Jurisdiction - Singapore
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Singapore – Sustainability Reporting For Listed Companies.

20 January, 2015


Legal News & Analysis – Asia Pacific – Singapore –  Construction & Real Estate


In recent years, the haze from the forest fires that raged Kalimantan and Sumatra that shrouded Singapore for months on end have been blamed upon palm oil producers clearing the rainforests for their plantations1. However, if these palm oil producers had been required to measure and report on the massive environmental and social damage caused by their deforestation practices, they could be made more accountable for such environmental harm and thereby address reforms and conservation efforts.

In contrast to financial reporting, the history of sustainability reporting (“SR”, which also denotes the sustainability report, as the case may be) is comparatively recent and first gained currency in the 1990s, especially following the 1987 Brundtland Report on sustainable development and the 1992 Earth Summit in Rio de Janeiro. The Brundtland Report defined sustainable development as any development that “meets the needs of the present without compromising the ability of future generations to meet their own needs”. In this context, SR refers to the publication of comprehensive information relating to an organisation’s activities in the environmental, social and governance environment in which the organisation operates or has influence.

In Singapore, on 27 June 2011, the Singapore Exchange (“SGX”) published its “Guide to Sustainability Reporting for Listed Companies” (“the SGX Guide”), following a public consultation on SR in August 2010. SGX’s move came in response to the growing momentum of SR among institutional investors and stock exchanges across the world. SR or non-financial reporting has become mandatory for listed companies on several stock exchanges, including those in China, Malaysia and Taiwan.

The SGX Guide sets out broad principles for listed companies in formulating a SR framework. Currently, SGX “encourages” listed companies to report on their sustainability practices in relation to economic, social and environmental concerns. Only companies in the Mineral, Oil and Gas (“MOG”) sector listed on SGX are required (since September 2013) to report on their sustainability practices in their annual reports2.

As the SR regime here is largely a voluntary one, it is hardly surprising that as at end-2013, only 160 or 29.8% of the 537 companies listed on the Mainboard of SGX communicated their sustainability practices3. Of those Mainboard companies which made SR, only 19 used the Global Reporting Initiative (“GRI”) framework to produce their SRs. Specifically, the GRI SR Guidelines provide general principles and indicators that listed companies can use to measure and report their economic, environmental and social performance.

On 17 October 2014, SGX made an announcement that has significant implications for all companies listed on SGX. At the Singapore Compact CSR Summit 2014, SGX chief executive Magnus Bocker said the bourse will be mandating that all listed companies publish SRs through a “comply or explain” approach. It will embark on a one-year study and consultation to work out the reporting guidelines. Assuming a two-year implementation period, we expect that SR may become mandatory for listed companies by 2017 or 2018.

Benefits Of SR

The benefits to listed companies making the SR, and its stakeholders, have been well documented. The commonly cited benefits of SR include tracking and keeping the company accountable for its social and environmental footprints, and strengthening engagement with its stakeholders (such as employees, suppliers, customers, residents in vicinity of the company’s operations). In recent years, other growing benefits or drivers of SR have also emerged, such as:

(i) demand from financial institutions which prefer to fund businesses that can demonstrate clear plans for sustainable development in the social and environmental realms;4

(ii) enhancing the reputation of a company’s products or services. For example, Apple Inc.’s websitehas a section on the firm’s environmental responsibilities, and how Apple Inc. designs its products with cleaner, safer materials to reduce and eliminate many toxins commonly used in the electronics industry. Apple Inc. holds its suppliers accountable by conducting factory audits and testing components with independent laboratories; and

(iii) the growing trend among developed markets to impose a statutory obligation regarding a company’s environmental and social impacts. For example, following a reform of the United Kingdom’s Companies Act in 2006, company directors now have a legal duty to consider the impact on the environment and the stakeholders, when making decisions for the company6. It remains to be seen whether Singapore will take a similar route in future.


Ensuring The Company Derives Real Value From Its SR

As compiling a SR requires organisational commitment and effort, it is natural that companies will want to make sure there is genuine value in the SR process. To achieve genuine value from SR, companies should pay attention to the following questions:

(i) It is commonly said that SR provides, inter alia, a means for companies to engage their stakeholders, who are the targeted audience of the SR. Naturally, companies should consider important questions such as who uses the SR information and how they use such information. What do readers of the SR really want to know? How can SR support an organisation’s strategy and culture of transparency and accountability? In other words, companies should focus on the “value” of SR to their own organisation rather than seeing the SR as mere compliance with another SGX reporting requirement; and

(ii) Many companies may see SR as a tick box exercise that doenot necessarily correlate to their core business development or profit maximisation efforts. They may not view the use of SR as a means to improve their own performance from a non-traditional perspective. In other words, how does doing a great job on the GRI make the company a “great” company for the shareholders?

