Stock exchanges are driving change across Asia through mandating non-financial performance disclosure of Environmental, Social, and Governance (ESG) performance of their business.
This change in legislation means that sustainability will be an essential part of a company’s external communication. Stakeholders are increasingly holding companies accountable for their activities and demand information that is consistent, material, comparable, credible and well structured.
With the choice to report ESG performance being removed, we are encouraging companies to see this as an opportunity to create a framework to make a difference and embed this integrated reporting into their wider business strategy. By creating a Policy and a clear roadmap of what the company would like to achieve in terms of sustainability, the mandatory reporting will become a tool to improve the business’s performance – identifying opportunities and risks within their portfolio.
A recent quote from Capita Land’s Chief Corporate Officer, Tan Seng Chai, said: “We find that by focusing on sustainability first, all other benefits fall into place naturally, from cost avoidance arising from reduced energy and water consumption, to greater employee satisfaction.” (http://www.iesingapore.gov.sg/Media-Centre/News/2016/7/Sustainability-reports-boost-S-pore-s-status-as-global-market).
Below is a summary of the legislation in Asia:
- Hong Kong – listed companies on both mainboard and Growth Enterprise Market (GEM) of the HKEx will be required to report after 1 January 2016. Further information.
- Singapore – all listed companies will be required to report after 31 December 2017. SGX is allowing up to 12 months from the end of the financial year to publish the first report. This takes effect for any financial year ending on, or after, 31 December 2017. Further information.
- China – there are currently no formal ESG reporting requirements. However, ESG reporting (such as GRESB in the property industry) is getting increased attention and a formal requirement is likely in the future.
If you are not experienced in sustainability reporting it can be a daunting and confusing process. The best approach is to keep it as simple as possible, allowing existing processes to be exploited, here are my five top tips on where to start:
- Understand and Define- What do you need to do for the new part of the legislation. Define exactly what needs to be included within the reports and communicate this clearly. Above are links to the guidelines for Singapore and Hong Kong
- Agree responsibility– Who will be collating information, when does information need to be gathered (weekly, monthly or annually?), is there a budget for the process.
- Have a stakeholder brainstorming session – What are the impacts of our business and how can we improve these? Can we have a positive effect on the local and wider community? Do we understand our supply chain and how this fits into our policy? This will future proof your strategy and any target you have in place.
- Set targets and benchmarks– You need to understand where you are today and where you want to be in future, set yourself interim targets and implement ways to measure these. Agreeing how to measure your performance at the start allows different departments to start recording information so it is readily available for the reporting – which ultimately needs to be reported for the stock exchange compliance.
- Implement, track and monitor – Have a system to keep the data and someone responsible for highlighting when you are not reaching your targets.
- Communicate – Celebrate successes and share data with both internal and external stakeholders
Cundall has worked with a number of organisations globally helping them with the above as well as going through the process ourselves. With offices across Asia, please contact us to discuss how we can help you.