This year Singaporean listed companies are expected to publish a sustainability report, under Singapore Exchange’s (SGX) Sustainability Reporting Guide. For many it will be a first and I can’t help but wonder if everyone is ready. A year and a half ago I wrote a short blog for companies getting started on their reporting journey. It offered some practical tips, but also had a fundamental point – that the quality of your sustainability report is a direct reflection on the quality of the management of the business.
In SGX’s own words on the very first page of their Guide, which states that “combined financial and sustainability reports enable a better assessment of the issuer’s financial prospects and quality of management”. This is an incredibly important point for companies starting out and seeing sustainability reporting as a bit of a burden and purely a compliance issue. Sustainability isn’t just about being good corporate citizens or being responsible towards society. Environmental, Social and Governance (ESG) factors have tangible economic implications and a real impact on a companies ability to create and sustain value. Investors, customers, employees, and a whole range of stakeholders are making hard-nosed business decisions based on ESG considerations. In fact, at a recent SGX event in Singapore, we heard from a few leading investors and lenders on exactly how important ESG is to their decision making today.
The exercise of preparing a sustainability report itself has many internal benefits, such as helping a company to really understand what the material ESG risks and opportunities are facing its business, how it is currently managing these, and how it could manage them better. But perhaps the most compelling case for any director in a listed company is that a sustainability report is a vehicle to build trust with stakeholders that your company is one which is well-managed and understands the world in which it is now operating in.
A ‘tick box’ report, or one which aims to meet the bare minimum requirements, may save a company from having to explain why it isn’t in compliance with SGX’s requirements. However, it will miss the point and indeed just be a cost if it the management don’t really embrace the spirit and purpose behind what SGX is trying to do with its sustainability reporting requirements.
I believe the best sustainability reports we will see published this year will show that a company has really thought about what sustainability means to them and have develop a strategy to address material ESG factors. The result will be that these reports will differentiate their companies in the minds of stakeholders, investors included. As a consultant, I am looking forward to helping our clients realise value from of their sustainability reporting. I am also looking forward to reading the reports of others.