THE Singapore Exchange (SGX) is seeking feedback on proposals that will elevate sustainability reporting to a "comply or explain" regime but give issuers discretion on what is material and whether independent verification is necessary.
For companies that list after 2016, the proposed guidelines are targeted to take effect for financial years ending 2017 and after. For all other companies, the target implementation will be for fiscal years ending Dec 31, 2017 and after. Companies will have five months after the end of each financial year to publish their sustainability report, one month more than the regulatory deadline for financial annual reports.
The level of compliance with the new guidelines, however, may be phased in according to publicly disclosed schedules that companies set for themselves.
Sustainability reporting is currently voluntary for Singapore-listed companies.
The proposed guidelines will require companies to include five primary components: a discussion of material environmental, social and governance (ESG) factors; an explanation of policies, practices and performance; targets; the sustainability reporting framework that the company is following; and a statement from the board to affirm compliance. The exchange is seeking further feedback on whether anti-corruption and diversity disclosures should be part of the primary components.
Companies that do not include all of the primary components must explain why they have not done so, and simply stating that a component is irrelevant will not be sufficient, under the proposed rules.
Companies should also verify with stakeholders such as customers and suppliers about the materiality of its disclosures. The companies, however, have ultimate discretion to decide what is material and whether independent assurance of the reports is needed.
The entire board of directors is responsible for ensuring compliance.
The public consultation closes on Feb 5, 2016.