CATALYSING SUSTAINABILITY REPORTING IN SOUTHEAST ASIA

Southeast Asia (SEA) stands at a critical juncture in its sustainability journey, confronting pressing environmental challenges amid rapid economic growth. This region's diversity, marked by more than 1000 languages and over 10 religions, in addition to a significant economic disparity, necessitates a tailored approach to sustainability practices. Direct adoption of policies from the EU, US, or other developed regions may not suit SEA's unique context. 

To foster sustainable development, SEA must prioritise robust and transparent sustainability reporting practices that consider the region’s rich resources and varied materiality. We will explore the evolving regulatory framework and strategies within the region to accelerate its adoption, ensuring that each country's specific environmental challenges are addressed effectively.

I. Policies and Regulatory Requirements:

Each country within Southeast Asia has distinct policies and regulatory requirements governing sustainability reporting, reflecting the region's diverse economic and environmental landscapes.

Singapore

Singapore, boasting the highest GDP per capita in the region, demonstrates a strong commitment to sustainable practices. The Singapore Exchange (SGX) requires listed companies to either adhere to the Global Reporting Initiative (GRI) standards for sustainability reporting or adopt a "comply or explain" approach, providing transparency for investors. The government also encourages companies to disclose environmental and social impacts in their annual reports.

Despite its economic prosperity, Singapore faces significant sustainability challenges due to limited resources, such as fresh water and land.  This highlights the need for continued innovation and investment in areas like renewable energy to ensure long-term sustainability.

Malaysia

Malaysia, which is known for its rich natural resources and in particular forests, faces significant environmental challenges, including air and water pollution, deforestation, and plastic waste management. In response, the Securities Commission Malaysia (SCM) has introduced the Sustainability Reporting Guide (SRG) for listed companies. The SRG encourages companies to report on their environmental, social, and governance (ESG) practices and performance.

Furthermore, Bursa Malaysia, the national stock exchange, mandates that listed companies disclose sustainability information in their annual reports or provide a rationale for non-disclosure. These measures reflect Malaysia's commitment to enhancing transparency and accountability in environmental management amidst its ongoing industrial activities.

Thailand

Thailand, grappling with significant environmental issues such as heavy air pollution exacerbated by transportation, manufacturing, agricultural mismanagement and cross-border pollution effects, has taken steps towards sustainability and transparency in corporate governance. The Stock Exchange of Thailand (SET) mandates that listed companies disclose environmental, social, and governance (ESG) information in their annual reports. 

Additionally, the Thai Government has introduced regulations requiring certain companies to conduct environmental and social impact assessments for their projects. These initiatives are part of Thailand's broader strategy to address its environmental challenges, which also include biodiversity loss, and land and water pollution, reflecting a commitment to preserving its environmental assets while promoting sustainable development.

Indonesia

Indonesia, a vast archipelago that spans across three time zones, is rich in biodiversity and extensive forest areas. It is facing the dual challenge of protecting its natural heritage while addressing its position as one of the top ten greenhouse gas (GHG) emitting countries globally. In response, the Indonesia Stock Exchange (IDX) encourages listed companies to disclose sustainability reports based on international standards such as the Global Reporting Initiative (GRI) or the Sustainability Reporting Guidelines issued by the Indonesian Institute of Accountants (IAI). 

Additionally, the Indonesian Government has implemented regulations mandating companies to conduct environmental impact assessments and disclose environmental management plans for certain projects. These initiatives are crucial as Indonesia seeks to balance its economic development with environmental sustainability, emphasising the need for robust decarbonisation strategies to mitigate its significant GHG emissions across its expansive territory.

Philippines

The Philippines is facing known environmental challenges such as pollution and significant plastic waste issues. As such, it is taking steps towards improving sustainability and transparency within its corporate sector. The Securities and Exchange Commission (SEC) of the Philippines encourages listed companies to voluntarily disclose sustainability information in their annual reports, aligning with international reporting frameworks such as the Global Reporting Initiative (GRI) or Integrated Reporting (IR). 

Additionally, the Philippines Government has introduced regulations requiring companies to submit Environmental Compliance Certificates (ECC) and Environmental Impact Statements (EIS) for certain projects. These measures are part of the Philippines' broader strategy to tackle its environmental issues and promote responsible business practices that are crucial for mitigating the impacts of pollution and addressing the persistent problem of plastic waste management.

 Vietnam

Vietnam, one of the fastest-growing economies in the world, is making significant strides in infrastructure investment and renewable energy development. With over 3,000 kilometers of coastline facing the South China Sea, Vietnam is uniquely positioned to capitalise on wind energy, which is becoming a substantial part of its renewable energy portfolio. In alignment with its economic growth and environmental priorities, the State Securities Commission of Vietnam encourages listed companies to disclose sustainability information in their annual reports, following international reporting standards such as the Global Reporting Initiative (GRI) or the Sustainability Reporting Guidelines issued by the Ministry of Planning and Investment.

Moreover, the Vietnamese Government has implemented regulations requiring companies to conduct environmental impact assessments and obtain permits for projects that may have significant environmental impacts. These measures are part of Vietnam's comprehensive approach to integrating sustainable practices into its economic development plans, ensuring that growth is both inclusive and environmentally responsible.

