Findings from the latest biennial study on sustainability reporting indicate need for greater accountability to report sustainability practices.
A study by National University of Singapore (NUS) Business School’s Centre for Governance, Institutions and Organisations (CGIO) and ASEAN CSR Network (ACN) revealed a 76 per cent rise in the number of Singapore Exchange (SGX) listed companies communicating sustainability.
According to the latest findings from Sustainability Reporting in Singapore, 2018, 327 out of a total of 678, or 48.3 per cent, of SGX mainboard and Catalist-listed companies, communicated their sustainability practices. This indicates an average level of disclosure of 55.3 percentage points (based on 100 per cent scale) as of May 31 2018.
Methodology
The study examined information disclosed by SGX-listed companies between 1 January 2017 and 31 May 2018. It then compared the figures against the biennial studies conducted in 2016 and 2014, which served as national benchmarks on sustainability reporting. The study’s methodology references the Global Reporting Initiative (GRI), an internationally recognised sustainability reporting framework that provides more comprehensive and extensive guidelines.
Although the percentage of reporting companies has increased from 37.1 per cent in 2016 and 31.3 per cent in 2014; the average level of sustainability disclosures had only marginally increased by 3 percentage points since 2016 (see Annex 1).
In Singapore, City Developments, CapitaLand, Singapore Telecommunications, Olam International and DBS Group Holdings emerged as the as top five companies respectively with best practices in sustainability communication (Please refer to Annex 2).
Board responsibility as one of the sustainability reporting principles
SGX’s 2016 ruling for all publicly listed companies to prepare an annual sustainability report under listing rule 711A on a “comply or explain” basis has driven up the number of companies reporting sustainability. The responsibility ultimately lies with the board to ensure the company complies with the guideline.
186 out of the 327 companies had demonstrated board level involvement in identifying and managing Economic, Environmental, and Social (EES) impacts. However, only 31 companies had linked EES topics performance with the remuneration of board and senior executives, and 96 companies disclosed training policy on EES topics for board of directors (see Annex 3). Disclosure on the board’s involvement in driving sustainability is limited.
“Driven by the new requirement, the state of sustainability reporting has witnessed major advancements in the past two years. However, board leadership and commitment have to be elevated for this reporting to keep the momentum. These will be the most critical incentives for sustainability to be robustly embedded across the entire company,” said Associate Professor Lawrence Loh, Director of CGIO at NUS Business School.
Five primary components and materiality disclosure practices
The Singapore Exchange Sustainability Reporting Guide studied the following five components (see Annex 4):
“Policies, practices and performance” was best disclosed, with 308 companies demonstrating their commitments through developing policies concerning social or environmental issues. This is an increase of 137 companies compared to 2016 figures.
While “sustainability reporting framework” was the least adhered component with 201 companies reporting the primary components, it did see an increase of 167 companies reporting compared to 2016.
The material aspects that were most cited by the companies were predominantly social indicators, including Training and Education, Occupational Health and Safety, and Philanthropy.
In spite of the growing number of sustainability reports, companies still struggle to identify topics that are most material to their business. Gaps exist between the material issues reported and stakeholders’ expectations. In particular, disclosures pertaining to emissions, biodiversity, product and services stewardship were insufficiently addressed. The evident gap could be due to the large number of first time reports, or ineffective stakeholder engagement (see Annex 5).
Sustainability reporting in ASEAN countries
Recognising the growing sustainability movement in ASEAN, the study also examined the sustainability reporting practices of the largest companies by market capitalisation listed on the major bourses of Indonesia, Malaysia, Philippines, Singapore and Thailand.
Regionally, Malaysia led with a score of 64.5 percentage points (based on 100 per cent scale), in overall sustainability disclosure level, followed by Singapore, Thailand, Philippines, and Indonesia (see Annex 6).
Overall, ASEAN countries had made progress as compared to 2016. The level of disclosures for most of Economic, Environmental and Social (EES) indicators increased notably from 2016 (see Annex 7). The study also observed that issues pertaining to economic impact from climate change, biodiversity and human rights had the lowest level of disclosure across all five countries.
These companies reported sustainability disclosures in English between 1 January 2017 and 31 May 2018. A total sample of 100 companies was reviewed for each country, with the exception of the Philippines where there were 44 companies due to the lack of accessibility to their corporate sustainability reports.
“With the Philippine Stock Exchange making non-financial reporting mandatory this year, all the major ASEAN stock exchanges are seeing the value of sustainability reporting to enhance the value of listed companies for the benefit of investors and other stakeholders. The level of disclosure is also improving. The challenge is to continue with better reporting which can only come with better adoption and implementation of sustainability issues by businesses. We need to mainstream sustainability and respect for people. Businesses are part of the wider society and will prosper or fail with their key stakeholders,” said Mr Thomas Thomas, CEO of ASEAN CSR Network.
The findings were released at an event about Sustainability Reporting in ASEAN and Singapore – Opportunities in an Era of Tension. Organised by CGIO, in partnership with ACN, the event aims to develop and build capabilities to achieve better sustainability practices in the region. More information on the reports can be found at CGIO’s Reports & Publications
Annex 1
Number of Reporting Companies and Overall Level of Disclosures in Singapore
* 2018 data is as of May 31 2018.
* Level of sustainability disclosures in 2014 and 2016 are restated in accordance with 2018 assessment framework. * 2018 data is as of May 31 2018.
Annex 2
Singapore Listed Companies Demonstrating Best Practices in Sustainability Disclosures
Annex 3
Disclosure on Sustainability Initiatives at Board Level of SGX Listed Companies
* Note: 1.EES: Economic, Environmental and Social. 2. The data is as of May 31 2018.
Annex 4
Singapore Exchange Sustainability Reporting Guide – Five Primary Components
Annex 5
Materiality Gaps between Current Practices and Expectations
* Note: 1. Electric, gas and water sector was excluded from this table as the number of reporting companies is too small for an accurate inference. 2. Information on “Expectations” is literature review based which may not be fully applicable to Singapore context.
Annex 6
Sustainability Disclosure Level of ASEAN Countries
* Sample: Top 100 largest companies by market cap in each country (except for Philippines with only 44 reporting companies)
Annex 7
Improvements in Economic, Environmental and Social (EES) Disclosures of ASEAN Countries
* Note: 1. Philippines was not included in 2016’s assessment. Thus, there was no past benchmark for comparison. 2. Disclosure level in 2016 are restated in accordance with 2018 assessment framework. 3. 2018 data is as of May 31 2018.
