits under KPMG’s Board Leadership Centre for audit committees in Canada. It matches the way audit committees actually work, moving from reporting rules to control design to the credibility of the final numbers.

In practice, that means your committee materials need to do more than describe ESG ambition. They need to show which standards apply in each jurisdiction, where climate assumptions affect estimates or disclosures, and how the control environment will stand up when someone asks for evidence.

The questions teams should be ready to answer

KPMG’s introduction to the guide calls ESG risks and opportunities, and their impact on long-term value creation, "top of mind for investors and other stakeholders." It identifies pressure from stakeholders, investors, regulatory bodies, employees, and others. For audit teams, that translates into a simple test: can you explain the data, the controls, and the accountability chain without improvising?

Audit committees are likely to press on three points:

• Which sustainability reporting standards apply, and where do they differ across entities or jurisdictions
• How climate-related impacts flow into the financial statements, internal controls, and disclosure controls
• What external assurance will cover, who owns it, and what evidence supports it

Those questions matter because ESG information often comes from systems that were built for operational reporting, not for audit-grade evidence. If the data is incomplete, the owner is unclear, or the control sits outside finance, the committee will expect that gap to be named, not buried.

Why internal audit is now part of the ESG conversation

In March 2023, KPMG Switzerland called ESG risks one of the most significant challenges for organizations and said effective internal auditing is essential in managing ESG risks and validating controls. For KPMG professionals, ESG is not just a reporting exercise; it is an internal-control problem that needs testing, escalation, and follow-through.

KPMG Ireland’s 2025 Audit Committee Handbook describes the audit committee as an oversight committee that must satisfy itself key controls are operating and that internal and external audits are effective. That is where ESG work now lands. If internal audit cannot trace the metric, test the control, and confirm who signs off, the committee will struggle to say it has fulfilled its oversight role.

What should go into the board pack

The guide works as a prep checklist. Before the audit committee meeting, KPMG teams should be ready to hand over a package that makes ESG oversight look like any other disciplined governance process.

A strong board pack should include:

• A standards map showing which sustainability reporting requirements apply and where differences across reporting entities sit
• A climate impact summary that connects assumptions, estimates, and financial statement disclosures
• A control map showing where ESG data is captured, validated, reviewed, and escalated
• An assurance plan that explains scope, timing, and any unresolved issues
• A short list of ownership gaps, so the committee knows which risks still need a decision

That format helps the committee satisfy itself that controls are operating and audits are effective. It also keeps the conversation out of the weeds and focused on the points that matter for governance.

External assurance is becoming a board issue, not a late-stage add-on

KPMG’s ESG Assurance Maturity Index 2025 describes sustainability expectations as having moved from a compliance exercise to a strategic imperative and presents ESG assurance as a way to build trust and unlock value. For audit committees, that changes assurance from a box-ticking step to a question of whether the company can defend its disclosures to investors, regulators, and other stakeholders.

The guide treats ESG external assurance as one of its core sections for a reason. Boards now need to understand not just whether assurance exists, but whether the underlying reporting process is strong enough to survive scrutiny. For KPMG audit and advisory teams, that means the earlier the assurance conversation starts, the easier it is to avoid last-minute redesigns in the reporting cycle.

Why the committee model is spreading

In April 2022, Accountancy Europe noted that the European Commission’s Corporate Sustainability Reporting Directive proposal assigned sustainability reporting and assurance tasks to audit committees. In May 2023, KPMG Nigeria said 54% of FTSE 100 companies already had some form of ESG committee.

ESG oversight is increasingly expected to sit in a formal committee structure, not as an informal management update. For multinational clients, that means audit committees are increasingly expected to understand cross-border reporting obligations and to coordinate with finance, risk, legal, and sustainability teams in one governance rhythm.

What it means inside KPMG

For KPMG staff, the guide also signals where the firm sees demand growing. Hayley Makrevski’s LinkedIn post captured the theme in one line: "With a changing world comes changing standards." It reflects a market where ESG conversations are being pulled into assurance, controls, and board governance, which creates more work across audit, advisory, and internal audit.