SGX-listed firms need to improve reports on sustainability: Study

Companies listed on the Singapore Exchange (SGX) still have some way to go in the quality of their sustainability reporting, a study from EY has found.

The study examined the sustainability disclosures of the top 50 listed companies by market value here.

It found that while 80 per cent of the companies make some mention of sustainability in their annual reports or websites, only 60 per cent actually report on their sustainability performance, EY said yesterday.

The depth of reporting varies enormously, with some companies providing robust and detailed disclosures on their performance and others offering limited information.

The quality of information provided also leaves much to be desired.

GREATER DEMAND FOR INFORMATION

Integrated reporting that links the financial reports with the business context will continue to gain popularity as companies respond to growing demands for information by increasingly sophisticated investors and stakeholders.

MR K. SADASHIV, EY's Singapore and Asean leader of climate change and sustainability services

Of the 60 per cent that report on their sustainability efforts, only 10 per cent produce reports that could be considered truly balanced.

These firms provide a wide range of performance data, disclosure on whether specific targets were met and any negative impact that the company's operations may have had on the environment or community they operated in, and how the impact was managed.

Another 43 per cent produced reports that were fairly balanced, with many disclosing sustainability data and commenting on areas where performance targets had not been met.

The remaining 47 per cent produced unbalanced reports.

That is, they provided only a one-sided view of their sustainability performance, focusing solely on positive progress and corporate social responsibility (CSR) programmes, while failing to mention challenges, negative performance or missed goals.

Another aspect of sustainability reporting that EY examined was "materiality".

In the past, companies often released a mass of information covering everything from paper recycling to human rights in their sustainability reports, with little regard to the relative importance of these disclosures to their business' performance, or to the relative importance of each aspect to their stakeholders.

The EY study found that this is no longer the case - 83 per cent of the companies that reported on sustainability also identified the sustainability issues most material to their businesses and stakeholders.

Mr K. Sadashiv, EY's Singapore and Asean leader of climate change and sustainability services, noted that with the SGX planning to implement the "comply or explain" requirement by financial year 2017, there will likely be an uptick in sustainability reporting among listed companies in the years ahead.

And as sustainability reporting continues to evolve, he said he expects to see greater alignment of financial and non-financial reporting, especially as leading companies integrate sustainability policies into their core business strategy.

"Integrated reporting that links the financial reports with the business context will continue to gain popularity as companies respond to growing demands for information by increasingly sophisticated investors and stakeholders."

A version of this article appeared in the print edition of The Straits Times on October 29, 2015, with the headline 'SGX-listed firms need to improve reports on sustainability: Study'. Print Edition | Subscribe