ESG Reporting: What Is It & How To Comply

ESG Reporting: What Is It & How To Comply

Many listed companies in Singapore and Hong Kong think of ESG reporting as a box-ticking exercise.

They get the data, they fill out the report, draft a boring press release and voilà.

The reality is more complex.

With higher pressure from authorities, listed companies must know how they consume energy. Depending on the quality of data, they now have stories to tell.

We'll see first what ESG reporting is and how to comply. Then we'll show you how an energy management system can help tell the right story to your audience.

What is corporate sustainability reporting and how does it affect companies?

A sustainability report is a document published by a company and/or organization that shows the breakdown of environmental and social impacts of their everyday processes, presents a company’s sustainability level and its contribution to a more sustainable world.

It is also a platform to keep track of their performances, goals and the effectiveness of green approaches.
Corporate sustainability has long transformed from an emerging concept to a compulsory imperative for business development. Regulators worldwide are pushing for higher sustainability standards due to the growing stakeholder concerns.

Singapore has been among the first in Asia to push for ESG reporting

The European Union Council has since September 2014 urged listed firms with over 500 employees to make environmental, employee, human rights, anti-corruption and board of directors’ diversity disclosures, while all listed firms in the United States must make filings on their environmental control spending and risks. Within Asia Pacific, Australia made ESG disclosures mandatory since 2014.

In 2015, listed companies in Hong Kong are mandated by the Stock Exchanges of Hong Kong (HKEx) to submit their ESG reports. In June 2016, the Singapore Exchange (SGX) mandated sustainability reporting for all listed companies for any fiscal year ending on, or after 31 December 2017.

This forces businesses to objectively review the environmental and social impact of their operational practices and corporate governance to regularly report their performance in a balanced manner. 

How does corporate sustainability affect external investors?

Corporate sustainability reporting often reflects a company’s economic value, contributions and impacts towards the global economy by the way it utilizes its resources and capital. This affects its long-term growth, its strategies in dealing with long-term sustainability development and the impacts of these strategies.

Thanks to the rising prominence of sustainability reporting standards, investors today are empowered by sufficient information to see the link between corporate sustainability and financial performance and they regard sustainability performance of a company as materially important to their investment decisions.

Stephen Tong, an investment consultant at global professional services firm Towers Watson, said ESG criteria is increasingly being used for portfolio development in many overseas markets. It is an integral part of the market DNA

In a recent survey by the Massachusetts Institute of Technology Sloan School of Management [1], 75% of investment community respondents see improved revenue performance and operational efficiency from sustainability as strong reasons to invest, while whereas 60% of board members say they are willing to divest from companies with a poor sustainability footprint (see the figure above).

Globally and regionally, more sustainable companies are outperforming their peers.

S&P Dow Jones Indices, the leading benchmark indices provider, reported that the 1,200 constituents of its S&P Global 1200 ESG Index achieved annualized returns of 6.44 per cent from 2010 to 2015, outperforming the entire S&P Global 1200 Index. [2]

According to Loh Boon Chye, the CEO of SGX, investors across the globe are placing increasing importance on ESG, resulting in the significant growth of Assets Under Management (AUM) being allocated to ESG strategies.

The new indices provide a transparent avenue which allows investors to identify ESG leaders from SGX-listed companies. These ESG leaders will also be further profiled with strong relevant credentials among a growing pool of ESG-aware international investors.

What information should be included in sustainability reporting?

ESG sustainability reporting includes a wide range of information about a company’s economic, social, environmental and governance performance and impacts and also sustainability-related practices.

Below we summarize some of the key pillars of reporting:

  • Consumption of resources (energy, fossil fuels, water and forestry products)

  • Production of waste and pollutants (landfill waste, greenhouse gas emissions, waste water discharges)

  • Risks and opportunities associated with climate change, resource shortage, demand for new products, regulation related to the sustainability agenda, and supply chain resilience

  • Involvement and participation in community groups that benefit society

  • Policies, initiatives taken by company relating to corporate sustainability

  • Product design of goods and services that support sustainability agenda

  • Human rights due diligence

  • Corporate governance

  • Human resources management

  • Social issues

  • Anti-corruption policies

  • Objectives, targets and performance in relation to above goals

How do you tell a great sustainability story?

