From financial year ending 31 December 2017 onwards, all public listed companies on the Singapore Exchange (SGX) are required to issue Sustainability Reports 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 Reports!
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!
Sustainability is viewed holistically and covers economic, environmental, social and governance (“ESG”) factors. Do take note that ESG issues are topics that pose risks and opportunities to a business. Hence, excluding charitable and philanthropy activities.
Some examples of social issues are 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. An organisation will chose the framework suited to the company’s industry and business model. There are numerous frameworks to choose from, such as CDP, DJSI, GRI, GRESB, SASB.
With 74% of the world’s largest corporation using GRI framework as a basis for their Sustainability Report, it is one of the more popular frameworks. 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. Firstly, the Universal standards cover the foundation, general disclosures and management approach.
- Reporting principles
- Materiality matrix
- Disclosure of operations or scale of organisation
- Management actions towards certain material issues.
Secondly, 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, energy or water.
3. The 3Ps – Policy, Practice and Performance
Each company is required to identify material ESG issues, assessed based on a number of indicators. But most importantly, it takes into the account of stakeholders’ interest.
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.
With the 3Ps forming the general content of the Sustainability Report, you can then evaluate the company’s targets and current status.
To learn more about SGX’s sustainability reporting guide, click here.