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SGX announces Sustainability Reporting rules
by Erin Lyon  elyon@csr-asia.com
22 Jun 2016


The long wait for the SGX sustainability reporting requirements is finally over. On the 20th June 2016, the Singapore Exchange announced:

  • The new reporting requirements – Listing Rule 711A and 711B;
  • A guide to implementation – Practice Note 7.6 Sustainability Reporting Guide; and
  • Plans for CEO briefing sessions, online portal and a series of workshops

This comes on the back of the announcement last week introducing the new SGX Sustainability Indices.

The new rules have been introduced following years of voluntary guidelines in place since 2010 that resulted in only a few companies disclosing sustainability information. More on the now defunct SGX voluntary guidelines here.

The new requirements have been released following a month of consultation earlier this year. SGX reports that the consultation exercise met with strong support for the proposals. Notably though, the Small and Middle Capitalisation Companies Association (SMCCA), said that whilst it "welcomes SGX's Sustainability Reporting Guide" it also noted that SGX has "softened many requirements ... in view of reducing anxiety to small- and middle-capitalisation companies when implementing this report".

Companies have been preparing for this announcement for some time now – having been given ample notice that this reporting requirement was coming. Many companies have been preparing based on the consultation draft of the requirements (our review of that draft here), but there are some significant changes.

What are the requirements?
As part of a listed companies continuing obligations it must comply with the rules set out below. Where a company does not include any of the ‘primary components’ it must disclose that these have been omitted and explain what the company does instead with reasons for doing so.

A listed company must issue a sustainability report for its financial year, no later than 5 months after the end of the financial year. (SGX is allowing up to 12 months from the end of the financial year to publish the first report. This takes effect for any financial year ending on, or after, 31 December 2017.) 


The sustainability report also must describe the sustainability practices with reference to the following primary components:

  • Material environmental, social and governance (ESG) factors and describe both the reasons for and the process of selection, taking into consideration their relevance to the business, strategy, business model and key stakeholders (lengthy guidance is provided on this in the practice note);

  • Policies, practices and performance in relation to the material ESG factors identified, providing descriptive and quantitative information on each of the identified material ESG factors for the reporting period. Performance should be described in the context of previously disclosed targets.

  • Set out the targets for the forthcoming year in relation to each material ESG factor identified.

  • Select a sustainability reporting framework (or frameworks) to guide reporting and disclosure. The framework(s) selected should be appropriate for and suited to its industry and business model. State the name of the framework(s), explain reasons for choosing the framework(s) and provide a general description of the extent of the issuer’s application of the framework(s).

  • Contain a statement of the Board on the Board having considered sustainability issues as part of its strategic formulation, determined the material ESG factors and overseen the management and monitoring of the material ESG factors.

More information can be found in the new SGX-ST Listing Rules Practice Note 7.6 Sustainability Reporting Guide here.

What are the key changes since the public consultation document?

SGX highlights that there three key changes since the draft document, one is the additional length of time allowed to prepare the first report and the other two are:

  1. The revised Guide states that the sustainability report should contain a statement of the Board on the Board having considered sustainability issues as part of its strategic formulation, determined the material environmental, social and governance factors (“ESG factors”) and overseen the management and monitoring of the material ESG factors as opposed to the draft requirements which meant that a board would have to ‘confirm compliance with the primary components’.

    This revision is a result of feedback that the requirement for a separate assurance from the Board might lead to increased compliance costs as the Board might require assurance from external auditors and/or consultants before confidently making the prescribed Board statement.

    Companies have the discretion to decide on the wording of the Board statement as long as it adheres to the substance of the Board statement provided in the Guide. This requirement is also arguably a requirement of the Singapore Code of Corporate Governance, more on the code sustainability requirements here.

  2. The revised Guide provides that in cases where corruption or diversity is not assessed to be a material ESG factor, it need not be included in issuers’ sustainability reports, but if stakeholders express sufficient interest in the information, issuers are advised to present information on their websites to satisfy the interest. It is also possible that issuers may discuss issues of corruption or diversity in their Corporate Governance reports or other sections of their annual reports. In this regard, SGX considers that it is sufficient for issuers to refer to that report or those sections of their annual reports. This removes the requirement that reporting on corruption and diversity are mandatory.


Other notable things to consider are:

  1. The Principles for reporting, outlined in the Practice Note 7.6 Sustainability Reporting Guide:
         •  Board Responsibility
         •  ‘Comply or explain’
         •  Report risks as well as opportunities
         •  Balanced reporting
         •  Performance measurement system
         •  Global standards and comparability
         •  Stakeholder engagement
         •  Independent assurance

  2. Guidance for Holding Companies. Where holding companies and operating subsidiaries are both listed issuers having to undertake sustainability reporting, the operating entities can report on the ESG factors within their scope of operations. If the ESG factors are also material to the holding company, the holding company may make reference in its sustainability report to the sustainability reports of the operating subsidiaries.

    If the holding company has material investee companies which are not subsidiaries, its sustainability report should include the selection and management of these investee companies.

  3. Companies should publish the sustainability reports on SGXNet and on the company website. After a few years of sustainability reporting, a company can maintain static information, such as, policies and historical sustainability information, on its website while presenting the current year’s changes as well as performance in the annual sustainability report.

  4. A phased approach is supported. With guidance on what a phased approach might look like included.

  5. Companies should take note that SGX explicitly states ESG factors are not philanthropy or other charitable activities. The practice of reporting charity as ESG should stop.

What’s next?

SGX is working with the Global Compact Network Singapore (GCNS) to organise training workshops by sustainability reporting consultants. CSR Asia is part of the network of consultants providing training and services to companies looking to report. SGX is also planning other initiatives including an online portal.

Mr. Wilson Ang, Executive Director of GCNS, says “The CEO briefings and series of workshops that we will be putting together will be essential for companies to understand how they can effectively implement their Sustainability Reporting and learn from some of the existing best practices. We are pleased to be working with CSR Asia, as one of the thirteen consultants who have proven track records in Singapore in sustainability reporting, to make sure we have a sound foundation programme for the listed companies.”

With this and other announcements, such as the upcoming launch of the latest update to the Singapore Sustainable Blueprint, the pressure on the private sector to engage with sustainability is non-negotiable.

We now look forward to the first reports, with the voice of those like corporate governance specialist Mak Yuen Teen sounding a cautionary tale: "As we have learnt from the 'comply or explain' approach to the Code of Corporate Governance, issuers may, with the aid of consultants, issue boilerplate disclosures and explanations that are not useful at all. There needs to be monitoring and education initially, followed by monitoring and enforcement after some time.”

Time will tell how SGX and other interested stakeholders look to enforce the new listing rules.


ESG/Sustainability Reporting with CSR Asia

As one of the longest-established sustainability consultancies in Asia, CSR Asia brings local knowledge and international experience to respond to all of your reporting requirements. Our expertise covers a wide range of services: materiality assessment, stakeholder engagement, impact measurement, supply chain assessment and mapping, collating data, data management, benchmarking and gap analysis against standards, using guidelines and frameworks and against industry peers.

Contact us to find out how our team of experts can be of assistance. As part of our service we also provide free in-house reporting training for companies and board briefings – just ask for further details.

Sam +852 3579 8079 (Hong Kong Office)
Angela +65 6734 9744 (Singapore Office)


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