Transitioning to ISSB requirements is not a mere labelling change

THE recently released EY-CPA Australia report on the state of climate reporting in Singapore revealed that more than two-thirds of Singapore-listed companies are falling behind on upcoming reporting requirements for companies with financial year commencing on or after Jan 1, 2025.

Under the Singapore Exchange’s (SGX) road map for mandatory climate reporting, companies are expected to transition from the current Task Force on Climate-Related Financial Disclosures (TCFD) requirements to International Sustainability Standards Board (ISSB) requirements. Companies must understand that the change from TCFD to ISSB is not a straightforward labelling change. 

While all 11 TCFD disclosure elements are incorporated into the ISSB requirements, there are additional disclosures that companies need to make.

For example, ISSB requires entities to provide an analysis of climate-related risks and opportunities across different time horizons, including their financial implications; disclose material information about the sustainability-related risks and opportunities that could reasonably be expected to affect their prospects; and make additional Scope 3 greenhouse gas (GHG) emissions disclosures.

This last part on Scope 3 GHG reporting requirement is currently under further review by the SGX, and thus not mandatory.  

According to the EY-CPA Australia report, for their FY2024 climate reports, under the current TCFD requirements, Singapore companies are making an average of nine out of 11 disclosures, up from eight in the previous year. Eliza Tan, head of Sustainable Development Office at SGX Regulation, said: “Companies have made progress, though they are still some ways from producing high-quality climate reports.”

However, a closer examination of the distribution reveals a notable gap between large versus small to medium-sized companies.

Among the 62 large-cap companies – those with a market capitalisation of more than S$1 billion – 60 per cent made disclosures against all 11 TCFD recommendations. This contrasts with 35 per cent of 57 mid-cap companies – those with a market capitalisation between S$300 million and S$1 billion – and a much lower 25 per cent of 232 small-cap companies that did so.

This is the same worrying picture shared by the Singapore Business Federation (SBF). In a survey of 40 companies earlier this year, only 4 per cent expressed confidence about meeting the deadline. SBF is lobbying for an extension for small and mid-cap companies, as well as improved guidance of the “proportionality mechanisms” as allowed by the ISSB. 

Whether the deadline is extended, the road ahead is clearly challenging for many companies, but it is one that must be met head on. 

Today, stakeholders are demanding actionable, transparent plans that clearly articulate how these ambitions will be realised. This call for more credible and meaningful sustainability data and reporting is clearer and louder than ever – and will only intensify further.

In fact, companies that continue to view climate reporting as a mere tickbox exercise will miss out on the opportunity to showcase how they are creating long-term value. Those who lead the charge will unlock new markets, attract customers and access innovative financing options. Conversely, those who lag behind may find themselves at a competitive disadvantage, excluded from strategic value chains. 

Beh Siew Kim, chief financial and sustainability officer at The Ascott, said: “Those who act now will not only build future-ready businesses, but also drive the evolution of their industries.”

To ensure the momentum for climate reporting is sustained, companies need to do three things. 

• Understand the true exposure of climate-related impact to the business. It is important for companies to take a holistic approach to assessing the impact of climate-related risks and opportunities on the business. Without conducting an adequate assessment, companies may struggle to mitigate climate-related risks to which they are materially exposed. They may also miss out on opportunities, such as increased access to funding via sustainability-linked financing, grants and new revenue streams, leading to a potential loss of competitive edge to their peers.
• Develop a robust transition plan. With a comprehensive overview of the climate-related risks and opportunities, companies can customise an actionable transition plan, focused on material areas that allows for effective resource planning and allocation, crucial for ensuring a viable transition to a low to no-carbon economy. When communicated clearly, a transition plan demonstrates clarity in the company’s vision and accountability for its commitments to its stakeholders, both internal and external. 
• Equip members across different functions with sustainability knowledge. As sustainability reporting is largely a by-product of the company’s strategy, plans and actions, a whole-of-organisation approach is key. Beyond the sustainability team, board members and employees should also possess a strong understanding of sustainability and key topics. This will help them recognise the implications of climate change on their roles, and encourage cross-functional collaboration to support the organisation’s sustainability agenda.

For Singapore’s listed companies, closing this reporting gap can help maintain credibility and competitiveness on a global stage that demands climate accountability. This not only fulfils regulatory expectations, but also fosters trust among investors and customers, ultimately driving innovation and sustainable growth. Themin Suwardy is an associate professor of accounting (practice) and the associate provost for postgraduate professional education at Singapore Management University. Ken Ong is an assurance partner at EY.

Some parts of this article were first published in EY Insights. The views reflected in this article are the views of the authors, and do not necessarily reflect the views of the university, the global EY organisation or its member firms.