The Singapore Stock Exchange (SGX) in January opened up its proposed comply-or-explain ruling on Sustainability Reporting to the public for consultation - this is the latest in a series of major initiatives the bourse has undertaken to put sustainability on board-level agendas.
While the hammer has not actually come down on whether this means mandatory reporting for Singapore-listed companies, it is clear that Singapore is getting serious on sustainability reporting.
The sustainability momentum in Singapore has picked up over the past few months with various regulations and government initiatives being introduced. Many of these changes were accelerated by the prolonged haze pollution that shrouded the Southeast Asian region last year.
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But the sustainability reporting requirement has been a long time coming – SGX announced its intention to move toward this ruling as far back as 2013.
During the haze crisis, it was abundantly clear that the burning in Indonesia’s peatlands was the result of poor environmental management. While the average Singapore citizen had to deal with respiratory discomfort and smoggy skies, the local communities and wildlife trapped in the hot spots at ground zero suffered more. It galvanized governments, businesses and the wider public to get to the bottom of the burning issue, and that got the sustainability ball rolling.
What I appreciated about SGX’s deliberation regarding its stance toward mandatory reporting was that it understood the importance of sufficient buy-in, rather than issuing a blanket statement and expecting Singapore companies to comply.
The regulatory body took careful, calculated steps to announce its approach in engaging its stakeholders in the process. It executed structured rounds of two-way dialogues to ensure the SMEs had the platform to express their grievances. And it even ensured that the companies which ‘missed’ participation in the first rounds of engagement where given further opportunities to do so later.
Still a numbers game
The truth is, whether or not this is a stick or carrot approach is inconsequential today. Companies have started reporting on their environmental, social and governance data not because regulators forced them into it, but because there was genuine demand from stakeholders.
Investors, bankers, key customers and even employees are asking for greater transparency from companies. The people need a credible place where they can find information over and above the sea of greenwash.
Companies started reporting on their environmental, social and governance data not because regulators forced them into it, but because there was genuine demand from stakeholders.
These companies did their own risk calculation and knew that it was better to start disclosing more relevant information that proves they are following responsible practices. And sustainability reports that are structured according to internationally-referenced frameworks such as Global Reporting Initiative (GRI) or Dow Jones Sustainability Index (DJSI) help capture the information required to enable these investors and analysts to make informed decisions either to procure or invest.
This was nicely echoed in SGX’s June 2015 survey among institutional investors, in which it found that 90 per cent of respondents take environmental, social and governance (ESG) factors into account when investing.
It is easy to see why - if an investor has 10 companies to analyse within a given day, they very quickly sift out the ones they would deem as a higher risk stock just from the fact that these do not have sufficient data they can look at.
Conversely, a company with rich, well-documented information about its sustainability management is very well-perceived by analysts.
We must not rest on our laurels
Out of over 600 listed companies in Singapore, only 30 have actually been reporting their environmental, social and governance information. We lag behind our counterparts in Malaysia, Thailand and Hong Kong.
The Malaysian Stock Exchange even launched its own FTSE4Good Listing to encourage more public companies to report, and reward those listed with an assured status symbol that investors are hungry for.
Over the next 12 months and beyond, I expect more demand for clarity about sustainability reporting among finance and communications managers.
“Have I reported sufficiently in my Disclosure of Management Approach? What if all my factories don’t capture emissions data the same way? What templates are available for data collection?” These are some of the common questions we have been receiving just in the past six months.
Referring to practical guides such as GRI’s Get Started Guide or ACCA’s Reporting Guidelines may provide structured support; what they need is someone they can turn to for questions, feedback and extensive guidance.
And as the bulk of major companies move onward in their sustainability journeys, more fundamental questions are likely to be raised: “Should we redefine our material issues to suit our organizational structure? Should more people undergo sustainability related training? How should sustainability management be implemented across our suppliers in the region?”
Development of effective strategies is the first step in target setting, whether it is to lower carbon emissions or increase transparency in supply chains. But translating these into real action is still where crux of the matter is.
And so I hope this exercise opens up even more conversations among business leaders, policy makers and industry associations to address common issues faced by companies in governing environmental and social issues to help shape the landscape of sustainability management and reporting in Singapore.
Junice Yeo is the Director of Corporate Citizenship, Southeast Asia. This article was written exclusively for Eco-Business.