Why Singapore firms must take advantage of sustainability reporting now

Sustainability reporting is the publication of environmental, social and governance information in a comprehensive and strategic manner that reflects the activities and outcomes across these three aspects of an organisation’s performance.

The benefits of sustainability reporting can be financial where it helps to drive operational efficiencies in the long run. It can also bring about, improved stakeholders engagement, corporate reputation and enhanced communications as well as increased proficiency at identifying risk and opportunity. Sustainability reporting forms part of a company’s sustainability practices which translate into better business.

Therefore, why is the rate of uptake in sustainability reporting lower in Singapore than in many other markets? Why are companies in Singapore finding it challenging to develop and maintain standards of reporting that accurately reflect their sustainability programs?

In January 2013 ACCA held a round table discussion with experts that included academia and somekey sustainability professionals. This resulted in the recent ACCA report entitled “The Business Benefits of Sustainability Reporting 2013”.

The report highlighted two main attributing reasons – a misunderstanding of the objectives of sustainability reporting and the lack of demand from stakeholders in Singapore – that result in the production of reports that are of limited value to their consumers and stakeholders.

The benefits of sustainability reporting for companies
Sustainability reporting can provide a company with many benefits. Sustainability reporting naturally requires attention to sustainability practices. Arguably the most visible benefit is a clear reduction in costs on several aspects of operations; due to increases in their efficiency. This benefit can be used to increase momentum behind sustainability within the organisation and drive external brand impact.

They are a great way for companies to showcase their sustainability practices while driving cost savings and new business opportunities, therefore growing s and increasing their organisation’s value.

On top of this, it encourages companies to consider social and environmental factors, helping to improve their reputation and shareholder value. The increase in transparency leads to improved trust from employees, investors, regulators and other external stakeholders.

Organisations are best placed to see the benefits of sustainability reporting when they report on their companies’ strategies and include specific improvement targets. Setting improvement targets help drive the efficiencies through the entire organisation and encourage the development of long term strategies and enhance stakeholder engagement.

The process of identifying these key performance indicators and targets allows organisations to pinpoint areas that help them reduce risk and identify opportunities at the same time as building resilience into their core business model.

Beyond the impacts on investors, sustainability reports can be a great tool for engaging with employees, communities and other businesses. It has the ability to attract talent, as more and more of the younger generation become conscious of and are interested in the issues surrounding the sustainability of businesses and the environment which they operate.

Overcoming the challenges
The uptake of sustainability reporting varies greatly from country to country and the uptake in Singapore has increased but we have not seen the same levels of reporting as in other parts of Asia and indeed throughout the rest of the world. Why may this be the case?

The perceived cost of producing a sustainability report may be discouraging many organisations as it can be easily quantified, while the benefits initially cannot. It may take a number of years of reporting before clear benefits are seen.

During the round table, some participants observed thatmany CFOssometimes do not play a constructive role in promoting sustainability reports due to a fixation on quantifying benefits. We should therefore make greater efforts to engage more CFOs in the sustainability agenda.

Another hurdle is that many companies are uncomfortable with transparency. These companies feel they dilute their competitiveness by disclosing their financial information. However, they can be encouraged if they are able to see that understanding that with a greater level of transparency will in turn lead to a higher level of trust and greater confidence in a business.

While the methodology of sustainability reporting is evolving and reporting standards are rising, this appears to be accompanied by a multiplication of frameworks and guidelines for reporting. According to the KPMG Corporate Responsibility Reporting Survey 2011, companies may be having trouble identifying and following the most relevant framework or guidelines for their reports.

The Accountancy profession thus has an important role to play by taking the initiative in defining and delivering the means by which sustainable development is measured and reported.

Where to from here?
Those who sit at management level need to take ownership of the sustainability reporting process to ensure an increase in awareness of sustainability practices within the organisation. The wider audience within the organisation needs to understand that the process will eventually instil reporting discipline and help a company and define its long term vision.

Greater education is needed for organisations and stakeholders on the relevance of sustainability issues. As education increases, company and stakeholder involvement will help shape the reporting practices.

The responsibility lies within the organisations themselves as well as those groups and institutions that want to see more sustainability disclosure, such as responsible investors, NGOs, special interest groups, consumers, stock exchanges and governments.

While the demand for sustainability reporting in Singapore is still relatively small, industry leaders such as the Asia Pacific Breweries and the National Environmental Agency (Winner of the Best Sustainability Report and Best First Time Report respectively at the recent ACCA Singapore Sustainability Awards 2013), continue to provide the momentum for reporting by continuing to put some focus on sustainability reportingand acting as an example for others in the industry to follow suit.

We hope to see more companies embed sustainability practices within their organisation and communities as a whole, and significantly influence the way we live and work going forward.