KPMG Finds Only 19% of Executives Quantify Sustainability's Financial Impact

Most large companies now understand their sustainability strategies, yet almost none can say what those strategies are worth in financial terms. That is the central finding of a new KPMG study, which reports that while 72 percent of executives say they understand their organisation's sustainability strategy, metrics and performance, only 19 percent apply robust methods to measure its financial impact. The result, drawn from a survey of more than 2,000 executives across 19 countries, points to a disconnect at the heart of corporate decision-making, where sustainability sits firmly on the boardroom agenda but rarely makes it into the numbers that drive investment.

 

The Valuation Gap and Why It Matters

 

The study, titled Closing the Sustainability Valuation Gap, frames the problem as a mismatch between awareness and financial integration. Sustainability has clearly arrived in the boardroom, with 60 percent of organisations weighing sustainability risks and opportunities in financial planning and half embedding it into core strategy. What is missing is the final step: translating those considerations into the metrics finance teams actually use, such as EBITDA, cash flow and capital expenditure.

That gap has consequences beyond reporting. Four in five companies cannot measure how sustainability affects profits, cash flow or valuation, which means both the risks and the opportunities are left largely unpriced. When a company cannot quantify the cost of inaction or the potential return on a sustainability investment, those initiatives struggle to compete for capital against projects with clear financial cases, and risks go unaccounted for in decisions. Global Head of Sustainability Advisory Simon Weaver argued that understanding alone is no longer enough, and that without robust quantification companies risk missing both the downside and the upside.

 

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Why Some Sectors Are Pulling Ahead

 

The gap is not uniform across industries. KPMG found that 33 percent of banking and capital markets firms, 31 percent of energy and natural resources companies and 27 percent of automotive organisations already use advanced valuation methods to quantify sustainability impacts, all well above the 19 percent global average. These are sectors where sustainability risk hits the balance sheet most directly and most immediately.

The pattern is telling. Banks face sustainability risk through their lending and investment portfolios, energy and resources firms through the transition pressure on their core assets, and carmakers through the shift to electrification, so for all three the financial materiality is hard to ignore. Their lead suggests that quantification advances fastest where the link between sustainability and financial performance is most concrete, which implies the practice will spread as that link sharpens across other sectors under regulatory and investor pressure.

 

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From Compliance to Commercial Value

 

The more actionable message is that closing the gap is a value opportunity, not just a reporting obligation. KPMG points to a UK case in which applying structured valuation approaches identified six sustainability initiatives capable of lifting EBITDA by as much as 35 percent for a food and beverage company, evidence that quantification can surface returns that would otherwise stay hidden. The firm argues this reframes sustainability from a compliance exercise into a driver of enterprise value.

The cost of standing still is becoming concrete too. The study cites a European bank that recently divested from dozens of companies after ESG-related risk assessments, a sign that capital is already being reallocated away from businesses that cannot demonstrate resilience to sustainability risk. As investor scrutiny intensifies, the inability to price sustainability becomes a competitive liability rather than a neutral gap. KPMG's conclusion is that the next phase of corporate sustainability will be defined not by awareness or disclosure but by financial integration and valuation discipline, achieved through consistent measurement methods and closer collaboration between sustainability and finance teams. Whether companies build that capability quickly enough to keep pace with shifting capital will determine which of them protect value and which are left exposed as the market rewards businesses that can prove their resilience in financial terms.

 

Source: KPMG