MUCH like their financial statements, companies in Singapore should set measurable and practical targets in their sustainability reports, instead of lofty and aspirational ones, said Ian Hong, partner of sustainability advisory and assurance at professional services firm KPMG.

As part of new requirements by the Singapore Exchange (SGX) mandating listed companies to issue sustainability reports, one component required by issuers is for them to set out their sustainability targets for the forthcoming financial year.

Speaking at a sustainability online workshop organised by the Singapore Institute of Directors (SID) for board directors on Tuesday (May 31), Hong said that setting targets that are practical and measurable shows that a company is managing its environmental, social and governance (ESG) risks on an active basis.

“These are not aspirational targets that you set, ‘You know what, in 50 years down the road, we are going to be net-zero, we are going to achieve 20 per cent reduction in carbon emissions,’” said Hong.

He explained that sustainability reporting should be no different from how a company reports its financials, where budgets are being set for the coming year.

“You don’t set a budget that says, ‘You know what, in 10 years’ time, we want to be a S$100 million-revenue company,’” he added.

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While such aspirational goals are not in itself a problem, companies require yearly financial budgets for their operational needs, and to measure their performance.

Companies also need to learn how to collect operational data relating to ESG issues to measure their performance against the targets they have set.

“It’s not just about having nice, great policies, nice wordings, but how do you, at the end of the day, quantify it?” said Hong.

He added that the expectations on boards to be transparent and ensure that the information published in sustainability reports is accurate and robust are increasing.

“As board members, how aware are you in terms of your internal processes, and how confident are you that every information that is important, there is no material misstatement in respect of those information?”

This is SID’s first sustainability workshop, which was launched to offer mandatory training for first-time directors appointed to the boards of listed companies in Singapore as part of sustainability reporting rules by SGX.

Besides the topic of corporate governance and how boards should discharge their responsibilities, the online workshop also touched on the changing market landscape pushing for more responsible investing policies, the taskforce on climate-related financial disclosures, and the importance of aligning one’s business to sustainability issues to thrive.

Michael Tang, who is the head of listing policy and product admission at SGX RegCo, and was one of the panellists during a panel discussion held towards the last hour of the 4-hour workshop, said its latest review showed that while half of companies in Singapore report on climate change as a factor they are looking at, only 2 per cent are using a dedicated climate reporting framework.

Independent director Tham Sai Choy, who was also a panellist, said that companies and boards should not perceive sustainability reporting as merely part of a compliance exercise.

“What we need to do as businesses is to think about what are the things my company can do that will shorten the odds to success,” he said.

“Are we going to be ahead, or are we going to be losing out because we are not on top of what’s happening? I just don’t think anything we are doing in this area is fast enough.”