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CR Talk: Sustainability is Key

The Sun Daily, Malaysia
By Dr. Jayanthi Desan on 19 December 2015

IT is the time of the year. Yes, Diwali is over and Christmas decorations are up. We are already thinking of presents, good food and holidays. For companies, it is the season of awards. Time to scrub up, dress your best and be ready for accolades for the year's hard work.

Earlier this month, I was at the Asian Corporate Excellence and Sustainability (ACES) Awards in Singapore where leading sustainability practices were selected after a series of highly competitive nominations. The participants were incredibly impressive, and their associated sustainability endeavours, inspiring. It was a great honour to be associated with the progress of the works being done in promoting sustainable business practices.

Of course, awards nights must stand for more than a mere opportunity for corporations to receive recognition and take a few photos. It must be an opportunity to collaborate, share best practices, and come together collectively as sustainability leaders, resolute in changing the future business landscape in Asia.

What is cause for optimism is the increased regulatory muscle that is being flexed throughout much of Asia in promoting sustainability best practices. Bursa Malaysia has been a leader in this aspect. In late October, it launched the Bursa Sustainability Reporting Guide. The Guide is issued pursuant to the amendments to the Main Listing Requirements to require disclosure of material economic, environmental and social risks and opportunities in the Annual Report. Bursa has reinforced the importance of sustainability by shifting the focus from CSR or social obligations to material "EES risks and opportunities" or material sustainability matters.

The obligations are aimed at improving the quality of sustainability practices and reporting, meet sustainability expectations of stakeholders, attract funds with a sustainability focus into the Malaysian capital market and also to facilitate more listed issuers to qualify for the FTSE4Good Bursa Malaysia Index as well as other international sustainability indices.

Sustainability reporting essentially opens up Malaysian companies to the global responsible investment market which is worth more than US$21 trillion. The numbers are staggering but they simply show that financial capital providers are increasingly drawing the link between strategy and sustainability.

Bursa's efforts have essentially placed sustainability reporting today as a strategic response that not only supports disclosure but also a key process that reviews non-financial risks and opportunities. For some perspective on sustainability reporting, as little as 10 years ago, corporations rarely made direct statements about human rights and health and safety. Early iterations were sometimes mere glossy communications tools. According to the Global Reporting Initiative (GRI), there are close to 8,500 reporters of sustainability performance today, from around 25 a decade ago. The rate of uptake is indicative of the changing landscape of business and the necessary stakeholder engagement that ensues.

When done right, sustainability reporting helps align EES risks and stakeholders' interests which then complements non-financial performance with the financial. When there are clear targets and year-on-year tracking with analysis of failures and success, a culture of transparency is fostered. The increased transparency in turn builds long-term trust and credibility.

Ultimately, regulatory push is needed to build a new ecosystem and equip companies with the necessary tools to face the changing context of business. Information and disclosure alone, however, does not lead to change. Scandal-ridden Volkswagen was a star on the Dow Jones Sustainability Index and some years ago, Enron was the beacon of corporate disclosure. The decision-making process must be accompanied by vision and the necessary goals for a desired future. The change towards a sustainable economy, one that involves transformational linkages between financial and non-financial matrices, must involve focus and leadership alignment.

In short, the real change and innovation can only occur if companies step forward and carry the sustainability torch lit by the regulators.

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