Singapore's rigorous update to its ESG reporting requirements shifts how businesses approach sustainability. These new regulations challenge companies to actively demonstrate their role in a sustainable future.
The stakes are high, impacting businesses' global standing and investor relations. Simultaneously, they address broader societal concerns like environmental health and the legacy left for future generations.
This article will explore the specifics of ESG reporting requirements in Singapore, why they matter, and how they align businesses with global sustainability reporting standards for environmental care, social responsibility, and ethical governance.
What is the current status of ESG reporting in Singapore for 2024?
In 2024, Singapore mandates that all listed companies adhere to updated climate reporting standards. This policy aims to align with global sustainability standards and increase transparency in corporate practices.
The introduction of these comprehensive regulations underscores Singapore's commitment to addressing critical environmental, social, and governance challenges. These areas are important for well-informed investors and stakeholders who care about environmental responsibility.
In FY24, climate reporting requirements apply to specific industries. However, by 2025, this mandate will expand to include all listed companies, requiring them to report Scope 1 and 2 greenhouse gas emissions. The progression continues into FY2026, when these companies must also start reporting on Scope 3 emissions, encompassing indirect emissions in the value chain.
Large, non-listed companies, (defined as those with at least $1 billion in revenue and $500 million in assets) will be required to report scope 1 and 2 emissions in 2027. Scope 3 reporting obligations for large, non listed companies will not kick in until at least FY2029.
These phased implementation steps ensure that organizations have adequate time to adapt and align with the International Financial Reporting Standards (IFRS) and International Sustainability Standards Board (ISSB) guidelines. It helps companies prepare for the broader implications of climate reporting.
Advantages of introducing mandatory reporting standards
With honest and accurate disclosures of ESG practices, mandated ESG reporting requirements in Singapore help companies attract socially responsible investments and build stakeholder trust. Here's how:
Global alignment
These standards demand that companies maintain integrity and openness about their environmental and social impacts. With the introduction of these measures, businesses can align their practices with international sustainability frameworks. This fosters more seamless integration into global markets and streamlines operations across borders.
Enhanced reliability and transparency
Reliability and transparency in company operations help gain stakeholder trust. Regular and consistent ESG reporting strengthens credibility with investors, customers, and regulatory bodies. It showcases a company's dedication to sustainable practices and corporate honesty.
Accountability
The new reporting requirements ensure that businesses state their intentions and follow through with measurable actions. Italso ensures that the actions they take as a result of their sustainability reports are well managed.
Global opportunities
The implementation of stringent reporting standards opens doors to global opportunities. McKinsey has found that companies focusing on ESG goals perform better than their peers, provided they also excel in basic business practices. Companies showing compliance with these standards can draw foreign investments and penetrate new markets that prioritize sustainability and ethical business practices.
Facilitate better risk management
Lastly, these standards help companies manage risk more effectively. They highlight areas where environmental and social risks could escalate into significant issues and provide a chance to address them proactively. In doing so, businesses can safeguard themselves against potential crises that could harm their reputation or financial stability.
"As the regulatory landscape continues to evolve, corporates must keep abreast of changes."
Lavinia Bauerochse, Global Head of ESG Corporate Bank, Deutsche Bank
Sustainable reporting in the EU, US, CA, and China
As awareness of environmental, social, and governance (ESG) issues increases worldwide, the demand for transparent business practices and sustainability in operations intensifies. Countries like Singapore, the European Union, the United States, and China have responded by creating distinct ESG reporting standards to address these needs.
This analysis will compare these various frameworks to better understand sustainability reporting in other countries and regions outside Singapore.
California's approach to integrated ESG standards
California sets a strong precedent in climate accountability with its recent legislation.The state mandates large companies to report sustainability disclosures by 2026. The Climate Accountability Package requires detailed reporting on all scopes of emissions, aligning with stringent global standards, such as the TCFD framework.
China's ESG regulatory developments
China is advancing its ESG regulatory framework to enhance transparency and align with international standards. Their recent proposals require over 400 major companies to issue sustainability reports by 2026.
These reports must address governance, societal impacts, and climate risks and include a decarbonization strategy. This initiative aims to mirror the EU's rigorous ESG standards and reduce greenwashing by emphasizing comprehensive and mandatory reporting.
US's climate-related disclosures
The US Securities and Exchange Commission (SEC) has introduced a new rule mandating that public companies report climate-related risks. This regulation enhances transparency by obligating companies to disclose Scope 1 and Scope 2 emissions.
However, the regulation has been critiqued for not requiring companies to report Scope 3 emissions—those that result from indirect activities not managed by the company but crucial for a full assessment of emissions impact. Although the rule aims to inform investors about how companies adapt to climate challenges, its utility is somewhat diminished without including Scope 3 emissions data.
EU's comprehensive sustainability framework
In January 2024, the European Union implemented the Corporate Sustainability Reporting Directive (CSRD). It has established new benchmarks in environmental, social, and governance (ESG) criteria.
This directive will affect over 50,000 large businesses across the EU. It will require them to evaluate their environmental and social risks thoroughly. The directive encompasses EU-based firms and non-EU entities listed on European exchanges and will broaden its reach by 2025 to include significant private companies.
Under the CSRD, these businesses must disclose Scope 1 and 2 emissions, with larger companies also needing to report Scope 3 emissions. This ensures a comprehensive level of transparency across their operations.
What is included in a sustainability report?
A sustainability report thoroughly examines a company's environmental and social influence. It reveals the company's approach to handling the various challenges and opportunities associated with sustainable development. Below are the critical elements of a sustainability report:
Material ESG factors
This section identifies essential environmental, social, and governance factors influencing the company's operations. Considering the ever-changing reporting frameworks, it highlights how these factors are managed and integrated into corporate strategies. Companies must stay flexible and informed about local and industry-specific requirements.
Climate-related disclosures
Companies disclose comprehensive information on climate impacts, following relevant guidelines. These reports detail various emissions, including direct emissions (Scope 1) and indirect emissions from purchased electricity (Scope 2).
Sometimes, they also cover emissions throughout the value chain (Scope 3). Such detailed reporting aids stakeholders in assessing the company's vulnerability to climate-related risks and its strategies for addressing these risks effectively.
Goals
The report establishes specific, quantifiable objectives to enhance ESG outcomes within designated periods. It explains variances between these objectives and the company's broader business tactics. This alignment allows stakeholders to assess the company's dedication to sustainability and its methods for reaching its goals.
Zuno Carbon streamlines your ESG reporting process
Zuno Carbon is an ESG platform that helps you meet regulatory requirements and improve sustainability practices. Companies can quickly generate transparent, compliance-ready reports for stakeholders and investors, enhancing their reputation and risk management.
Our platform delivers real-time updates, guaranteeing that your ESG reports reflect the most current data. Additionally, Zuno Carbon adheres to the GHG Protocol and ISO14064 standards, ensuring precise and dependable emissions tracking.
The software can be tailored to your company's unique requirements and features an interface that simplifies sharing data with auditors, investors, and certification bodies.
Request a demo of Zuno Carbon today and explore how our specialized features can benefit your organization.
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