28 July 2020
In an article posted on the Regulator’s Column on 6 July 2020, Singapore Exchange Regulation (“SGX RegCo”) shared what it expects of sustainability reporting during the Covid-19 period.
With the gradual reopening of borders and the resumption of more economic activities, issuers need to re-evaluate how they can operate safely in the new environment. A responsible board of directors would need to conduct a fundamental review of the company’s business and its business strategy against the operating environment. Investors and other stakeholders similarly need to be kept updated.
SGX RegCo notes that the Covid-19 outbreak has underscored the importance of managing material social risks and opportunities among key stakeholder groups, such as employees, customers, suppliers and the community. Thus, the company’s response in relation to these matters should be included in, and may even form the basis of, the social aspect of sustainability reporting.
SGX RegCo states that examples of social aspects that companies may want to consider and describe in their reports include the following:
- Employees: Response to governments’ call to institute safe distancing measures and embrace “work from home” arrangements to the furthest extent possible. The health and safety of employees, previously perceived to be more of a concern for heavy industries, may have become a critical consideration for all types of businesses. Efforts here may include providing face masks and hand sanitisers to employees and facilitating telecommuting. The training and reskilling of staff to meet new challenges, leveraging on training grants, may also have been considered as an appropriate alternative to retrenchment.
- Customers: Covid-19 also impacts downstream customers, who may be unable to perform contractual obligations due to physical restrictions or financial difficulties. Issuers should describe any extension of assistance to customers where possible, from not insisting on strict legal rights to providing free or discounted goods or services.
- Suppliers: Covid-19 has underscored the importance of maintaining visibility on associated risks in their supply chain, with many businesses forced to seek out alternative supplies following the implementation of lockdowns in many countries. Issuers who have conducted a supplier assessment exercise as part of their sustainability reports would appreciate its importance to deal with both foreseen and unforeseen circumstances. They would do well to describe how they have considered their supply chain, and assess the impact of potential of lockdowns.
- Community: Many have called on companies to use the Covid-19 crisis as a catalyst for change. Some businesses have sought to renew their social licence and enhance their legitimacy in the local communities by repurposing their facilities to produce scarce essential necessities such as face masks or hand sanitisers that are in short supply. Others have organised their furloughed staff to help in national efforts to combat Covid-19, for example as safe distancing ambassadors or contact tracers. Issuers’ plans to show solidarity with the people will generate goodwill and other reputational benefits for the future.
Businesses can expect to be constantly challenged about how they intend to sustain themselves in the face of risks such as diseases. SGX RegCo would expect issuers to set out their plans and strategies to recover from Covid-19 in the annual reports or sustainability reports for the relevant period, with a special emphasis on the social aspects in their sustainability reports. Stakeholders can then benefit from a holistic understanding of the company’s responses.