As regulations tighten and expectations grow in the long run, you will be weighed down by more compliance. If it is not correctly managed, it may potentially drive away investment interests or damage your brand’s reputation.

You will need quality data to support your ESG report to be on top of these challenges. We share below three ideas which we think are key consideration to fulfill ESG compliance.

You can't manage what you can't measure

In all corporate sustainability efforts, data availability is essential. Without easy data access, your company could end up spending months going through inconsistent documents and tedious spreadsheet compilations, without confident conclusions. You will need an efficient data collection system to effectively collect and consolidate data for reporting.

Data quality is key

Good quality data will pin-point you in the right direction for bigger change. For instance, most companies typically rely simply on electricity bills to track their energy performance, which will only provide the total value of an entire office or building. There is no insight into the cause of your wastage, areas of improvement, or quantify savings from energy campaigns.

You need high quality, clear and reliable data down to end-use level to understand interactions between components in your electricity bills, spot saving opportunities and track energy management.

Need high-quality energy data to fill out your ESG reporting? Then our energy management system will help you.

Getting everyone onboard

To tell a truly great sustainability story, it’s not just about packing it with data, it is also about how you drive changes from a bottoms-up approach, by engaging your employees, motivating actions and obtaining all-rounded support for company’s direction in sustainability.

You need to share your visions, goals and progress, supported by accurate data, with both internal and external stakeholders on a regular basis. With the right tool, you can convert data into comprehensible facts to obtain management support, and keep key staff motivated.

Hong Kong is now following the path of ESG reporting

Hong Kong Stock Exchange (HKEx) data-driven sustainability journey

As the frontline regulator of listed companies in Hong Kong and the third largest stock exchange in Asia, Hong Kong Stock Exchange (HKEx) have overcome challenges in energy data collection and centralization, in the process of enhancing their energy efficiency and productivity.

Challenges faced in data-collection

The Facilities Manager of HKEx found that their energy reporting was inefficient due to multi-site manual data collection, despite the deployment of a Building Management System (BMS).

In addition, there is system access restriction, incomprehensible BMS graphs and low data granularity that prevents management from targeting energy efficiency enhancement effectively.

Solution & outcome

After learning about En-trak™, our market-leading cloud-based Energy Management System that empowers efficient energy management through intuitive visualization and streamlined workflow, HKEx deployed this system to help them with their challenges.  

Once En-trak system is online, it captures, centralizes and consolidates all energy data across all HKEx business portfolios on a single platform in real-time. With intuitive and automated energy reports from En-trak, HKEx’s operational efficiency is significantly raised, and their management can also understand their progress instantly.

Besides, providing data down to the end-use level, En-trak™ provides actionable insights for reducing energy wastage and ensuring internal compliance of environmental policy.

Resolution: sustainability begins with data

Having optimized their energy performances with En-trak tools, the team can confidentially disclose reliable environmental KPIs to engage stakeholders and reap multiple benefits beyond cost savings including employees’ buy-in, heightened reputations, lower regulatory risks and greater potential of long-term value creations.

Sustainability begins with data and maintains progress with managing data the right way. With quality data, you are well-empowered to measure and track performance, identify problems, verify outcomes and engage your stakeholders. With the right tool to leverage data, you are taking the first step towards a successful energy management.  

Sustainability reporting helps organizations to set goals, measure performance, and manage change in order to make their operations more sustainable. A sustainability report conveys disclosures on an organization’s impacts – be they positive or negative – on the environment, society and the economy.

About En-trak

En-trak is an award-winning proptech IoT company. We design and sell cloud-based solutions to help enterprises manage and optimize their energy consumption. Our flagship solution En-trak™ Energy enables users to know where, when and how they are using energy in real-time.

With continuous monitoring and advanced analytics, we’ve helped over 350+ world-class clients including Hong Kong Stock Exchange, National Environmental Agency, and Fuji Xerox achieve their sustainability goals. We’ve also recently launched our brand-new, patented En-trak™ Smart Lighting solution designed to help companies and building owners to automate and optimize their office lights. 

[1] Investing For A Sustainable Future: Investors Care More About Sustainability than Many Executives Believe. (2016). MIT Sloan Management Review and BCG study.

[2] ESG is new buzzword for listed firms, investors in HK, Asia as regulations tighten. (2016, June 12). SCMP, by Eric Ng