Businesses worried about ESG fraud as stakeholder pressure mounts: KPMG poll

Logo of the chartered accountant company KPMG is pictured in Berlin, Germany, Thursday, June 22, 2017. KPMG says businesses are increasingly concerned about ESG fraud, which is when a company’s environmental, social and governance efforts or data are exaggerated, embellished, or distorted. THE CANADIAN PRESS/AP-Michael Sohn

KPMG says businesses are increasingly concerned about ESG fraud, which is when a company’s environmental, social and governance efforts or data are exaggerated, embellished, or distorted.

In a new survey of 300 Canadian organizations victimized by fraud, KPMG found that 89 per cent of respondents say they’re facing intense scrutiny from stakeholders to demonstrate progress on ESG targets.

The majority of the respondents say they’re worried these pressures are increasing the risk of ESG fraud.

The majority also say they’re worried their organization could inadvertently commit ESG fraud.

Becky Seidler, a partner in KPMG’s forensic and dispute advisory practice, says pressure from stakeholders can be a force for positive change, but can also motivate some to misrepresent their sustainability and financial metrics for corporate or personal gain.

She says the consequences of ESG fraud can be significant, including financial and reputational harm.