The Rise of the Sustainability Reporting Megatrend: A Corporate Governance Perspective

By C Koh, Jerry K.; Leong, Victoria | Business Law International, September 2017 | Go to article overview

The Rise of the Sustainability Reporting Megatrend: A Corporate Governance Perspective


C Koh, Jerry K., Leong, Victoria, Business Law International


'Sustainability is a clear business case. It promotes growth and is essential to long-term business success.'

Mark Rutte, Prime Minister of the Netherlands (2012)

Sustainability reporting generally refers to the issuance of reports and other statements by a corporation about non-financial information, such as the environmental, social and governance (ESG) factors relating to the corporation. The past few decades have seen the rise of a 'megatrend' towards sustainability reporting. Investors, consumers, regulators and other stakeholders have become more active in demanding and evaluating information on how businesses are run. For instance, investors now pay greater attention to the ESG aspects of business and strategy to obtain a better insight into the companies they invest in.1

In keeping with this trend towards sustainability reporting, on 20 July 2016, Singapore Exchange Securities Trading Limited (SGX-ST) amended its listing rules to implement sustainability reporting requirements on a comply or explain basis. Under this approach, an issuer must either comply with specified disclosures on sustainability reporting, or disclose such non-compliance, giving its reasons for deviation and outlining its individual approach.

This article charts the rise of sustainability reporting as a megatrend2 and explores recent legal developments in sustainability reporting in various jurisdictions, with a particular focus on Singapore. It highlights key issues that corporations, particularly those listed on the SGX-ST, may face in the course of sustainability reporting, namely, the scope of requisite disclosure, targets and aspirational statements, as well as board responsibility.

The rise of a megatrend

In the 1990s, rapid globalisation and the liberalisation of markets propelled the rise of multinational corporations and attracted a wave of attention to their activities. There was a growing consciousness that the footprints of large and powerful businesses have the potential to both inflict great harm and deliver great good to communities.3 This thinking was influenced by the work on stakeholder theory published by R Edward Freeman, an American philosopher and professor of business administration at the University of Virginia. Stakeholder theory asserts that corporations should focus on creating value for all stakeholders (not just shareholders), and give due regard to their interests when making decisions.4 Non-governmental organisations (NGOs) played a major role in pushing for sustainability. Their efforts, among others, included organising demonstrations to protest against perceived unethical behaviour by corporations, as well as advocating frameworks and standards to guide such behaviour.5

In 1997, the Coalition for Environmentally Responsible Economies (CERES), in conjunction with the United Nations Environment Programme (UNEP), launched the Global Reporting Initiative (GRI), which develops and disseminates sustainability reporting guidelines for voluntary use by organisations reporting on their ESG factors.6 As sustainability reporting grew in prominence, the GRI was joined by other reporting standards, such as the Dow Jones Sustainability Indices (DJSI) and Sustainability Accounting Standards Board (SASB).7 These standards tend to vary in their focus on how to determine the materiality of information to be disclosed, with the GRI focusing on stakeholder engagement, and the DJSI and SASB focusing on industry-specific criteria. The GRI is one of the more well-known standards of sustainability reporting, and the SGX recognises the GRI as providing a 'valuable framework to assist listed companies with sustainability reporting'.8 That said, the sustainability reporting frameworks are not without detractors. For instance, some have criticised the GRI as being merely an exercise in box-ticking and superficial compliance.9 Thus, the key to effective disclosure would be to focus on the substance and spirit of the reporting guidelines, rather than treating them as part of a compliance checklist. …

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