Singapore Exchange (SGX) Sustainability Reporting Guide
Sustainability reporting is an essential part of any business nowadays for legal compliance. It goes along with the financial reporting procedures of a company. The purpose of financial reports and statements is to give insight into the income and financial position of a company.
Similarly, a sustainability report deals with the key environmental, social, and governance (ESG) factors to showcase how a company is addressing these factors and the associated risks and opportunities for the organization in these areas.
Generally, you can complete the sustainability reporting process by hiring a professional audit firm in Singapore that is familiar with the reporting procedures. In this article, we’ll discuss the major aspects of sustainability reporting introduced by the Singapore Exchange (SGX).
Sustainability Reporting Requirements
The Singapore Exchange (SGX) initially announced the sustainability reporting requirements back in 2017, and they became an application in 2018.
The guidelines are applicable to the listed companies of the SGX and were established after comprehensive research and consultation with key stakeholders.
According to the SGX sustainability reporting guidelines, companies and audit firms in Singapore handling sustainability reporting have to keep the following aspects in mind:
- Organizations have up to 12 months from the end of a financial year to make their first report public. In other words, issuers have to file the sustainability reports within 5 months of their financial year-end.
- The materiality principle is applied to the listed companies to determine whether an individual company should report the ESG factors. Companies have the option of excluding factors like corruption and diversity if such factors are considered to be immaterial in a company’s working procedures. Nevertheless, relevant information must be provided on the website to the target audience.
- It was common for companies to include a compliance statement from the Board. However, the new guidelines make it clear that the SGX companies have to include a Board statement in sustainability reports, and this statement must give a thorough description of the company’s sustainability efforts.
Five Primary Components
1. Reporting framework and ESG factors
The content of a sustainability report must be decided according to the key issues of the company and the reporting framework.
Stakeholders in the business should sit together and analyze their issues in the form of ESG factors so that a comprehensive and easy-to-understand report can be generated.
There can be a lot of ESG factors involved in a company, but it is important to pick the ones that affect the organization the most.
2. Materiality Assessment
A comprehensive materiality assessment will show the key sustainability factors that are vital to a specific company, and the details of this assessment should be shown in the sustainability report.
3. Policy, practice, and performance reporting
An organization has to disclose its policies, practices, and performance associated with the ESG factors. Such a declaration is supposed to be made in both quantitative and descriptive formats so that the reader can fully understand the company’s sustainability efforts.
4. Target setting
It is important for a sustainability report to clearly convey the issuer’s targets for the next year, especially when it comes to the identified ESG factors. Realistic and achievable targets should be set so that the company is able to achieve them within the year and impress the stakeholders.
5. Board Statement
A sustainability report must have a board statement in which the board emphasizes the importance of ESG factors and how the company is working towards achieving its different sustainability goals.
Role of Global Frameworks
It is important to note that the SGX provides guidelines for sustainability reporting and not any set pattern or design that a company must follow.
This is in line with international practices for sustainability reporting, in which the relevant authorities set a standard framework and the companies act accordingly.
The recommendations of SGX also include that if a listed company or issuers find the guidelines by SGX to be insufficient for their specific business model, then they should follow the globally-recognized frameworks to complete the reporting requirements.
All in all
Overall, SGX has clear and easy-to-follow guidelines and recommendations for sustainability reporting.
By following the SGX guidelines and implementing internationally recognized sustainability reporting standards, companies that are aiming to expand globally and cater to an international audience can fulfill their sustainability reporting obligations.
It makes it easier for the stakeholders all over the world to understand the report. Experts, such as audit firms in Singapore, are capable of facilitating companies in creating such comprehensive sustainability reports of international standards.