KPMG study finds sustainability understanding outpaces financial impact measurement

Sustainability is no longer sitting neatly in the reporting lane. KPMG’s latest study says it is moving into capital allocation, deal logic and assurance expectations, which means the work now spans strategy, ESG, valuation, finance transformation and audit instead of living in a single specialist silo.

The practical message for KPMG professionals is hard to miss: clients may say they understand sustainability, but many still cannot tie it to profit, cash flow or valuation. That gap is where funding decisions get made, where board conversations get tougher, and where cross-functional teams either show up together or leave money and credibility on the table.

What the valuation gap looks like

Published on 22 June 2026, the study surveyed more than 2,000 executives across 19 countries and territories. KPMG says 72 percent of respondents understand their sustainability strategy, metrics and performance, but only 19 percent apply robust quantification approaches to measure the financial impact. In KPMG’s framing, that is the valuation gap: the story is increasingly understood, but the numbers are not yet consistently translated into financial terms.

The firm says four in five companies cannot measure sustainability’s impact on profit, cash flow or valuation, even though 60 percent say they factor sustainability into financial planning. That combination matters because it suggests sustainability has already entered planning meetings, but not always in a form that can survive a CFO review, a capital committee challenge or an audit trail. If a company cannot show whether an initiative affects EBITDA, capex or the balance sheet, the business case can stall even when the strategic logic is strong.

KPMG says the strongest use of advanced valuation methods shows up in banking and capital markets, energy and natural resources, and automotive. That is a useful clue about where the market is further along: sectors with heavier regulatory pressure, more visible transition risk and larger asset bases have had more reason to build valuation discipline around sustainability. For everyone else, the message is that the methods are becoming more common, not more optional.

Why this is becoming a boardroom issue

The study says rising executive understanding is being driven in large part by regulation and mandatory reporting requirements. That tracks with what many teams inside KPMG are seeing already: disclosure rules have forced more executives to learn the language of sustainability, but understanding a requirement is not the same thing as embedding it into financial decision making.

That difference matters for how KPMG teams are organized around clients. Strategy teams want to know where sustainability changes the competitive position. ESG teams need to define the metrics and the narrative. Finance teams need to convert those signals into budgets, forecasts and scenario models. Valuation specialists need to test how assumptions flow into enterprise value. Audit teams need evidence that the underlying controls, estimates and judgments are defensible. When those functions work in separate lanes, the client gets a reporting package; when they work together, it gets an investment thesis.

The broader risk is widening for companies that still treat sustainability as a compliance exercise. KPMG’s own report says the issue is not whether leaders are aware of sustainability risks and opportunities, but whether that awareness gets translated into the numbers that govern funding and capital allocation. In other words, the real governance shift is from describing sustainability to pricing it.

What the report says firms should do next

KPMG says the report includes perspectives from its subject matter experts and a case study on how companies can quantify sustainable value creation in practice, including an example focused on uplifting EBITDA at a portfolio company. That detail is important because it pushes sustainability work closer to the kinds of questions deal teams, finance transformation groups and private equity advisers already ask: what changes in revenue, cost, risk, working capital or exit value if the company acts now?

For KPMG professionals, that is where advisory work gets more concrete. Sustainability investments increasingly need to be translated into near-term economics, not just long-term intent. The report’s message is that a project can fail a narrow business-case test and still create value once the full set of effects is counted, which is exactly why robust quantification is becoming a prerequisite for approval rather than a nice-to-have appendix.

Simon Weaver, who leads KPMG’s Global ESG, Sustainability Advisory practice, sits at the center of that shift. His role is to help businesses embed sustainability into strategic decision making, and the study reinforces the point that understanding risk and opportunity is not enough on its own. The winning argument inside a boardroom is the one that connects sustainability to the language of the CEO and CFO: margin, valuation, capital intensity, resilience and return.

The reporting baseline is already higher than it was

This is not KPMG’s first signal that sustainability is becoming embedded in corporate governance. Its 2024 Survey of Sustainability Reporting reviewed 5,800 companies across the largest 100 companies in each covered market and found that double materiality, required under the EU’s Corporate Sustainability Reporting Directive, was already being used by half of the largest companies. That is a sign that reporting expectations are no longer experimental in the largest issuers.

KPMG’s U.S. summary of that survey said 40 percent of G250 companies connected sustainability performance to executive compensation. Its November 2024 global release went further, saying 95 percent of the world’s top 250 companies were already publishing carbon targets, more than half had a sustainability leader and 30 percent of top 100 companies considered sustainability in leadership pay. Taken together, those numbers show that sustainability is not sitting on the edge of corporate decision making anymore. It is already being tied to leadership, incentives and public commitments.

For KPMG teams, the implication is straightforward. Sustainability work now needs to be designed like a governance system, not a communications exercise. The firms that can connect strategy, finance, valuation, ESG and audit will be the ones helping clients make better capital decisions. The firms that keep those functions separate will keep producing reports, but they will miss the bigger shift: sustainability has become a valuation question, and valuation is where boardrooms decide what gets funded, slowed down or left behind.