As Singapore positions itself as a global leader in sustainable finance, corporate boards must evolve from compliance monitors to proactive champions of environmental, social and governance (ESG) principles.
Singapore has emerged as a regional leader in sustainability reporting and ESG disclosures. In 2016, the Singapore Exchange introduced sustainability reporting requirements for listed companies, government sustainability initiatives include the Singapore Green Plan 2030, and the country plans to achieve net-zero greenhouse gas emissions by 2050.
ESG disclosures must be based on authentic corporate performance
ESG considerations for organisations have evolved from compliance to strategic significance. Regulation and compliance are increasing, investors are focusing on long-term value rather than short-term gain, and sustainability consciousness is growing among consumers. Organisations will need to strategically capitalise in these areas to enhance their ESG reporting.
As the landscape evolves, boards have to navigate the emerging disruptions and shifting expectations surrounding ESG to report the true state of affairs. With stakeholders wanting transparency, accountability and measurable outcomes, boards must ensure that disclosure is based on authentic corporate performance. Some ways to achieve this include the following.
Regulations
Governments worldwide are tightening regulations around ESG disclosures. Boards must ensure compliance while embracing these regulations as opportunities for genuine engagement with stakeholders. Examples of current reporting frameworks include:
- Global Reporting Initiative standards
- IFRS Sustainability Disclosure Standards
- Social Value International standards
- the Integrated Reporting Framework
- the UN’s Sustainable Development Goals (SDGs).
Performance measurement
Metrics for evaluating ESG performance need to go beyond compliance. Boards should seek meaningful key performance indicators (KPIs) that reflect the company’s genuine impact and align with stakeholder values. KPIs need to be relevant to the ESG strategy and capture material issues.
Boards need to assess current KPIs alongside sustainability performance targets (SPTs) to determine if they truly reflect the material areas for ESG reporting. SPTs should be benchmarked to a baseline and aligned to sector, national or international goals.
To be useful to stakeholders, KPI and SPT metrics – which encompass environment, social and governance risk – must be comparable across companies. As they tend to be dynamic, a clear mitigation plan should also be in place.
Continuous learning
The ESG landscape is a dynamic one. Top management must remain informed about emerging trends, best practices and evolving stakeholder expectations. Continuous education and adaptation are vital here.
The genuine challenge rests in how boards can excel at devising sustainable innovation, reduce costs, improve productivity and remain profitable at the same time. The additional economic angle in ESG must be clearly defined, and ultimately, boards need to be accountable for the chosen strategic direction of their ESG plans.
Maintaining proactive communication with stakeholders is crucial
Stakeholder engagement
It is crucial to maintain proactive communication with various stakeholders, such as investors, employees, customers, suppliers and communities. Boards must foster a culture of transparency and trustworthiness among their stakeholders through annual reports, sustainability reports, corporate governance reports, company website, newsletters and surveys.
The rise of social media has amplified voices demanding corporate responsibility through new channels for interactive communications. By staying attuned to societal shifts and responding proactively to issues such as diversity, equity and climate change, organisations can build a stronger and lasting relationship with their stakeholders.
Data and technology
Innovations in big data analytics, artificial intelligence, cloud computing and blockchain are reshaping how companies gather, analyse and report ESG data. Boards need to understand these technologies to leverage their potential for enhanced transparency and operational efficiency.
Digital transformation and technology are playing an increasingly important role in streamlining data collection, scenario planning and sensitivity analysis on the performance measurement of ESG strategy. Scenario planning allows organisation to simulate multiple scenarios, enabling risk and opportunities assessments. Meanwhile sensitivity analysis examines how changes in key variables may affect outcomes.
ESG is no longer a tickbox exercise – it requires genuine commitment from boards
Advantage
While ESG initiatives can indeed be a source of competitive advantage, boards must approach them with a discerning eye. To truly thrive in this new environment, boards will need to embrace ESG as a core component of their governance strategy, ensuring that their organisations not only shine but also make a meaningful difference in the world.
Sustainability and responsible governance is no longer a tickbox exercise – it requires genuine commitment from boards. When that happens, ESG acts as the heartbeat of a trailblazing organisation looking to capture positive impacts.
More information
For information and resources on sustainability issues, visit ACCA’s Accounting for a better world hub.
