Sustainability Reporting is on the rise in Asia

In conversation with Rajesh Chhabara, managing director of CSRWorks International who shares his views on current trends, challenges as well as his future hopes for sustainability reporting in Asia. This interview first appeared in the June issue of CSR Today published from Mumbai, India.

Q: What is the state of sustainability reporting in Asia?
Sustainability reporting is gaining traction in Asia. The number of companies which report is on the rise. We are also seeing a marked improvement in the quality of reports. However, the number of companies which don’t report is significantly higher than the ones that do. So clearly, there is much work to be done.

Q: What is driving sustainability reporting in Asia?
Early adopters started producing sustainability reports to reflect their leadership in responsible business practices. Their peers and competitors began reporting as they did not want to be seen as a laggard. More recently, regulation has become the main driver for those who refused to report voluntarily. Many stock exchanges in Asian countries, including India, Malaysia, Hong Kong, Taiwan, Thailand, China and Singapore have made sustainability reporting mandatory for listed companies. This will result in a dramatic increase in the number of reporting organisations.

Q: Why are regulators taking an interest in sustainability disclosure?
Regulators’ intervention reflects the interests of stakeholders in general. Stakeholders expect businesses to disclose how they manage their social and environmental impacts. In recent years there have been many incidents worldwide where businesses have been accused of putting profit before people and planet. This has created a deficit of trust between businesses and stakeholders. Regulators are making an effort to hold businesses accountable by enforcing disclosure.
Stock exchanges are also under pressure from investors who are increasingly wary of risk surprises emerging from potentially irresponsible business practices by companies they invest in. Increasingly, investors are assessing companies’ long term ability to create value by appraising their approach to managing social, economic and environmental risks. They require full disclosure by companies to evaluate how it is addressing sustainability risks and opportunities.

Q: Is regulatory compliance an effective approach to get companies to adopt sustainable business practices?
Probably not. Regulation should be the last resort. Ideally, companies should report voluntarily and consider sustainability a key element of their overall business strategy. If companies see sustainability reporting as a form of compliance, too often they fail to see the benefits which come with adopting it. Sustainability reporting should be seen as an important strategy for competitive advantage. 

Q: What are the common topics that Asian companies report on?
Companies in Asia tend to be strong on community work, charity and philanthropy. Thus, there is more emphasis in these areas in their reporting, which may not necessarily be linked to their business strategy, or may not align with their business goals. There is less focus on those issues which would be more strategic to their businesses, making sustainability reporting more beneficial for business development. However, there is a clear change in the air. There are several companies who have taken a more strategic view of sustainability and value creation. Many of them now have world class reporting on topics such workplace practices, climate change, environmental health and safety, customer experience, anti-corruption, human rights and diversity, just to mention a few.

Q: What do you say to those who think sustainability reporting is a Western concept and not relevant to Asia? 
There are always skeptics, and they would want to say that. But Asian businesses operate in a global market and all markets are inter-connected. Even though the trend of sustainability reporting started from the West, there is no reason why we should not follow it here. The reason that the sustainability reporting concept emerged from the West is perhaps because consumers and stakeholders there are more aware of what firms are or are not disclosing. As such, they demand responsibility and accountability from these companies. In turn, firms are responding to these demands and expectations, and this is why they started disclosing information. However, in Asia, this demand is not coming from local stakeholders and consumers yet, because of lack of awareness. But I believe this will change. Young generation in all Asian countries are more aware, more global and they will be more vocal. They will demand responsible products and services as well as responsible behavior from companies they patronize. It will change here, and it will no longer be just a Western idea. 

Q: Is sustainability reporting useful for small businesses?
There are many benefits that small businesses can look forward to. For example, if a small firm wants to start business relations with multinational companies, they will need to have sustainability programs in place. If these small firms want to internationalize their business, enter consumer markets in other parts of the world, they will need these credentials because consumers in these markets are highly aware and will expect companies to act responsibly. Another important advantage is access to capital. Small businesses generally have very low access to capital and usually fall under the radar of analysts. But reputation as a sustainable company can increase their visibility to more investors, especially with investors who take into account sustainability performance, such as SRI funds. This helps small businesses open new doors to capital by establishing themselves as firms committed to sustainability. 
Another example, if a small business is a significant consumer of energy, focusing on becoming more energy efficient will save cost for them in the long run, and any saving in cost will help them to be more competitive. 

