The Singapore Exchange (SGX) is going green. It is encouraging all listed firms to undertake ‘sustainability reporting’ - or the disclosure of the social and environmental aspects of their business - and has issued guidelines regarding this.
‘Investors who lead world opinion expect listed companies to be accountable for their financial results, how they achieve the results, and what impact they have on the communities within which they operate,’ said a regulatory announcement yesterday.
But SGX added that this disclosure of the social and environmental aspects of a listed company’s business will not be mandatory at this stage.
Still, mandatory rules could be developed in future as more companies adopt such reporting.
The guidelines come amid allegations from environmental group Greenpeace that a unit of locally listed Golden Agri-Resources had cleared forests illegally in Indonesia.
Sinar Mas Agro Resources and Technology (Smart), which operates all oil palm plantations for Golden Agri, has refuted these allegations after conducting independent reviews by certification bodies and forestry experts.
SGX made no mention of the incident yesterday, adding only that the disclosures on sustainability of operations are particularly relevant for ‘companies susceptible to environmental risks’.
These include oil and gas and mining companies, as well as those that produce significant pollutants, like chemical and apparel firms.
Firms that use natural resources heavily - such as palm oil producers and forestry companies - should also look at issuing reports, said the exchange.
SGX suggested that the disclosures should highlight companies’ policies regarding sustainability issues and contain assessments of the risks or impacts of the companies’ operations.
It added that companies can follow internationally established frameworks like the Global Reporting Initiative (GRI) Reporting Framework.
The SGX guidelines were issued in conjunction with its annual Investor Day yesterday.
As SGX celebrated 10 years as a listed company, some 700 shareholders of the exchange gathered at the Suntec ballroom yesterday to hear from its top executives.
An afternoon panel session was also open to the general public, as were investment talks and an exhibition.
Mr David Gerald, president of the Securities Investors Association of Singapore (Sias), welcomed the SGX guidelines.
‘Globally, there is a move towards recognising the importance of corporate social responsibility (CSR). So it’s timely that SGX is paying attention to such issues,’ he said.
Mr Gerald added that Sias itself has decided that from next year, it will be giving attention to CSR practices in selecting companies for its Corporate Governance Awards.
There has been an increasing focus in the region on CSR practices. In 2007, Malaysia legislated that all companies listed on Bursa Malaysia must report on their CSR efforts, including the impact of their businesses on the environment.
Some companies listed in Singapore have already been issuing sustainability reports. These include Banyan Tree Holdings, Keppel Land, City Developments and Sembcorp Industries.
But not everyone is sold on the idea of companies reporting on their own environmental and social efforts.
‘Wherever your operations are, whether in Australia or China, you will have to comply with the regulations there anyway. I don’t see much value added to investors or to the company in issuing additional reports,’ said Mr Edwin Goh, chief financial officer of China Animal Healthcare, which has plants in China producing drugs to combat diseases linked to animals.
Mr Goh said his company has not issued sustainability reports, but noted that before being awarded a licence to manufacture drugs, the Chinese authorities would have already inspected his firm’s plants to ensure compliance with various requirements, including those related to the environment.
