From financial year ending 31 December 2017 onwards, all public listed companies on the Singapore Exchange (SGX) are required to issue a Sustainability Report on a “comply or explain” basis. This new requirement undeniably creates greater transparency towards companies’ sustainability actions and also increase awareness among stakeholders.
But as readers, what does this mean? How will it benefit us and do we have the basic knowledge to understand these reports? Well, here are 3 essential points you need to know about Sustainability Reporting!
1. It is more than the environment
It is normal to expect that a Sustainability Report will only cover topics relating to environmental conservation efforts of companies. However, there is so much more to that!
For sustainability reporting, the word “sustainable” is being regarded as a holistic definition and covers economic, environmental, social and governance (“ESG”) factors. One should take note that ESG issues are topics that pose risks and opportunities to a business, hence excluding charitable and philanthropy activities.
Examples of social issues could be the use of child labour in a company’s operations or the company’s actions to ensure that occupational health and safety for its workers.
2. It’s all about the frameworks
All Sustainability Reports require the use of a certain reporting framework as a guideline for reporting and disclosure. The framework chosen should be suited to the company’s industry and business model. There are numerous frameworks to choose from, such as CDP, DJSI, GRI, GRESB, SASB.
One of the more popular frameworks used is the GRI framework, with 74% of the world’s largest corporation using it as a basis for their Sustainability Report. GRI is an international independent organisation which helps businesses understand and communicate their impact on sustainability issues.
Under the GRI framework, there are two categories of standards – universal and topic specific. Universal standards cover the foundation, general disclosures and management approach. This includes the reporting principles, materiality matrix, the disclosure of operations or scale of organisation and the management actions towards certain material issues.
Topic specific standards are more focused towards the economic, environmental and social topics. Within the ESG umbrella, there are smaller topics that can be disclosed by a company. For example, under the environmental (GRI 300) topic, possible issues could be materials (GRI 301), energy (GRI 302) or water (GRI 303).
3. The 3Ps – Policy, Practice and Performance
Firstly, each company is required to identify the ESG issues that are regarded material to them. The materiality is assessed based on a various number of indicators, but most importantly, taking into the account of stakeholders’ interest.
After which, for each material issue, the company would have to set out a policy, elaborate on the company’s practice and their related performance and target. For example, by having a no deforestation policy, the company ensure that no forest is being cleared for development purposes. They will report their performance in terms of the hectare of the deforested area and their target in 5 years time.
The 3Ps will form the general content of the Sustainability Report and allow the reader to evaluate whether the company is performing as it intended to and its current status.
To learn more about SGX’s sustainability reporting guide, click here.