Sustainability reporting: listed firms report mixed experiences

Singapore

SINGAPORE-LISTED companies have started to file sustainability reports under the new comply-or-explain guidelines - but for some, it's been a steep learning curve as they grapple with unfamiliarity and issues like costs and staff buy-in.

The Singapore Exchange's guidelines for sustainability reporting apply to listed companies on a "comply or explain" basis from the financial year ending on, or after 31 Dec 2017, with reports to be published from 2018.

In addition to revenue, earnings and other financial data and business information, businesses are now publishing information on everything from electricity use to staff welfare initiatives.

Baker Tilly TFW head of governance and risk Lim Wei Wei said: "Most listed companies would already have environmental, social and governance (ESG) initiatives in place, so it would just be a matter of compiling and reporting them in the sustainability report."

But for many companies, a lot more organisational effort was involved.

ComfortDelGro group corporate communications officer Tammy Tan told The Business Times that "the first year was the hardest".

The transport blue chip - which has been issuing standalone sustainability reports for three years - started by identifying hot-button issues for stakeholders, "and we set about gathering the information".

Ms Tan noted: "This is, of course, easier said than done - especially when you have global operations."

Catalist-listed Japan Foods Holding ran its inaugural sustainability report last July as a 10-page section in its annual report.

Takahashi Kenichi, the executive chairman and chief executive, said: "The main challenge was getting employee buy-in because it meant allocating manpower and resources for the sometimes tedious task of data collection and collation.

"In order to do this, the management spent time to educate our staff about the requirements of the sustainability reporting process and where it was important for the company."

Another first-timer was Roxy-Pacific Holdings, which included a sustainability report with its annual report on March 14. It set up a sustainability steering committee, comprising the senior management team, and a sustainability task force, with representatives from various departments.

A top executive said: "Although we have been managing sustainability elements of the business for a long time - for example, energy management - we did not have a formal sustainability oversight team and neither were our monitoring and key performance indicators formally set out. It took some time... to better understand as well as standardise and formalise our management of these factors."

Baker Tilly's Mr Lim said businesses should not face a struggle over what elements to cover, if they have surveyed stakeholders or hired consultants to help. "Generally, the standards are rather prescriptive. Therefore, few companies would have issues complying," he asserted.

But consultants do not come cheap, said Emily Choo, head of corporate development and investor relations at events organiser Cityneon Holdings.

She called the report "a very big organising commitment" that took about eight months, to the tune of a "six-figure sum" - or about ten times as much as what it would take to prepare a regular annual report.

Much of that went towards an external consultant to advise Cityneon on what it should address and beef up, she said.

Ms Choo said "goals should be clearer" in the reporting framework, which she suggested be tailored to specific industry sectors. "It's not that the environmental and social aspects are not important. But, as a small company hoping to grow, we have to focus on the business front."

But all that effort has not been wasted. Ms Choo acknowledged that the "process actually drives improvement" because with data closer to hand, the firm is better placed to approach tenders.

Palm oil producer Golden Agri-Resources's head of sustainability communications Lim Shu Ling called for more standardisation. "There are always new requirements or expectations from our stakeholders that we take on board... There is a great need for more standardisation on the part of those coming up with new reporting requirements for companies."

For the old hands - like commodities and energy firms which are scrutinised for their environmental impact - the new comply-or-explain sustainability guidelines were less of a struggle.

A spokeswoman for water treatment company Hyflux said: "We have previously produced informal sustainability reports in-house as we have always viewed sustainability development and its responsibility central to how we operate and how we behave as a corporate body."

Kenny Yap, executive chairman and managing director of fish farm Qian Hu, said the family business has been reporting since 2011. There must be buy-in from the top, he noted: "You really need a very capable financial controller or director to assist the company to do the job. All top-level management such as human resources managers and overseas subsidiaries' heads must be briefed about the standard."

Under the bourse's reporting regime, companies must assess which ESG aspects are "material" to how they run their organisations.

In this way, a property developer could address environmental issues, suggested Lawrence Loh, from the National University of Singapore Business School; or a healthcare business might look to the governance and social arenas, such as questions of ethical practices and employee safety.

In this vein, OCBC Bank - which debuted its sustainability report ahead of schedule, bundled with its annual report on April 6 - had anti-money laundering and counter-terrorism financing practices in its write-up. Deciding what factors were material for reporting came after, among other things, "benchmarking against our banking peers and engaging representatives from units across the OCBC Group", said group corporate communications head Koh Ching Ching.

OCBC also disclosed the electricity and water consumption of its building and branch operations, even though the report asserted that "the environmental impact arising from the operational activities of financial institutions is relatively small, compared to companies operating within the industrial sector".

NUS's Dr Loh added: "Sustainability reporting is not about showcasing a company's achievements. The last thing to do is to 'greenwash' the organisation and 'whitewash' the track record."

Above all, said Baker Tilly's Mr Lim,"what would be interesting to see in the coming year is how companies report on the achievement of the targets that they have set for themselves in the current year".

READ MORE: Catalist firms fret over high compliance costs