While the concept of social responsibility and ethical behaviour by business has been a component of the corporate playbook in North America and Europe for more than a decade, Asia has somewhat lagged behind in the sustainability stakes. With troubling corruption levels, poor reporting standards and significant environmental risks a prominent feature of many countries in the region, the lofty standards now frequently expected by consumers were historically falling well short of the mark.
‘Southeast Asia has been a late starter in corporate sustainability, but it is becoming a much more important topic for organisations here,’ explains Wan Kwong Weng, general counsel of Singapore-based real estate development, investment and capital management company Mapletree.
‘There is a real regulatory push here; the Singapore Stock Exchange (SGX) has come out with a sustainable reporting rule that companies need to be compliant with after 31 December.’
The new rule requires all companies listed on the SGX to file annual reports on a ‘comply or explain’ basis, covering five primary components: material ESG (environmental, social and governance) factors; policies, practices and performance; targets; sustainability reporting framework; and board statement.
Comply or explain is a corporate governance principle that, in the context of the SGX guidelines, requires companies to publish reports, or explain why not. In addition, if a company does not include a primary component, it must explain why and detail an alternative. Shareholders and investors are then furnished with the information to hold the company accountable for any explanations they find unconvincing.
SGX is in good company in its drive for transparency, with many Asian markets witnessing a growth in sustainability reporting, driven variously by stock exchanges, regulators and governments. Hong Kong, for example, has made a similar move to Singapore, with the Hong Kong Stock Exchange (HKEX) requiring listed companies to publicly disclose ESG policies from the beginning of this year, again on a comply or explain basis. But across Asia Pacific, rules vary from country to country, and comprise a combination of mandatory and voluntary reporting, in addition to comply or explain regimes.
‘There is a real regulatory push here, but it is not only regulations powering this,’ says Wan. ‘The issue of sustainability is a lot more real for customers, therefore it is becoming more real for lawyers. Whether you are in Beijing, Shanghai, Bangkok, Malaysia, or Singapore – it is real for companies here and for their lawyers.’
As such, regulatory and legislative imperatives are only part of the story behind Mapletree’s current review of ESG processes, in order to align with GRI Sustainability Reporting Standards.
‘We are not simply looking to meet the regulations, but to take the spirit of the regulations and develop programmes that implement them across the organisation,’ says Wan.
‘We have to consider our customers. They will ask what we have done to make things better, or whether we have looked at reducing consumption. There is much more of an investor focus on this now, too.’
Environmental protection has been a compelling focus of much regulatory activity across Asia, as consumers and other stakeholders have become concerned by the tangible impact of commercial activity on their lives. This has driven a demand for organisations to perform better in this area.
‘If you take something like haze pollution, which is caused by slash and burn plantation farming, it has affected the entire region, and investors and consumers are now a lot more conscious of whether companies are standing up against it. It’s not about global warming, it’s about whether you can open your windows at night,’ says Wan.
The link between socially responsible business and economic advantage is a long-established concept in the minds of many corporates and Wan believes that, in Asia, a sustainable approach to business is becoming appealing for both customers and shareholders. That’s quickly translating into practical efforts and pragmatic solutions from business.
Sometimes the benefits are directly quantifiable – ‘it can make a building more efficient, for example,’ says Wan. It can also have an impact on partnerships, because if the company is doing business in a regulated environment, then dealing with a counterparty that already practices to the right standards makes life simpler. ‘By maximising our commitment to sustainability standards, we make it easier for others to work with us,’ he says.
A sustainable approach can drive employee retention and customer satisfaction: ‘In the real estate sector, you find that people want to work and live in an environment where there is an acceptable standard of environmental protection.’
Veronica Lai, general counsel and corporate secretary of Singapore telecommunications giant StarHub, is also director of the company’s sustainability strategy. But even if she did not occupy this role, Lai believes that sustainability issues would be a major topic of interest for her, due to their impact on risk.
‘Being part of the risk and management committee helps me see that a lot of the issues we consider when we discuss sustainability are really pragmatic business concerns that affect any executive,’ says Lai.
She sees the GC role as a gatekeeper of risk, and sustainability is, by its nature, concerned with the long-term and evolving risks facing any organisation. ‘The GC’s role in all of this is almost like conducting a health check on the enterprise,’ she says. ‘What are the risks and how suited are the existing governance frameworks to meet those risks?’
Lai has applied this thinking at a granular level and StarHub’s legal function has worked to embed sustainability into its everyday operations. That has meant using e-filing to eliminate paper waste and the implementation of a contract management system that is geared towards managing long-term risks – with further initiatives on the horizon.
Like Lai, Kwong Weng Wan’s role encompasses sustainability issues. He co-chairs Mapletree’s five-person corporate social responsibility committee, playing an active role in the company’s ‘shaping and sharing’ programme. He has recently been involved in identifying ESG factors across all business units that might impact performance.
He recognises that different corporate divisions will face different challenges, but the company as a whole is striving for standards above and beyond regulatory requirements. This involves reaching out across the supply chain, Wan explains: ‘We hold workshops with vendors and buyers to make sure we achieve a common journey.’
Examples of work already done can be seen in the area of green issues. Mapletree uses rainwater in some of its buildings, and recycles the heat generated by its refrigeration units to power its hot water pools. ‘We want to be seen as a company that walks the talk,’ says Wan.
Contextualising sustainability as an economic differentiator, and a lever for ensuring a healthy business in the long term, means that sustainability and CSR are becoming key topics for organisations in Asia. And, as the ‘company conscience’, in-house lawyers are ideally situated to partner with their business colleagues and share the value of responsible business practices with their communities and stakeholders.