Apac companies stepping up in sustainability reporting, but challenges remain: study
Organisations continue to encounter difficulties, such as in finding accurate, comprehensive data on climate impact, emissions and financial metrics in their efforts to develop a quantitative scenario analysis
A HIGHER proportion of companies in the Asia-Pacific are muscling up on their sustainability reporting initiatives, based on findings presented in the third edition of Sustainability Counts released on Monday (Dec 23).
Conducted with the National University of Singapore’s (NUS) Centre for Governance and Sustainability, the report reviews developments in global sustainability reporting standards and offers insights from the region over the past year.
Data from the top 50-listed companies by market capitalisation across 14 selected jurisdictions in Asia-Pacific was featured, based on their latest sustainability reports and annual reports available in May 2024.
Though the latest report pointed to continued year-on-year improvements for companies in the region, it also presented several areas for improvement:
Gaps in Scope 3 emissions disclosures
Professor Lawrence Loh, director at the Centre for Governance and Sustainability at NUS Business School, observed “substantial gaps in verification and transparency” for Scope 3 emissions disclosures.
Despite an improved disclosure rate for Scope 3 emissions (63 per cent versus 50 per cent in 2023), many companies had only reported on selected activities in often less-complex areas, such as business travel.
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Among companies that disclosed Scope 3 emissions, 45 per cent were found to have carried out a minimal level of disclosure, as compared to moderate (33 per cent) and comprehensive (13 per cent) levels of disclosure.
Nine per cent of companies also did not disclose categories contributing to their Scope 3 greenhouse gas (GHG).
While Scope 1 and Scope 2 emissions provide insights into a company’s direct operations and energy use, the report highlighted that Scope 3 emissions offer a deeper understanding of climate risks and opportunities beyond immediate control, such as supplier practices and product lifecycle impacts.
It also underscored Scope 3 emissions as critical, as they often represent the largest share of an organisation’s total GHG emissions.
Invalidated net-zero targets
Of the 700 companies studied, more than half or 53 per cent said they had set net-zero commitments, up from 47 per cent from the prior year’s report. Though 37 per cent of the latest survey participants described their targets as science-based, the report found that only 18 per cent had their net-zero targets verified by the Science-Based Target initiative (SBTi).
The SBTi develops standards and guidance in setting greenhouse gas GHG emissions reduction targets. Verifying net-zero targets under the initiative ensures that companies’ climate goals are in alignment with the latest climate science, based on the Paris Agreement’s target to limit global warming to 1.5 degrees Celsius.
“Few companies have validated their net-zero targets through the Science-Based Targets initiative, emphasising an urgent need for greater accountability,” commented Loh.
“Echoing COP29’s emphasis on urgent climate action, our findings highlight the critical need for robust governance frameworks and actionable climate strategies to drive sustainable development across the Asia-Pacific,” he added.
Quantification, framework challenges
More companies in the Asia-Pacific (81 per cent) are disclosing their process for managing climate-related risks and opportunities, as compared to 74 per cent in 2023. Nine out of 13 jurisdictions studied reported an increase in disclosures for the process of managing climate-related risks and opportunities compared to the previous year.
However, it was also found that only 55 per cent of companies provided disclosures on climate scenario analysis in 2024 – of which close to half, or 46 per cent, disclosed only qualitative scenarios.
PwC and NUS said this indicates that developing and disclosing a quantitative scenario analysis “presents several challenges” such as in finding accurate, comprehensive data on climate impact, emissions and financial metrics as such data could be difficult to obtain.
Both parties also observed that applications for the Taskforce for Nature-related Financial Disclosure (TNFD) framework remained in nascency. Though over half or 62 per cent of all companies studied included sections on nature and biodiversity in their sustainability reports, only 7 per cent said they referred to the framework for their nature and biodiversity reporting. Another 11 per cent said they planned to align with the TNFD in the future.
“We will need to continue building ‘muscles’ in better climate risks quantification, Scope 3 comprehensiveness, and application of the TNFD, as we get better data and insights,” concluded Fang Eu-Lin, sustainability and climate change leader of PwC Singapore.
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