THE IMPERATIVE OF SUSTAINABILITY REPORTING IN SINGAPORE: NAVIGATING CURRENT REGULATIONS AND FUTURE PATHWAYS

In recent years, driven by the urgent need to address climate change, resource depletion, and social inequalities, sustainability has emerged as a critical consideration for businesses worldwide. For Singapore, their reputation as a leading global business hub means the importance of sustainability reporting cannot be overstated. Not only does it enhance transparency and accountability, but it also fosters trust among stakeholders, attracts investment, and drives innovation. We will explore the current landscape of sustainability reporting in Singapore, including regulatory frameworks, trends, and future directions, and what the latest requirement for all listed companies in Singapore to make climate-related disclosures starting from the financial year (FY) of 2025 will mean for the country and its economy.

Regulatory Framework and Policies

Development in sustainability reporting among companies has been spearheaded by the Singapore Exchange (SGX), targeted at listed companies. The Singapore Exchange (SGX) introduced sustainability reporting requirements for listed companies in 2016, further reinforcing the importance of ESG disclosures.

In 2020, the SGX mandated sustainability reporting for all listed companies on a "comply or explain" basis, requiring them to report on their ESG practices or explain why they have not done so. This move aligns with global trends, as investors increasingly consider ESG factors in their decision-making processes.

Current Trends and Statistics

The uptake of sustainability reporting in Singapore has been encouraging. According to the GX's Sustainability Report 2021, 92% of listed companies published sustainability reports in 2020, up from 80% in 2018. This indicates a growing recognition among businesses of the importance of ESG disclosures.

Moreover, Singapore has seen a rise in the number of companies adopting international reporting standards and frameworks such as the Global Reporting Initiative (GRI), Task Force for Climate-Related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB). These frameworks provide standardised guidelines for reporting on ESG factors, enhancing comparability and transparency.

Benefits for Singapore Companies

Singapore companies, listed or otherwise, must embrace sustainability reporting for several reasons. 

Firstly, it is increasingly becoming a global norm, with investors and stakeholders expecting companies to demonstrate their commitment to sustainable practices.

Secondly, sustainability reporting can enhance the company's reputation and brand value, attracting socially responsible investors and customers.

Thirdly, it can help mitigate risks associated with climate change, resource scarcity, and regulatory changes, ensuring long-term business resilience by driving innovation and efficiency, leading to cost savings and improved competitiveness.

Future Directions and Opportunities

Looking ahead, sustainability reporting in Singapore is poised for further growth and evolution. Following the recommendations of the Sustainability Reporting Advisory Committee (SRAC), a committee set up by ACRA and SGX RegCo to advise on the roadmap for advancing companies’ sustainability reporting in Singapore, the Singapore Government has announced that all listed companies in Singapore will be required to make climate-related disclosures starting from the financial year (FY) of 2025.

Such disclosures will have to be done based on local reporting standards that are aligned with the International Sustainability Standards Board (ISSB), an independent standard-setting body within the International Financial Reporting Standards (IFRS) Foundation. New climate reporting obligations will be implemented in a phased approach, beginning with listed companies in 2025, followed by large, non-listed companies, defined as those with at least $1 billion in revenue and $500 million in assets in 2027.

The specific obligations for each group will also be phased in over time, with listed companies required to report on Scope 1 and 2 emissions in the first year, and on Scope 3, or value chain emissions, in 2026, and to obtain external limited assurance on Scope 1 and 2 GHG emissions two years after beginning reporting. Large non-listed companies will follow a similar timeline, although Scope 3 reporting will begin for these companies no earlier than 2029.

Singapore will also provide funding support of up to 30 per cent for large companies that will begin making mandatory climate-related disclosures aligned with the International Sustainability Standards Board (ISSB) framework from 2027. For SMEs, a separate program will also be launched for the same purpose. To qualify for the grant, disclosures must be consistent with the International Sustainability Standards Board’s standards. The grant is administered by the Economic Development Board and Enterprise Singapore (EnterpriseSG).

Conclusion

Sustainability reporting is no longer just a corporate responsibility; it is a business imperative. In Singapore, where sustainability is increasingly seen as a key driver of competitiveness and resilience, companies that embrace sustainability reporting stand to gain a competitive edge. 

It’s important for companies to understand key stakeholders’ expectations and take practical actions to address their needs and concerns in a timely manner. This includes embedding sustainability considerations in our business strategies and balancing the business, environment, and society impacts. 

By adhering to current regulations, leveraging international reporting frameworks, and preparing for future developments, companies can not only enhance their sustainability performance but also contribute to a more sustainable future for Singapore and the world.