In this webinar, our expert panellists discussed the latest trends and challenges, as well as the role of technology in sustainability reporting and corporate governance and provided insights for businesses seeking to enhance their sustainability practices and reporting.
Sustainability reporting plays a key role in today’s business landscape, enabling corporations to communicate their environmental, social, and governance (ESG) performance in a transparent and effective manner. On 4 July, NBS Knowledge Lab was joined by Mr Jonathan Jong, Group Chief Sustainability and Risk Officer at ComforDelGro Corporation Limited; Ms Bong Yap Kim, Senior Technical Director of the Sustainability Reporting Office at Accounting and Corporate Regulatory Authority (ACRA); and Ms Lorybeth Baldrias, Senior Manager of Mergers & Acquisitions Tax at Deloitte Singapore; to discuss the latest trends and challenges in sustainability reporting and corporate governance. The session was moderated by Nanyang Business School’s Associate Professor Kelvin Law.
On balancing sustainability and operational efficiency, Mr Jong stressed that sustainability is increasingly perceived as an investment and less as a cost. More corporations have started to recognise that the benefits of sustainability outweigh the costs in the long run. By incorporating sustainability in business strategies, corporations can reduce their liabilities, give a sense of purpose to their employees, and attract new customers. As land transport vehicles account for 25% of total greenhouse gas (GHG) emissions, ComfortDelGro has started transforming its fleet to be more environmentally friendly to reduce GHG emissions.
Ms Baldrias shared four key trends that Deloitte observed on tax transparency and governance in sustainability reporting. The first is the public calls for more tax transparency, mainly due to the perceived abuses of the international tax system. The Global Reporting Initiative (GRI) and World Economic Forum have implemented qualitative and quantitative measures to safeguard the system. Second, more tax authorities, globally, started implementing tax governance, control, and risk management programmes. Third, more multinational enterprises are adopting the ESG standard, GRI 207 Tax Standards as part of their core metrics. Fourth, heads of tax are requested to participate in sustainability initiatives, indicating an expectation that tax can contribute to reasonable ESG performance ratings. However, she stressed that such expectations need to be managed because there are drivers in the tax metrics that are driven by business requirements. Tax transparency and tax governance are tax agnostic, covering all kinds of taxes and not just ESG-linked taxes.
In Singapore, the Singapore Exchange Regulation recently set up the Sustainability Reporting Advisory Committee to develop a roadmap to advance sustainability reporting by Singapore companies. Ms Bong shared three main developments in the global ESG space that influence the development of the roadmap. First, the demand for ESG data will increase as more firms and investors are committed to ESG goals. Second, C-suites are warming towards the idea of sustainability reporting, agreeing that ESG programmes improve financial performance. Third, companies embracing ESG can better secure talent and strengthen their proposition.
Use of technology
On using technology for sustainability reporting, Mr Jong shared that ComfortDelGro operates across seven different countries and has close to 100 subsidiaries. Thus, it is a big challenge to aggregate ESG data across all subsidiaries in accordance with disclosure requirements and reporting. In this instance, technology can aid in the reporting process. Other uses of technology include data analytics for tracking fuel consumption and analysing driving habits to help drivers reduce their GHG emissions.
From a regulator’s perspective, Ms Bong raised the example of ChatGPT and the possibility of using it to identify patterns of language that are commonly used in greenwashing campaigns and to analyse the context in which these words are used to mislead. While this is untested in Singapore, it has given her confidence to explore possibilities of applying machine learning technology to detect non-compliance with accounting standards. ACRA receives a filing of 80,000 financial statements a year and a mechanism is needed to flag up things that require more attention.
For tax and ESG measurement and reporting, Ms Baldrias noted that there is currently no tool that aligns reporting for GRI 207.4, vis-à-vis other GRI standards. To overcome this, Deloitte has developed a range of tools to not only enable GRI 207.4 reporting but also aggregate tax data and reports across different countries, with proper documentation and mapping.
On how tax governance framework and tax risk management can integrate into good corporate governance practices in the context of ESG, Ms Baldrias commented that compliance with IRAS’s tax governance programmes is a way of substantiating the report. Such compliance demonstrates that there is substance behind the sustainability report, specifically with respect to GRI 207.3, which deals with the relationship of a taxpayer with tax stakeholders. IRAS currently has three voluntary tax governance programmes that focus on tax controls and governance at both strategic and operational levels: (1) Tax Governance Framework (TGF), (2) Tax Risk Management and Control Framework for Corporate Income Tax (CTRM), and (3) Assisted Compliance and Assurance Programme (ACAP).
On carbon emissions, Mr Jong pointed out ComfortDelGro’s recognition of its contribution to greenhouse gas emissions as a transport operator. As such, the firm was one of the first mobility operators in Southeast Asia to commit to having their decarbonisation plans validated by the Science Based Targets initiative. This is a top-down target from the group, trying to align this with all the different operations across the globe is not easy. On one hand, the firm needs to work with local authorities in order to operate cleaner energy buses, while on the other hand, electric vehicles present technical challenges such as charging time and the high cost of installing fast chargers. Consequently, time is needed for these upgrades to happen and for the technology to catch up.
On the topic of greenwashing, Ms Bong pointed out that the term is used to describe a very broad topic, beyond reporting and assurance. For example, some companies prefer to use financial performance to achieve their emission reduction but this practice may be frowned upon by some stakeholders. Therefore, in proposing a roadmap for sustainability reporting, the requirements and rules need to be consistent to deliver comparable and credible disclosures transparently. What the roadmap does is to recommend the consistent use of reporting standards for reporting carbon offsets, for instance. But conversations about the use of the offsets in the first place will be left to the company directors and shareholders to decide amongst themselves.
On how Scope emissions can influence a company's tax strategy, Ms Baldrias gave the example of a company having high carbon emissions in a certain portion of its value chain. In such cases, sustainability reports may influence management decisions towards more environmentally friendly sourcing. Such shifts can trigger an entire realignment of the value chain. This can have tax implications for areas such as corporate tax, royalty, or even IT management of certain intangibles in relation to the business. Whenever there are changes in sourcing from one country to another, there is also a need to look at the global trade perspective and at the corresponding GE tax, for example. There can also be personnel realignments across entities or countries, which can trigger tax cross-border reporting, impacting permanent establishment as well as employment taxes and tax incentives.
Watch the webinar here: