The recent proposal by Singapore’s Sustainability Reporting Advisory Committee (SRAC) to extend climate reporting to all listed and large unlisted companies marks a significant development in the business and environmental sectors.
This move underscores Singapore’s commitment to aligning with global sustainability standards. In this article, we will explore the details of this recommendation, its implications for businesses in Singapore, and the broader context in which it sits.
As sustainability becomes increasingly central to business operations, understanding these new requirements is crucial for informed decision-making.
The New Proposal: What Might Change?
Expanding the Scope of Reporting
Singapore’s recommendation to mandate climate-related disclosures for all listed and privately held large companies is part of its proactive approach towards environmental transparency and accountability.
While previously, the emphasis was on listed companies (listcos) from certain industries, the latest recommendation signifies a potential pivotal shift. If accepted, starting from FY2025, all listcos will be required to adhere to these disclosure mandates.
Beyond that, by FY2027, large non-listed companies will also come under this purview. This possible strategic expansion ensures that a more comprehensive segment of the business community, both public and private, is held accountable for their environmental impact.
The Role of the Sustainability Reporting Advisory Committee (SRAC)
The SRAC, a collaborative effort by the Accounting and Corporate Regulatory Authority (ACRA) and Singapore Exchange Regulation, made the new proposal in July 2023. The proposed rule changes signify its commitment to refining and enhancing the existing regulations.
It is important to understand that these proposed changes are not arbitrary — rather, it is a response to the evolving global landscape of sustainability reporting. As an international hub for investment, Singapore simply must be part of leading this charge to remain competitive on the world stage.
Aligning with Global Trends
Financial markets, investors, and stakeholders are increasingly demanding clear, comprehensive information on the impacts of climate change on businesses.
This includes understanding the risks and opportunities presented by changing temperatures, climate-related policies, and the advent of new, sustainable technologies.
Singapore’s Commitment to Sustainable Business
The proposal is a reflection of Singapore’s commitment to creating a business environment that is not only profitable but also sustainable and responsible.
By extending the climate reporting requirements to unlisted companies, Singapore is ensuring that a larger segment of its business community is contributing to the global dialogue on sustainability and is prepared for the environmental challenges of the future.
This is not just an economic or environmental, social, and corporate governance (ESG) change, but a cultural paradigm shift that will become the new normal. Singapore has made it clear that ESG is not just about compliance, but untapped economic growth.
The Global Context: Aligning with TCFD Standards
Understanding the TCFD’s Role
The Task Force on Climate-Related Financial Disclosures (TCFD) serves as a global benchmark for companies and organisations aiming to enhance their environmental transparency.
Established by the Financial Stability Board, the TCFD’s primary mission is to promote the reporting of climate-related financial information, ensuring that businesses provide clear insights into their environmental footprint and the associated financial implications.
The Need for Comprehensive Climate Information
As mentioned earlier, financial markets, along with investors and stakeholders, are showing an increasing appetite for detailed, high-quality information on the impacts of climate change. This demand stems from the recognition that climate change presents risks, but crucially, it also offers economic opportunities.
Whether it’s the challenges posed by rising temperatures, the implications of climate-related policies, or the potential of emerging sustainable technologies, there’s a growing need for businesses to disclose their stance and strategies.
TCFD’s Framework for Effective Disclosure
The TCFD has developed a robust framework to guide public companies and other organisations in their climate-related disclosures. This framework emphasises the importance of disclosing climate-related risks and opportunities through existing reporting processes.
Key areas of focus include governance around climate-related risks, the potential impacts on an organisation’s strategy and financial planning, risk management processes, and the metrics and targets used for assessment.
Driving Global Alignment in Reporting
By championing clear and comprehensive climate-related financial disclosures, the TCFD is playing a crucial role in aligning global reporting standards.
As businesses across the world adopt these standards, it fosters a unified approach to addressing the financial implications of climate change, ensuring that companies, investors, and stakeholders operate from a shared understanding.
SGX’s Stance on Sustainability Reporting
Embracing Global Reporting Frameworks
The Singapore Exchange (SGX) has consistently demonstrated its commitment to sustainability, recognising the importance of ESG factors in the modern business landscape.