Key Challenges Faced By Companies

Listed companies should be aware of the following key challenges if and when SR obligations are made compulsory:

(i) Deciding who the audience is: Large listed companies that may have a presence in Singapore and other overseas markets may have large diverse groups of stakeholders. Compiling a report that is appealing to stakeholders with different perspectives on SR will be challenging, as companies may also wish to avoid the reports from becoming too voluminous;

(ii) Implementing a corporate policy and framework: The board and management will need to establish and implement across all levels of the company a corporate policy and framework for sustainable practices and reporting. Employees will need to be trained on these sustainable practices. The company will also need to design and put in place internal systems to identify issues or high-risk areas associated with the company’s operations, along with the appropriate solutions for dealing with those risks. The company should have the means to monitor for any non compliance, e.g. a feedback channel from stakeholders. Attempting to gather reliable SR data from different parts of the organisation can be a challenge especially if data collection systems are outdated or fragmented;

(iii) Being prepared for regulatory changes in jurisdictions of operations: Companies which have operations in various countries must keep abreast of changes in environmental laws and regulations, in order to ensure continuing compliance;

(iv) Need for external assurance of SR data: The accuracy and completeness of reported information will need to be verified; hence it will be important for an external independent professional party to assure the SR data, much like how an auditor audits a company’s financial statements. The SGX Guide recommends the use of external assurance to verify the SR information and to lend credibility to the SR. One view is that until sustainability data is subject to the same level of detailed, independent and professional assurance as financial and accounting data, SR will not be as valued or credible7; and

(v) Costs, costs and costs: Finally, the financial costs associated with (i) implementing a company-wide SR policy; (ii) implementing the internal controls; (iii) implementing the requisite systems and tools to capture the necessary data or indicators for reporting; and (iv) engagin external assurance providers can be a huge burden, especially for small and mid-cap listed companies. Although frameworks like GRI allow first-time reporters to report on a small number of issues which are of the most concern to them and their stakeholders, the underlying reporting principles of completeness and accuracy found in the GRI will certainly require companies to collect and report on more SR data on other aspects of their environmental and social footprints.8


SR has come a long way since the 1990s and is increasingly recognised as an important metric, like financial performance data, to measure good corporate governance.

In the medium-term, for companies listed in Singapore, it is likely that SR will make steady and incremental progress among the larger public-listed companies, with improvements in the depth and quality of reporting. It is also likely that reporting will increasingly be based primarily on the GRI SR Guidelines. If SR is made compulsory, a single, universally accepted framework for reporting should also be prescribed. The different approaches towards SR today are not ideal, because although large publicly listed companies practise SR seriously, small and mid-cap listed companies have some way to go in carrying out SR.

Another related development may be that more attention will be paid to issue- or sector-based reporting of sustainability practices. This may be driven by growing regulatory or market demands on specific companies or sectors that have a greater impact on one or more sustainability issues. We may expect to see regulators imposing requirements on companies in more sectors to report on their sustainability practices.

Whatever the future holds, companies need to quickly understand the full implications of SR and start taking preparatory measures sooner rather than later for a compulsory SR regime.


End Notes:


1 http://www.economist.com/news/asia/21599388-fires-cause-much-regionshaze-have-started-early-year-leaders-fiddle-sumatra.

2 Rule 1207 of the SGX Listing Manual.

3 “Sustainability Reporting in Singapore among Singapore Exchange Mainboard Listed Companies 2013”, a joint study by the Singapore Compact and National University of Singapore published in July 2014.

4 http://www.ussif.org/sribasics. According to the US SIF Foundation’s 2014 Report on Sustainable and Responsible Investing Trends in the United States, as of year-end 2013, more than one out of every six dollars under professional management in the United States—USD 6.57tn or more—was invested according to Sustainable, Responsible and Impact Investing (“SRI”) strategies.

5 https://www.apple.com/environment/.

6 Section 172 of the United Kingdom’s Companies Act 2006.

7 https://www.globalreporting.org/resourcelibrary/GRI-Assurance.pdf; Section 2.1.

8 Sections 4.1 and 4.2 of the GRI G4 Reporting Guidelines and Standard Disclosures.




For further information, please contact:


Li-Ling Ch’ng, Partner, RHTLaw Taylor Wessing
[email protected]

Chee Meng Lee, RHTLaw Taylor Wessing
[email protected]

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