Sustainability reporting in Malaysia: which framework to choose?
Bursa Malaysia has demonstrated a commitment to sustainability by asking listed companies to disclose a narrative statement of their material economic, environmental and social (EES) risks and opportunities in their annual reports.
Compliance with the initiative may sound easy to some companies, but it would in fact require a lot of thinking, internal alignment and possible organisational changes. The focus on materiality, governance and management - as suggested by Bursa Malaysia - encourages companies to bring investor relations and sustainability teams together and agree how sustainability supports the investment proposition. In my mind, this is the main advantage of the initiative.
To comply with the requirements, companies have to ask themselves the question: Which reporting framework allows them to best present the EES governance, strategy and performance? The answer to this question will impact the way you disclose information to investors and other stakeholders.
What does the Sustainability Reporting Guide say?
In its Guide to help companies report on sustainability, Bursa Malaysia suggests that companies “may also choose to move beyond the Guide and adopt a reporting approach in accordance with international sustainability reporting frameworks or guidelines…”.
What are the options?
We believe that companies have three options in terms of their sustainability reporting approach, each with their own advantages and disadvantages.
1. Annual report with a narrative sustainability statement (no framework)
This is the most straightforward option. You can include a narrative sustainability statement (as a separate section) that would cover the required disclosures that depend on your market and capitalisation. The advantage is that your sustainability information will get enough prominence and will be noticed by both internal and external users of the report.
Due to the stakeholder-focused definition of materiality in the Guide, some of your sustainability information (e.g. on community projects) may be important to wider stakeholders, but not necessarily investors.
2. Annual report with a narrative sustainability statement (GRI Guidelines)
The proximity of the Guide and the GRI Guidelines in the definition of materiality drives us to a natural conclusion that Malaysian companies should adopt the latter as a reporting framework.
However, neither the GRI Guidelines, nor any other framework, can be applied to just to a statement in the report, which means The GRI Contents Index will have to refer to information elsewhere (other sections of the annual report, website, presentations, etc.). You may need to gather and publish additional information to be able to tick all the GRI boxes.
As an alternative, you can produce a standalone sustainability report in line with these guidelines and provide an extract of it in your annual report.
3. Integrated report (<IR> Framework)
Integrating sustainability into the core elements of the annual report in line with the <IR> Framework will help you provide meaning information to investors in one document, as well as trigger integrated thinking within your organisation and demonstrate market leadership. To meet the needs of other stakeholders, you could publish additional information on your website. The disadvantage of this approach is that sustainability disclosures might not be visible enough in the annual report for unexperienced users.
To comply with Bursa Malaysia’s requirements, you can have a sustainability index referring to the provided disclosures in the integrated report and, if necessary, on the website.
How should you get ready?
Depending on the capitalisation, some companies have to comply with the requirements in 2017, while others in 2018 and 2019. Even if you have some time, you can run preparatory activities this year, such as:
- Materiality analysis
- Gap analysis in terms of policies, strategies and performance indicators to cover material EES risk and opportunities
- Review of your governance structure
It is better to start earlier, as seeking internal agreement on sustainability will take time. The sustainability reporting journey, if navigated correctly, can enhance your performance, build stakeholder trust and give you a competitive advantage.
Would you like to know more?
Contact Alex Annaev, Lead Sustainability Consultant, to hear more about how we can help you in your sustainability journey.
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