Coming to grips with sustainability reporting

Goh Eng Yeow, The Business Times AsiaOne 19 Dec 16;

For some listed firms, getting out the next annual report may prove to be a big challenge.

Besides putting together their financials in the annual report, they will also be expected to discuss non-financial matters such as management of environmental risks, supply chain partner practices and even employee satisfaction.

This arises from a Singapore Exchange (SGX) initiative requiring listed firms to publish sustainability reports for the financial year ending on, or after, Dec 31, 2017, as it joins other major stock exchanges around the world in encouraging companies to be more transparent by offering more than just financial information on their businesses.

But rather than make sustainability reporting a hard and fast rule, the SGX is adopting a "comply or explain" regime to give listed firms a chance to explain away non-compliance.

This has led to a concern that a few listed firms may be tempted to take the "explain" route as management is confronted with bigger challenges such as keeping their businesses afloat as the regional economies slow down.

Not that adopting sustainability reporting is a bad move.

Going through a firm's financials offers few insights into the sustainability of its business mode.

Its profit and loss account may give us some insights into its profitability. But the numbers themselves do not tell us the challenges confronting a company and what it is doing to face up to them.

In order to get a flavour of that, a company will have to issue a sustainability report which maps out the different threats posed by environmental, social and governance issues and how it plans to respond to them.

There is a further incentive: Jumping on the bandwagon to do a sustainability report may even widen the pool of investors available to invest in a company's shares, given the US$60 trillion (S$86.8 trillion) of assets under management that have signed up to adhere to responsible investing principles.

Despite the obvious benefits, a study conducted by the National University of Singapore Business School's Centre for Governance, Institutions and Organisations and the ASEAN CSR Network showed that as at the end of last year, over 60 per cent of mainboard-listed firms are still not reporting on their sustainability practices.

That said, there is no denying that the bosses of many listed firms - especially the smaller ones - are still failing to see the merit in compiling such reports.

To them, sustainability reporting is useful only to big companies which do it as part of their efforts to attract new investors who may see areas such as environmentally friendly practices as a key threshold to a decision to invest.

In fact, for many smaller firms facing tough times as they confront a slowdown in business in major markets such as China, sustainability reporting is just more paperwork they could gladly do without as they struggle for survival.

Then there is the question of costs. One common complaint in the market is the outrageous fees which consultants want to charge listed firms - the figure can run to as high as $120,000, according to some sources - to help them comply with sustainability reporting.

As cash resources become a more and more precious commodity with worsening business conditions, some firms are very reluctant to be saddled with the new set of costs that they may have to shoulder in order to do sustainability reporting.

It led one market pundit to ask: "What happens if a listed firm steps forward to say that the reason it doesn't comply is that it is too costly and the money saved can serve shareholders and the company better in other ways? Will that suffice as an explanation?"

Some companies, however, do get a helping hand in defraying the costs. The Maritime and Port Authority of Singapore, for instance, will help listed maritime firms to pay for half of the costs of producing the reports, capped at $50,000 per company.

Still, there are some who continue to argue on the need to keep sustainability reporting voluntary, given the costs to be shouldered by companies for completing the task.

One merchant banker said: "If companies think that they can attract investors keen on sustainability, they will do the report regardless of whether there are requirements from the SGX or not."

For the rest of the firms yet to be convinced of its merits, there are other means to ensure a higher take-up rate, rather than using the "comply or explain" approach.

He said: "For instance, the SGX can do an annual survey to give a state of play of the larger versus smaller firms on such practices, which is similar to what the Monetary Authority of Singapore does with its annual fund management survey. This can give a good snapshot by segment of the areas of improvement which have been made."

Another way is to offer incentives such as granting awards by sector to companies that do best in terms of sustainability reporting, he added.

But getting the SGX to change its stand may be tough as matters stand. The big challenge for firms is how to implement sustainability reporting without being crippled by the costs. One suggestion is to try to do as much of the work in-house as possible and leave only the finishing touches to the external consultant. A company's management is, after all, in the best position to articulate the challenges it is facing and how it is tackling them.

