Palm | Kelapa Sawit

In a significant move, Singapore Stock Exchange has issued a policy statement and a guide on sustainability reporting for its listed companies.

The Exchange is seeking feedback from the public and market players on the policy statement.

The policy statement says the sustainability reporting guidelines are voluntary at the moment. But there is a hint that the reporting may become mandatory in future. The policy statement says: "SGX is of the view that as more companies become inspired to adopt sustainability reporting, it will be natural to take the next step on guidelines and standards leading to rules."

These are the key points of the SGX policy statement and the reporting guidelines:

1. The Board is responsible for matters of sustainability as it leads and directs the company.
2. Environmental, social and governance considerations are important for the long term performance of the company.
3. No single standard is advocated, but the Global Reporting Initiative’s Sustainability Reporting Guidelines which are linked to the UN Compact principles, are among the globally recognised standards.
4. Applying global standards is important for cross-jurisdictional comparability and to give confidence that SGX-listed companies aim to achieve global best practices.
5. The reporting guide says that sustainability reporting is particularly relevant for companies that operate in industries that are susceptible to environmental risks e.g. oil & gas, mining & metals, raw material processing; industries that produce significant environmental pollutants such as chemical and apparel industries; heavy users of natural resources such as palm oil producers, forestry companies, etc.; or part of a supply chain where end customers demand that suppliers behave responsibly.
6. The guideline also emphasises the importance of independent assurance of the report from credible assurance firms.

The SGX policy for encouraging sustainability reporting is likely to result in more Singapore-listed companies reporting on their social and environmental impacts. Currently, Singapore companies lag behind in sustainability performance and disclosure from their peers in other developed countries.

The last date for the submission of feedback is on the 29th Oct 2010.

The full policy statement and the guide are available here.

Two recent reports indicate that India and China may have started viewing corporate social responsibility a bit more seriously.

Last December, India's corporate affairs ministry issued voluntary CSR guidelines for companies. The ministry has also urged all companies to create a separate fund for their CSR activities. Separately, the ministry also issued a voluntary guideline on corporate governance last year.

The corporate affairs minister Salman Khurshid has even suggested issuing social credits, on the lines of carbon credits, to companies which engage in corporate social responsibility programmes. He says that if needed his ministry will consider making CSR mandatory for companies.

In China,the Ministry of Commerce says it is using CSR indicators like environmental protection and employee welfare to appraise exporters - including domestic- and overseas-funded enterprises - to ensure they meet international standards.

Shanghai Bureau of Quality and Technical Supervision, a government department, introduced Shanghai Municipal Local Standards on CSR in January 2009. The guidelines though voluntary promise a number of incentives to those companies which adopt CSR.

A string of scandals in the recent couple of years ranging from child slavery and product safety to more recent incidents of worker suicides in Foxonn, an electronics manufacturer for Apple and other global brands, has tarnished the image of China-based businesses.

The government understands that a poor corporate responsibility image can dent the competitiveness of Chinese companies in the international markets. More importantly, bad corporate responsibility reputation will increase opposition to Chinese companies' takeover bids to acquire western companies.