Sustainability Reporting Desirable but not Compulsory

In a significant move, the Singapore Stock Exchange (SGX) has released a how-to guide so firms can prepare ‘sustainability reports’ that show how they are reducing carbon emissions or improving labour relations, believing an increased emphasis on a firm’s impact on the environment and society will help the community and give companies a leg-up for long-term growth. It wants all listed companies to release such reports but is not making it compulsory.

Jonathan Kwok in Straits Times (28 June 2011):

THE Singapore Stock Exchange (SGX) has released a how-to guide so firms can prepare ‘sustainability reports’ that show how they are reducing carbon emissions or improving labour relations.

The SGX believes an increased emphasis on a firm’s impact on the environment and society will help the community and give companies a leg-up for long-term growth. It wants all listed companies to release such reports but is not making it compulsory.

Some companies, including Olam International, Wilmar International, City Developments, Hyflux, Sembcorp Industries and Keppel Corp, already produce such reports.

The SGX is encouraging firms in industries that significantly impact the environment and local communities – such as agriculture, forestry, mining, energy and shipping – to issue the reports.

Investors pay a lot of attention to sustainability reporting, said SGX chief executive Magnus Bocker.

Responsible investing – which uses strategies that seek to achieve social good as well as financial returns – may be a niche in Asia-Pacific, but the field is growing rapidly, he noted.

Mr Bocker quoted estimates from asset manager Robeco Group and consulting firm Booz & Company, stating that responsible investments will make up between 15 per cent and 20 per cent of all assets under management worldwide in less than five years.

‘Since 2003, responsible investment has grown by 22 per cent (per year), in terms of assets under management, compared to assets under management generally growing by 10 per cent,’ said Mr Bocker. ‘Responsible investors’ will be a major group that will be evaluating businesses in the years to come, he added.

Dr Vivian Balakrishnan, Minister for the Environment and Water Resources, was at yesterday’s launch of the guidelines.

He said the shift to sustainable production and development will offer significant cost savings to firms in the form of energy efficiency, waste reduction, increased recycling and higher productivity from a more engaged workforce.

‘All these translate, in very real terms, into improvements in companies’ performance and ultimately the bottom line,’ said Dr Balakrishnan. He added that sustainable practices and reporting will also help firms to build up their brands.

There has been an increasing focus in the region on corporate social responsibility practices. In 2007, Malaysia legislated that all companies listed on Bursa Malaysia must report on their social responsibility efforts, including the impact of their businesses on the environment.

What is involved

SUSTAINABLE reporting involves a firm disclosing aspects such as labour practices, policies on issues like corruption, diversity and what action it takes if one of its products causes injury.

The company should also report its steps taken to cut greenhouse emissions and energy use, and its management systems for the environment and biodiversity. Firms should record their progress in these areas against stated goals and industry benchmarks.

The SGX is particularly encouraging firms in industries that significantly impact the environment and local communities to undertake sustainability reporting.

These include those in agriculture, air transport, chemicals and pharmaceuticals, construction, food and beverages, forestry, mining, oil and gas, shipping and water.

Firms are encouraged to adopt globally accepted frameworks, such as the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines. They can also use guidelines specific to their industries.

Sustainability reports may be verified independently by external assurance providers. Companies can embed sustainability reporting in their annual reports or produce standalone reports.

They can make timely announcements via the SGX website.

Source: www.singaporelawwatch.sg