Why sustainability reporting matters
“Sustainability reporting is now more than a buzzword to business and accounting professionals,” noted Mr Thomas Thomas, Executive Director of the Singapore Compact for CSR. “For the past year or so, the growing awareness of sustainability reporting has led to greater proactive interest from companies and organisations.”
A BOARD AGENDA
This impetus for non-financial reporting is in line with the recent Government push to promote best-sourcing, which refers to looking beyond the tender price to whether the bidder for a contract is offering fair wages to its workers.
Mrs Josephine Teo, Minister of State for Finance and Transport, has pointed out that cost is not the only measure of value and urged the private sector to consider adopting best-sourcing as part of their corporate citizenship.
In June last year, the SGX released its “Guide to Sustainability Reporting for Listed Companies”, which reinforces the importance of holistic disclosure. Going beyond the regulatory disclosure of the financial and governance aspects, companies should further assess and disclose, voluntarily, the environmental and social aspects of their organisational performance.
More and more, sustainability reporting has become a board agenda – and rightfully so, as companies now face increased queries on the subject during shareholder meetings, too. The trend of sustainability reporting is expected to grow with the global trend for companies to report or explain why they are not reporting.
While non-financial reporting has been practised for years, most organisations traditionally focused on charity-related activities such as donations or man-hours put into volunteer projects.
But this is no longer deemed adequate. Although such projects benefit society, they may remain peripheral to the organisations’ core goals. Instead, key areas of corporate responsibility include governance, labour practices and resource management. These areas are scrutinised for clues to a firm’s ability to sustain itself in the long run.
For example, property developers such as City Developments Limited (CDL) and Keppel Land stood out in their disclosure of resource consumption and management. CDL further detailed energy and water usage broken down across various divisions and developments with a five-year comparison, as well as recycling and waste-generation quantities.
Instead of being superficial, this form of corporate responsibility is more pragmatic, farsighted and focused on achieving business success on multiple levels. It is no coincidence that some of the more successful corporations in Singapore have committed to reporting ahead of their peers.
For companies which compete in the global arena, sustainability has increasingly become part of their identity.
CDL is the only Singaporean company to make it to the Global 100 Most Sustainable Corporations list three years in a row. It also follows the latest standards, such as the ISO 26000 “Guidance on Social Responsibility”, a key part of its sustainability strategy.
The firm was one of the first in Singapore to disclose its information systematically using the Global Reporting Initiative framework, which sets out general principles and indicators that listed companies can use to measure and report their economic, environment and social performance.
COMMUNICATE WHAT MATTERS
Sustainability reporting has also emerged as an important form of communication with external stakeholders such as shareholders and suppliers, as well as internal stakeholders such as staff.
Like traditional forms of financial accounting, a Sustainability Report itself does not indicate that a company is more responsible. Rather, it provides a clearer understanding and disclosure of actions and measures, and ties it to a firm’s various bottom lines.
Captain Simon Bennett, General Manager of Sustainable Development at Swire Pacific Offshore Operations, has also cautioned against assuming that reporting itself brings direct financial value. Its value, rather, is in its ability to provide a clear picture for continued self-assessment and improvement.
In sum, a Sustainability Report supports an organisation’s analysis, measurement, disclosure and communication of key sustainability performance indicators. It can help companies identify material sustainability issues, enhance productivity and build relationships. It allows them to showcase their well-rounded performance to investors and stakeholders.
For professionals tasked with measuring performance in the environmental, social and governance aspects, this requires a deeper understanding of their firms’ non-financial performance information.
And experts suggest there may be an overall shift towards integrated reporting – the disclosure of non-financial performance data alongside firms’ annual or financial reports, as part of their overall performance and strategy review.
“Finance professionals have a greater role to play within organisations – one which is not limited to figures, but integral to a firm’s various facets of operations,” says Mr Yee Cheok Hong, ICPAS’ Executive Director of Policy and Strategic Planning/Industry Development.
Thomas Thomas is Executive Director of the Singapore Compact for CSR. Perrine Oh is a Certified Public Accountant and Research Manager with the Institute of Certified Public Accountants of Singapore.
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