Takeaways

• KPMG survey shows that while most companies understand their sustainability strategy, only a small number can accurately measure its financial impact.
• Just 19% of companies use advanced valuation methods to assess sustainability risks and sustainability opportunities.
• Experts warn that weak sustainability valuation could lead businesses to overlook risks and miss long-term value creation opportunities.

Most companies have become more aware of sustainability-related challenges and opportunities, but few are able to measure how these factors affect their financial performance, according to a new KPMG survey.

The report, Closing the Sustainability Valuation Gap, found that although sustainability has become a key part of corporate planning, businesses continue to face difficulties in linking environmental and social initiatives to measurable financial outcomes. This disconnect could affect investment decisions, business planning, and long-term growth.

The survey gathered responses from more than 2,000 C-suite and senior executives representing companies with annual revenues of at least $100 million across 19 countries and multiple industries.

The findings show that 72% of executives have a detailed understanding of their company's sustainability strategy, including its goals, performance, and key metrics. In addition, 60% said their organizations already consider sustainability risks and sustainability opportunities during financial planning, while half reported that sustainability has become an essential part of overall business strategy.

Read More: Understanding ESG Metrics: Measuring Environmental, Social, and Governance Performance

Despite this growing focus, only 19% of companies use widely accepted financial valuation techniques to calculate the financial impact of sustainability initiatives. Advanced approaches such as digital twins and Monte Carlo simulations remain uncommon, limiting companies' ability to assess how sustainability influences business performance, operational efficiency, innovation, and long-term value creation.

Simon Weaver, Global Head of Sustainability Advisory at KPMG International, said that understanding sustainability issues is no longer enough. He noted that companies now need reliable methods to convert those insights into financial information that supports business decisions. Without stronger measurement tools, organizations risk overlooking both potential losses and opportunities to create value.

The report also highlighted notable differences across industries. Banking and capital markets emerged as the leading sector, with 33% of companies using advanced valuation techniques. Energy and natural resources, along with the automotive sector, followed closely at 31% each.

According to KPMG, these industries are moving faster because sustainability issues have a more immediate effect on their financial performance. Financial institutions must evaluate climate-related risks within investment portfolios and lending activities, while energy and automotive companies are managing costly transitions toward lower-carbon operations.

KPMG said the main obstacle is not a lack of awareness but the absence of reliable tools and frameworks that connect sustainability performance with financial results. Existing measurement approaches are often fragmented, making it difficult for businesses to produce consistent and meaningful assessments.

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Julie Vasadi, Global Lead for Sustainability Deals & Value at KPMG International, said companies that begin building stronger sustainability valuation capabilities today are likely to be better positioned to safeguard future growth and strengthen their competitive advantage. She added that understanding the business value of sustainability is essential for meaningful progress, warning that delaying action could leave organizations at a disadvantage as sustainability expectations continue to evolve.

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Source: ESGtoday