Q: It definitely sounds appropriate for small firms to take up sustainability reporting and disclosure as soon as they can. However, what are some difficulties or concerns small firms might face when producing their first sustainability report? 
The first challenge will be resources. Producing sustainability reports is a new area, so quite likely there will be no in-house resources. Hence, there will be a need to hire an external consultant. There is a cost to this and small businesses are inclined to be sensitive to any additional costs. Sustainability reporting might seem like a luxury to them, especially if one cannot see any immediate benefits. There is a clear gap of awareness and this lack of awareness poses as a barrier. 

Q: If cost and resources are main obstacles for small firms, how do you think firms can set out on their first sustainability report?
Definitely small firms can embark on sustainability reporting by starting small. There is no need to produce a large report initially. There is a perception that only large companies produce reports, and their reports often look overwhelming and intimidating. But they have the resources and experience for reporting for many years. In the case of small firms, they don’t have to strive to produce lengthy reports. The key is to understand the process, identify 3 to 5 issues most relevant to their business, in terms of risks or impacts or opportunities, and just focus on these few things in the beginning. 

Q: CSRWorks is organizing Asia Sustainability Reporting Summit in September in Singapore. What prompted you to start this conference?
The Asia Sustainability Reporting Summit is the first regional conference here. We noticed the need for a regional platform for businesses and other stakeholders to come together to have a meaningful conversation about reporting. We have a growing sustainability reporting community in Asia and the Summit offers them an excellent platform to learn, share and network with each other. This Summit is also an extension of our hugely popular Asia Sustainability Reporting Awards, where we hope to showcase the excellent work from our winners and finalists. The Summit will be addressed by an impressive line-up of well-respected sustainability reporting leaders. This is an unprecedented opportunity to learn from the experts.  

Q: What are the main topics for the Summit?
The Summit agenda includes almost all aspects of sustainability reporting. My favourite sessions are going to be the ones focused on how to develop best-in-class sustainability reports, how to develop your first sustainability report, how to report on Sustainable Development Goals (SDGs), what do investors expect from sustainability reporting, and how to report on inconvenient topics!

Q: Can you share with us more about the Asia Sustainability Reporting Awards?
We started the Asia Sustainability Reporting Awards to create the first, and the highest, regional recognition for reporting excellence. We had compelling reasons for doing that.
Currently, in Asia, companies which don’t produce sustainability reports overwhelmingly outnumber those which do. Our mission therefore is two-fold: one, to honour the leaders, and two, to encourage and inspire more companies to embrace sustainability reporting. We want to celebrate best practice in sustainability reporting. 
We firmly believe that it is very important for Asian companies to disclose their sustainability performance to stay relevant to investors, customers, employees and community at large. A good sustainability strategy makes a company future-proof. An economy with lots of future-proof companies simply means better life for everyone.
Overwhelming response to the Asia Sustainability Reporting Awards proves that there is a strong need for a regional platform to showcase best practices and for benchmarking and peer learning. We are happy to have created this platform.
Last year, we received more than 450 entries from over 100 organisations from 16 countries in Asia. Our winners and finalists display high-quality reporting performances that have thoroughly impressed our independent panel of judges. We are already accepting entries for this year’s Awards, and it looks like a very promising year again. 

Q: How has been the participation from India?
An impressive number of Indian companies have been regularly participating in the Awards. Quality of reports published by Indian companies is impressive. In fact, the performance of Indian companies at ASRA has been outstanding. A significant number of Indian companies have made it to the finals with several of them eventually winning. Past winners from India have included Arvind, YES Bank, Birla Carbon. Birla Carbon and Arvind have actually won awards in multiple categories which reflect their commitment to high level of reporting.
Other very promising reports submitted from India that I would like to mention would include Bharti Airtel, L&T, Vedanta, Shree Cement, Hindustan Zinc, Hero MotoCorp, Mahindra & Mahindra, and GAIL. 

Q: How do Indian companies benefit by participating in ASRA?
Winning a reputed international award helps companies to build trust both at home and overseas among stakeholders which include customers and investors. Participation in ASRA allows Indian companies to show case their sustainability credentials to an international audience and boost their reputation. Moreover, winning awards motivates the teams which work hard to produce top class sustainability reports. 

(This interview first appeared in the June 2017 issue of CSR Today, a pioneer magazine on corporate social responsibility published from Mumbai, India.)

To learn more about the Asia Sustainability Reporting Summit 2017, please visit www.csrworks.com/Summit

To learn more about the Asia Sustainability Reporting Awards 2017, please visit www.csrmatters.com