Professionals need to push sustainability reporting beyond just meeting basic requirements, according to industry leaders at a recent ACCA roundtable discussion on sustainability initiatives.
Sharon Machado, ACCA’s head of sustainable business, shared findings from ACCA’s report on sustainability progress tracking at the event, which was attended by Singapore-based leaders. According to the report, 71% of companies globally (73% of businesses in Asia Pacific and South Asia, and 68% in China) focus on sustainability primarily because they are required to.
Machado said companies need to view sustainability reporting as more than just a box-checking exercise. Only 16% of senior management and boards (17% in Asia Pacific and South Asia, and 22% in China) use sustainability information when making decisions, but that data can help identify material risks and opportunities, particularly those related to climate change, which can greatly impact financial performance as well as environmental footprint.
‘You shouldn’t be reporting for the sake of reporting’
Core insights
The ACCA report reveals that 41% of companies worldwide struggle to understand sustainability reporting requirements and identify relevant information for stakeholders. Indrie Tjahjadi, managing director for sustainability and climate change at PwC Singapore, called that finding ‘alarming’, adding: ‘You shouldn’t be reporting for the sake of reporting.’
She told the roundtable that sustainability should not be just ‘an extra-curricular project or a tack-on’, adding that clients are most successful when sustainability initiatives are integrated into the organisational DNA.
‘Institutional investors and clients are changing the overall landscape’
Meanwhile Vikash Hurrydoss, Munich Re’s head of regional middle office centre for Asia and Australia, warned that climate change is creating new business risks as natural disasters become both more frequent and more severe. ‘Losses from these natural catastrophes translate into greater exposure for balance sheets of business,’ he said.
Beyond the business imperative of embedding sustainability practices in the organisation, Hurrydoss stressed that companies need to track and report on sustainability to meet investor and client expectations. ‘We are seeing institutional investors and clients demanding a certain set of behaviour from companies, investment strategies, sustainability profiles,’ he said. ‘These are all changing the overall landscape.’
ESG embedded
Industry leaders at the roundtable agreed that companies need to weave environmental, social and governance (ESG) concerns into their core business metrics. Without specific targets and concrete actions, sustainability cannot become a meaningful part of business operations.
Singapore is one jurisdiction that is making headway here, having introduced extended timelines for climate reporting requirements earlier this year. Tina Thomas, head of ESG and sustainability at Baker Tilly Singapore, said: ‘After years of reporting, companies, especially listed, don’t want to lose their momentum on sustainability reporting, even with the extended deadline. They increasingly recognise that establishing strong reporting frameworks is crucial.’
Business value
A climate and sustainability partner at one Big Four firm emphasised the importance of measuring returns on sustainability investments. She explained: ‘It provides a clear way to visualise how much companies are investing and how those efforts translate into outcomes.’
Thomas said that some companies are starting to see how strong environmental performance can create business value. In Malaysia, for example, companies are embracing sustainability reporting to maintain their competitive edge as global suppliers.
‘Having a green asset definitely protects us from valuation disruption’
A finance VP from the hospitality sector shared his own company’s experience that green and sustainable assets could help protect the business from losing value. A study by his company into the potential impact of sustainability initiatives on some of its properties showed real cost savings from adopting sustainable practices for the majority.
‘Regardless of the change in the returns, having a green asset definitely protects us from disruption of the property valuation,’ the VP said, adding that effective sustainability initiatives need to work both bottom up and top down. ‘That’s how we organise,’ he said.
The vision
Companies need to establish their own guiding vision for sustainability and ensure everyone in the organisation understands what it means at every workstream, according to Hong Tin Wei, director of ESG at Grant Thornton Singapore. ‘With that, you can influence your ecosystem and value chain.’
Perhaps most importantly, employees need to truly understand the company’s sustainability goals. ‘The key success factor is spending genuine time asking what ESG means for [your] company and how those sustainability goals bring you to that vision,’ Hong said. ‘I don’t think that question is being asked enough.’
At a disadvantage
Hurrydoss pointed out that the stringent requirements for data governance and assurance can put small and medium-sized businesses (SMEs) at a disadvantage in gathering data for sustainability reporting. ‘There’s a tendency for larger companies that have to report on sustainability to narrow their vendor base to those who can provide such reliable data,’ he said.
However, SMEs frequently lack access to assurance or rating systems, making it harder for them to partner with companies that require strong sustainability credentials. ‘There’s a growing reliance on external assurance or quality assurance rating agencies,’ Hurrydoss said.
Hong pointed out that SMEs do not receive enough support on how to start out on their sustainability journey, even though they are key to the green transition.
‘We advise our clients to right-size into their ambition’
According to the ACCA report, 29% of SMEs and 30% of small and medium-sized accountancy firms globally said they were not ready to collect and use sustainability information. ‘They come to us not knowing where to start,’ Hong said. ‘What we usually recommend to people are solutions that are right-sized and prioritised for their purpose.’
Ultimately, SMEs need affordable sustainability solutions they can gradually adopt and scale, Hong added. ‘That’s how we advise our clients – to right-size into their ambition at the moment about what they want to do.’
Hong also pointed out that data tools for SME sustainability reporting are still relatively new, and vendors are grappling with complexity, both in operation and integration. ‘There’s room for consolidation, or at least some level of interoperability between these systems,’ he said.
