What SG Companies Need to Know About ESG Reporting

Welcome to the June issue of BoardRoom's Think ESG Newsletter. This month we look at the evolving global ESG reporting landscape and what implications it has on Singaporean Companies.

Navigating the Evolving Global ESG Reporting Landscape

As the global focus on Environmental, Social, and Governance (ESG) reporting intensifies, companies worldwide are adapting to new and emerging standards. This trend is driven by major frameworks such as:

the International Sustainability Standards Board (ISSB) Integrated Framework
the US Securities and Exchange Commission (SEC) regulations, and
the European Union's Corporate Sustainability Reporting Directive (CSRD)

These frameworks aim to create a unified approach to ESG reporting, ensuring that companies sustainability efforts are consistent, transparent, and comparable across different regions.

In Singapore, this evolving landscape poses both challenges and opportunities. The Singapore Exchange (SGX) has introduced mandatory climate-related reporting for listed companies, and the Monetary Authority of Singapore (MAS) has provided guidelines to help companies align with international standards.

Companies must now navigate these local requirements while also considering global frameworks like the ISSB to ensure compliance and competitiveness.

Quality & Consistency of ESG Data

One of the primary challenges for Singaporean companies is managing the quality and consistency of their ESG data. Often, data related to sustainability is fragmented across various departments, making it difficult to gather accurate and comprehensive insights.

To address this issue, companies need to deploy advanced data management platforms that can consolidate information from multiple sources. Additionally, engaging with external ESG consultants can help companies standardise their reporting practices and meet diverse regulatory requirements.

Be Future-ready with a Strong ESG Reporting Plan

The recent survey results highlight a significant gap in ESG readiness among Singaporean executives. A striking 68% of CEOs in Singapore believe their current ESG progress is insufficient to withstand stakeholder scrutiny, while only 8% feel they have the necessary capability to meet new reporting standards.

This underscores the urgent need for companies to build their internal capacities and capabilities in ESG reporting. The survey also revealed that higher costs and difficulties in raising finance are major concerns for companies that fail to meet stakeholder expectations regarding ESG performance.

From the investor's perspective, the integration of sustainability information into fundamental analyses has grown substantially, with 83% of investors now incorporating such data. This trend reflects a broader recognition of the importance of ESG factors in assessing long-term corporate value and risk. Regulatory measures are expected to further enhance investor confidence by addressing current data challenges, thereby fostering a more reliable and transparent sustainability reporting environment.

Disclosures at the Core of Your Business

Singapore's regulatory landscape for ESG reporting is becoming increasingly stringent. Climate-related disclosures will be phased in for listed issuers, starting with high-risk industries such as financial services, agriculture, energy, materials, and transportation.

By 2025, these requirements will align with the ISSB standards, reflecting a commitment to international best practices. This phased approach allows companies to gradually build their reporting capabilities while adhering to global standards.

The European Union's CSRD, in conjunction with the EU Taxonomy and Sustainable Finance Disclosure Regulation (SFDR), represents a comprehensive framework for sustainability reporting. The CSRD introduces rigorous reporting requirements and mandates double materiality assessments, compelling companies to disclose not only the financial impact of sustainability risks but also their broader impact on people and the planet.

This directive has significant implications for EU-based companies and their non-EU subsidiaries, including those in Singapore, which will need to comply with these stringent standards.

Be Up to Date on ESG Reporting in Singapore

For Singaporean businesses, the implications of these global and local regulations are profound. Companies must integrate environmental considerations into their strategic planning, ensuring that product designs are environmentally attentive.

Boards of directors are increasingly taking direct oversight of environmental pledges, key performance indicators (KPIs), and targets. Transparency and traceability in supply chains are also becoming critical, with companies required to monitor and mitigate the environmental impacts of their upstream suppliers.

To prepare for future reporting requirements, Singaporean companies should conduct thorough gap assessments to identify areas needing improvement. Standardising data collection and reporting practices according to international frameworks like the ISSB and TCFD will be crucial. Engaging stakeholders and verifying reports through external audits can further enhance credibility and compliance.

By adopting active measures, companies can showcase their sustainability achievements, build stakeholder trust, and set new goals for continuous improvement.

The evolving ESG reporting landscape presents a complex but essential journey for Singaporean companies. Embracing these changes will not only ensure regulatory compliance but also position businesses as leaders in sustainability, driving long-term value and resilience in an increasingly scrutinised corporate environment.