The business context for environmental, social, and governance (ESG) impacts is complex and evolving rapidly, challenging companies to manage an increasingly diverse set of risks while adapting to global megatrends such as climate change, automation, and population growth. Through ESG transparency, companies have an opportunity to increase accountability and corporate responsibility and translate this into long-term growth.
In Asia, ESG disclosure has increased, especially in Japan, in part due to the proliferation of reporting policies set by governments. Stock exchanges and regulators are also mandating increased transparency to build investor trust and confidence, particularly in emerging markets. Corporate responsibility reporting has become a valuable tool for increasing ESG disclosure, and Asian companies have made significant progress, posting some of the highest annual reporting rates globally over the past decade, closely behind those in North America and surpassing those in Europe. However, due to a lack of comparable data, depth, and verification, the value of this information to stakeholders has been limited.
Corporate responsibility reporting has become a valuable tool for increasing ESG disclosure, and Asian companies have made significant progress, posting some of the highest annual reporting rates globally over the past decade.
Positively, we are beginning to see change in critical markets. In China, under the revised (2018) Code of Corporate Governance for Listed Companies, entities are required to disclose information on their board and management composition. Those who fail to comply or issue false information will be penalized to protect investor interests.
As these markets continue to mature and grow, so will the role of ESG in securing the sustainability of the region’s transformation. Therefore, now is the time to reflect on the importance of ESG disclosure and consider how data can be collected, shared, and acted on to take advantage of emerging opportunities.
Here are some things to keep in mind as you begin to enhance your ESG profile in Asia:
- Know your audience: To begin, make sure that you have identified all relevant stakeholders. To do this, map stakeholder groups, engage them early, understand their expectations, and build trust through frequent and informed engagement. For experienced companies looking to enhance their ESG data and communication, focus on the most critical, relevant, and material issues as they relate to your business and your stakeholders.
- Assess the ‘critical’: Understanding your environmental and social impacts is essential to building an effective governance structure. After an organization has determined its material sustainability impacts and mapped those to business value drivers, it can look to the various sustainability standards and frameworks to guide credible, reliable disclosure.
- Work smarter, not harder: The foundation of any market is a common language for communication. As the attention around the role and necessity of business in driving solutions to pressing global social and environmental challenges increases, so does the need for greater consistency in company communications on ESG performance. Think about what you want to achieve, know your audience, and determine the smartest approach.
- Share and compare: Establish a long-term plan, so that investors and stakeholders can understand your vision, goals, and achievements. Demonstrate how sustainability priorities are embedded in business priorities. Provide comparable data to allow readers to benchmark and assess performance, while disclosing procedures and management systems that support.
- Emphasize value: Reports can be used to develop a purpose and rationale for actions that can be rewarded through internal engagement and brand equity. Increasing the quality and decision-usefulness of the data disclosed allows for greater ESG analysis. Explore opportunities to translate value into clear financial terms.
As companies gain more experience with ESG reporting and sustainability management, the business case for high-quality ESG measurement and reporting systems to enhance stakeholder confidence will become even clearer. While we have seen significant developments in ESG integration and disclosure in Asia over the past several years, opportunity remains to improve quality and enable communication that empowers stakeholders, reduces disruption, and supports sustainable growth.