The Singapore Stock Exchange (SGX) has issued its listed companies a new set of guidelines on reporting social and environment impacts which are voluntary now but could become a legal requirement in the future.
SGX, which last August announced a new policy encouraging its listed companies to disclose their environmental and social impacts, launched the voluntary guidelines for sustainability reporting at its headquarters on Monday.
SGX chief executive Magnus Böcker said the exchange would start with voluntary reporting for its companies. But he added that he expected the voluntary measures to become everyday practice, similar to the way Singapore companies follow guidance and rules on corporate governance.
Singapore companies consistently rate highly in Asia on corporate governance and transparency, but lag when it comes to sustainability reporting. Last year’s Asian Sustainability Rating (ASR) , an index that rates Asian countries on sustainability disclosure, ranked Singapore fifth out of ten Asian countries – behind South Korea, India, Malaysia and Thailand.
“Let’s be a little bit honest here. There is currently limited mainstream sustainability reporting beyond corporate governance here in Singapore,” said Mr Böcker. He added that only a handful of the 800 companies listed with SGX undertake comprehensive sustainability reporting.
Singapore’s Minister for the Environment, Dr Vivian Balakrishnan, who was at the launch ceremony, told executives that Singapore’s corporate citizens had a responsibility to ensure that all aspects of their companies’ activities were sustainable for the long term.
“I think (the SGX guidelines on sustainability reporting) lights a little fire under the seats of CEOs and other business leaders that they need to pay attention to this aspect, and that being sustainable is not merely ideology. It actually makes good business sense and puts a company in a better competitive position,” he said.
One source of competitive advantage is that firms can attract investors who target companies that are transparent about their environmental and social impacts. This is also known as Responsible Investing (RI), in which investors track companies on a growing number of sustainability indices, such as FTSE4Good or the Dow Sustainability Indices. These indices rate companies based on their treatment and disclosure of ethical and sustainability issues.
“Today, Responsibility Investment (RI) may be a niche market for many of you and for this part of the world, but it’s growing rapidly,” said Mr Böcker, adding that globally the RI market has grown 22 per cent since 2003 and is expected to reach between 15 and 20 per cent of all assets under management in less than five years. “For those of you representing companies, this will be one of your major groups of investors,” he noted.
Sustainability experts at the event said that sustainability reporting provided significant benefits for companies, such as savings due to more efficient use of resources, first-mover advantage, reduced risks from environmental and social factors and enhanced community goodwill.
But the same experts warned the companies present that a sustainability report is a means to an end and not an end in itself.
It requires commitment from the whole company, starting with the board, they said. Nor is it an easy process, according to panellist Esther An. Ms An is head of corporate social responsibility (CSR) of City Developments Limited, a recognised leader on sustainability in Singapore. She stressed that the reporting process is not a public relations exercise: “you really have to walk the talk.”
CSR Asia’s director for Singapore, Jenny Costelloe, noted that a company’s first sustainability report could take up to nine months.
CSR Asia, a regional organisation that promotes corporate social responsibility (CSR), conducted a brief workshop on the sustainability reporting process following the launch of the guidelines for SGX member companies.
Ms Costelloe acknowledged the process could be daunting and pointed to the human rights aspect of CSR as one that Asian companies tend to find intimidating. But she said, human rights is not a political issue in CSR: “it’s about respect for the people who work for you.”
Despite the challenges of producing sustainability reports, the number of published reports is increasing each year. A recent report by advisory firm KPMG found that globally the number of companies producing dedicated reports increased more than ten-fold from about 300 in 1996 to 3,100 in 2010.
“This move towards more accurate, more balanced reporting and being able to be open and honest all the time will be useful and I think is an unstoppable trend,” said Dr Balakrishnan.
The SGX workshop listed several resources for companies seeking guidance on the reporting process.
These include international organizations providing guidance and standards, such as the Global Reporting Initiative (GRI) and the International Organization for Standardization (ISO), which has recently produced ISO 26000, a new set of guidelines on social responsibility.
Locally, the Association of Chartered Certified Accountants (ACCA) – Singapore has produced a micro-website dedicated to helping Singaporean companies with sustainability reporting.
And there are always the new SGX guidelines, designed to push the exchange and its members to a higher level of performance.
SGX’s Mr Böcker said that the Singapore Stock Exchange had a vision to be a leading global exchange.
“We will never be leaders as a global exchange unless our companies are global leaders in the way they report and the way they do business,” he said.