SGX’s sustainability reporting guidelines are developed drawing inspiration from top global sustainability and ESG reporting frameworks. This alignment with international standards ensures that businesses in Singapore are not only compliant locally but also resonate with global benchmarks.
Key Frameworks Endorsed by SGX
SGX endorses several globally recognised reporting frameworks, reflecting its dedication to comprehensive and transparent sustainability reporting:
- Global Reporting Initiative (GRI): An international independent standards organisation that aids businesses and other entities in understanding and communicating their impacts on various issues, including climate change, human rights, and corruption.
- Sustainability Accounting Standards Board (SASB): Provides industry-specific standards that guide companies in disclosing decision-useful sustainability information to investors.
- International Integrated Reporting Council (IIRC): Champions integrated reporting and promotes communication about value creation as an evolution in corporate reporting.
- CDP Global (CDP): An international non-profit that runs a global disclosure system for companies, cities, states, and regions to manage their environmental impacts.
- Taskforce for Climate-related Financial Disclosure (TCFD): As mentioned earlier, TCFD focuses on promoting more informed investment, credit, and insurance underwriting decisions through its recommendations for climate-related disclosures.
- Climate Disclosure Standards Board (CDSB): An international consortium of business and environmental NGOs, CDSB offers a framework for companies to report environmental information in mainstream reports to investors.
Promoting a Culture of Transparency
SGX’s approach to sustainability reporting is rooted in the belief that transparency and accountability are key to economic leadership. By setting clear guidelines and actively endorsing globally recognised frameworks, SGX ensures that companies disclose meaningful data about their sustainability initiatives.
This proactive approach aims to not only foster trust among stakeholders but also equip companies to address potential ESG challenges proactively.
Positioning Singapore as a Sustainable Business Hub
SGX’s rigorous sustainability reporting standards play a crucial role in bolstering Singapore’s reputation as a leading hub for sustainable business practices.
As companies align with these standards, it sends a strong message about Singapore’s commitment to creating a business ecosystem that prioritises both profitability and responsibility.
InCorp’s Approach to Sustainability Reporting in the New Regulatory Landscape
The Three Lines of Defence in Sustainability Reporting
InCorp’s structured approach to sustainability reporting is built around the ‘Three Lines of Defence Model’, a renowned risk and control framework:
Defence 1: Sustainability Reporting Framework
Customised to fit your company’s industry and business model, ensuring accuracy and relevance.
Defence 2: Comprehensive Sustainability Reports
A thorough exploration of ESG factors, highlighting both potential risks and lucrative opportunities, ensuring proactive management for future success.
Defence 3: InCorp’s Internal Review on Sustainability Reporting
This is the crux of our offering and directly aligns with the evolving regulatory changes that have brought you to this article. Our internal review process fortifies your company’s governance structure, backed by stringent internal controls and risk management systems.
It ensures that your sustainability reporting is not only compliant but also strategically poised to address the latest mandates and requirements.
Who Benefits from Our Expertise?
From publicly listed Companies facing complex disclosure requirements to financial Institutions keen on showcasing their ESG commitments, to Public Sector and Non-Profit Organisations aiming for utmost transparency, InCorp’s Internal Review on Sustainability Reporting is the definitive solution.
Where to Next for Complying With New Climate Reporting Rules?
Navigating the evolving landscape of sustainability reporting in Singapore can be challenging, especially with the recent regulatory changes. However, with the right expertise and guidance, businesses can turn these challenges into opportunities.
At InCorp, our Internal Review on Sustainability Reporting is specifically designed to help companies seamlessly align with the new mandates, ensuring compliance while also leveraging ESG factors for strategic growth. Don’t leave your sustainability reporting to chance.
Contact InCorp today and ensure your business is not only compliant but also positioned as a leader in sustainability.
- Singapore recommends extending climate reporting requirements to include unlisted companies, ensuring a broader segment of the business community is accountable for their environmental impact.
- The 'Three Lines of Defence Model' is a robust risk and control framework ensuring businesses have a structured approach to their sustainability reporting, encompassing framework design, comprehensive reporting, and internal review.
- SGX's rigorous sustainability reporting standards and endorsement of global frameworks ensure that businesses in Singapore align with both local and international benchmarks, fostering trust and positioning Singapore as a sustainable business hub.