For the sustainability report, the SGX requires a listed firm to have a discussion on five primary components - environmental, social and governance (ESG) issues; policies, practices and performance in relation to the important ESG issues; targets for the coming year; the reporting framework being used; and the board of directors' affirmation of compliance.

And this is the carrot which company bosses overlook when they gripe about the difficulties of doing the report: Firms get to enjoy considerable latitude on how they plan to report.

They can decide on which are the material issues within the five primary components that they need to report on. They also have the discretion on the reporting framework to adopt, the implementation timeline and the need for a third party to offer assurance.

Better still, sustainability reports don't even have to come in hefty tomes. Currently, many of them are crammed full of details of the good work which companies do, such as handing out cheques to charities. But that is not exactly information that is useful to investors.

Indeed, smaller listed firms can cover disclosures on exposure to key environmental and social risks and how these risks are being managed in a page or less - and this would have taken care of some of the reporting requirements.

Given the dearth of analyst coverage on their stocks, a good sustainability report may turn out to be another way for smaller listed firms to attract investors' attention. How they prepare it can lead to greater investor confidence in their shares. In the end, isn't that what it really boils down to?

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NEA steps up enforcement against unhygienic food sellers in 2016

Channel NewsAsia 19 Dec 16;

SINGAPORE: Figures released by the National Environment Agency (NEA) on Monday (Dec 19) showed that the agency stepped up enforcement against unhygienic food sellers in 2016, carrying out more inspections and in more instances, taking action against errant sellers compared to last year.

In a media statement, NEA said its officers conducted more than 137,000 inspections and in more than 3,000 instances, took action against unhygienic sellers in the first 11 months of 2016.

The result: 118 sellers had their licences suspended and six of them had their licences revoked entirely - slightly fewer than the 137 who had their licences suspended in the same period last year.

Between Jan and Nov 2015, officers conducted about 136,000 inspections and took action against errant retailers in more than 2,700 instances, NEA said in a similar statement issued last December.

Licensees who are convicted for hygiene lapses may be liable to a fine not exceeding S$2,000 and may have their licences suspended, NEA said.

Noting that food sellers may see an increase in patronage during the festive period, NEA called for them to ensure that good hygiene standards are maintained.

The agency said it would continue inspecting caterers and restaurants, and has issued advisories to food retail operators to tighten supervision of food handlers during this season.

NEA also advised members of the public who come across poor hygiene practices in food establishments not to patronise them and call the 24-hour NEA call centre at 1800 - CALL NEA (1800 - 2255632).


NEA also encouraged consumers and food retail establishment to minimise food waste, especially during the festive season.

Singapore generated 785.5 million kilogrammes of food waste in 2015, said NEA, adding that the amount of has increased by about 45 per cent over the past 10 years and is expected to rise further with a growing population and more economic activity.

NEA urged both consumers and food sellers alike to reduce the amount of food wasted - retailers by not over-purchasing food, and consumers by not over-ordering it.

- CNA/dl

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Vietnam: Floods kill 24, more rain expected

Channel NewsAsia 20 Dec 16;

HANOI: Days of unseasonably torrential rain have killed at least 24 people in central Vietnam, authorities said on Monday (Dec 19), inundating swathes of the region including the tourist draw town of Hoi An.

Vietnam regularly experiences tropical storms and heavy downpours but it is unusual for the country to see so much rain in December, during the cooler dry season that is popular with tourists.

Coastal Binh Dinh province reported the biggest death toll with 16 people killed since heavy rain began on Dec 12, according to an official online report from the national flood and storm control committee.

At least two more are missing in the province with hundreds of houses in remote areas currently under water.

The report said damage totalled US$32 million with more than 32,000 hectares of crops destroyed.

Parts of the central town of Hoi An, a World Heritage site that boasts picturesque pre-colonial trading houses, were submerged under water.

"It is strange for our town to be hit with flooding in December," Nguyen Thi Hon, a restaurant owner in Hoi An, told AFP adding some tourists had taken to seeing the sights by boat.

The floodwaters have receded in the last few days, she added.

But local forecasters have warned of further rain to come in the region at the end of the week.

- AFP/ec

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