Myanmar

Myanmar, amidst internal political and social unrest, faces unique challenges in its approach to sustainability and corporate governance. While Myanmar has yet to establish formal sustainability reporting requirements at the national level, some international companies operating within the country voluntarily disclose sustainability information, adhering to global reporting frameworks such as the Global Reporting Initiative (GRI). 

Despite these challenges, Myanmar possesses high potential due to its rich natural resources, making conservation and protection efforts crucial for sustainable development. The absence of mandated sustainability reporting underscores the need for robust frameworks to ensure that the natural wealth is managed responsibly and that development progresses without exacerbating existing social and environmental issues.

Cambodia

Cambodia, while lacking formal national sustainability reporting requirements, allows companies operating within its borders the option to voluntarily disclose sustainability information. These disclosures often align with international reporting frameworks such as the Global Reporting Initiative (GRI). This approach provides a level of flexibility for businesses to demonstrate their commitment to sustainable practices, even in the absence of stringent local regulations. This voluntary framework enables companies to contribute to transparency and accountability in their operations, fostering a culture of sustainability in Cambodia’s growing economy.

Laos

Laos, while lacking formal national sustainability reporting requirements, allows companies operating within the country to voluntarily disclose sustainability information, aligning with international reporting frameworks such as the Global Reporting Initiative (GRI). This openness to voluntary disclosure is particularly significant given Laos's strategic position with a border adjacent to China and its high potential in hydroelectric energy. This energy sector not only supports the nation's economic growth but also positions Laos as a key player in regional energy markets. The combination of these factors highlights the importance of integrating sustainable practices to ensure that development is both environmentally sustainable and economically beneficial. This approach encourages transparency and accountability, which are essential for promoting sustainable development in Laos's unique context.

II. International Financial Reporting Standards (IFRS) – S1 and S2

The adoption of International Financial Reporting Standards (IFRS), including standards like S1 (Presentation of Financial Statements) and S2 (Income Statement and Balance Sheet), is crucial for ensuring transparency and comparability in financial reporting across SEA. By adhering to these standards, SEA countries can enhance investor confidence, attract foreign investment, and promote sustainable economic growth. 

Additionally, the transition to IFRS will involve replacing the Task Force on Climate-related Financial Disclosures (TCFD) with IFRS disclosures, further aligning regional reporting practices with global financial and sustainability reporting norms. This shift is expected to streamline reporting processes and enhance the quality of disclosures regarding environmental and economic impacts.

III. Taskforce on Nature-based Financial Disclosure (TNFD)

The Taskforce on Nature-based Financial Disclosure (TNFD) offers a valuable framework for integrating nature-related risks and opportunities into financial reporting. For companies in SEA, partnering with TNFD provides insights into the financial implications of biodiversity loss, deforestation, and other environmental risks. By incorporating nature-based disclosures, companies can better assess and manage their environmental impacts, driving long-term sustainability and resilience.

IV. Net Zero Pathways in Southeast Asia

SEA countries are increasingly committing to net-zero emissions targets to mitigate climate change and promote sustainable development. However, each country faces unique challenges and opportunities in transitioning to a low-carbon economy. Sustainability reporting can play a crucial role in identifying priority areas for emissions reduction, attracting green investments, and driving innovation in clean technologies, tailored to the specific context of each SEA country.

V. Impact on Biodiversity

SEA is home to some of the world's most biodiverse ecosystems, yet it also faces threats from deforestation, habitat loss, and climate change. As major contributors to carbon emissions, SEA countries have a responsibility to safeguard biodiversity and mitigate environmental risks. Sustainability reporting can help companies assess their impact on biodiversity, implement conservation measures, and contribute to global efforts to address biodiversity loss.

VI. Accelerating Sustainability Reporting

To accelerate the use of sustainability reporting in SEA, stakeholders must collaborate to raise awareness, build capacity, and provide incentives for reporting. Governments can incentivise reporting through tax incentives, grants, and regulatory support. Industry associations and non-governmental organisation (NGOs) can offer guidance, training, and resources to help companies integrate sustainability into their business strategies, tailored to the specific needs and challenges of each SEA country.

Singapore: Enhance regulatory requirements for sustainability reporting and provide incentives for companies to disclose environmental and social impacts.

Malaysia: Strengthen collaboration between government, industry, and civil society to promote sustainability reporting and support capacity building initiatives.

Thailand: Implement mandatory reporting requirements for environmental and social impacts, and provide training and resources to help companies comply with reporting standards.

Indonesia: Improve transparency and accountability in sustainability reporting through regulatory reforms and stakeholder engagement initiatives.

Conclusion

Southeast Asia stands poised to become a global leader in sustainable development through the adoption of robust and transparent sustainability reporting practices. By aligning with international standards and embracing initiatives such as the Taskforce on Nature-related Financial Disclosures (TNFD), the region can effectively navigate its diverse environmental and economic challenges. 

Committing to net-zero pathways not only addresses urgent climate issues but also opens avenues for sustainable growth. The region's vast natural resources and strategic advantages highlight its potential to safeguard biodiversity and promote environmental resilience. Through collective action and shared commitment, SEA can serve as a beacon of sustainability reporting, driving significant positive change and ensuring a resilient and prosperous future for generations to come.