Predict & Influence Muses - Series 014: Mandatory sustainability disclosure, are the public listed companies ready?

As the announcement of mandatory disclosure of sustainability indicators took place for a few regional stock exchanges including Bursa Malaysia and Singapore Exchange, there are a few reactions from the public listed companies (PLCs).

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The better minorities (that are typically much larger, with much better resources) are very pro-active, getting ESG consultants and deploying different ESG solutions to ensure they can comply to the disclosure, and beyond. Some would hope to have higher ESG/ Green Score so that access to capital, financing and international markets are easier.

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However, the majority ones are mostly adopting wait-and-see approach. Some may be thinking of last minute appeal to the regulators to suggest the postponement of implementation as they are not ready. This may be backfiring, the importance of getting ESG disclosure properly is really similar to having your proper accounting and financial reporting, there is a high risk of non-compliance which may jeopardise their listing status. More importantly, it is not just about having complied with disclosure mandate, but to be a good corporate citizen. If one has studied the indicators published by the exchanges, you would know why.

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A lot of point solutions in the market are focussing on the “E” in the ESG. Tracking emission, and other carbon related metrics. That’s good, but not good enough. If someone goes deeper dive into the Common Indicators and Sectoral Indicators, they would find that a lot of data points are likely not tracked. For example, one Common Indicator read “Total waste diverted from disposal and to disposal”. Basically the waste/rubbish management for an organisation. Do you also track this data point? If not, who in your organisation should you assign to track, or provide reasonable estimate?

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The other Common Indicator read “Percentage of employees who have received training on anti-corruption by employee category”. Assuming that the PLCs may not read through the “Sustainability Reporting Guide”, when they are about to submit the report, this indicator would be an item that the PLC has to report 0. Now, comply to disclosure is one thing, but if what you are disclosing is potentially revelation of not-so-good practices with the organisation, the disclosure can be damaging.

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While most of the ESG solutions are looking at ways to automate the data collection from systems, there is less focus on the human side of things within the PLCs or any other organisations that would need to report sustainability reporting (read: government agencies). Human collaborators, in this case the stakeholders like employees, suppliers and customers etc. are really the ones that ensure beyond disclosure and compliance, something more meaningful are happening, ie actual contribution to reduce carbon footprint, better practices for social good, and have good governance in the business conducts. While awareness and actions of key stakeholders, ie sustainability development, corporate development, facilities/building management, IT, HR etc. can be a good start to collect some essential data manually, or having reasonable estimates, knowing where you are as part of the first disclosure is going to be helpful to chart the course of where you want to be. Consciously, deriving a roadmap based on AI driven recommendation, and embrace better practices, diligently collect data, track progress, would be the way forward for a better world.