Noah Rosenstein
Updated on: October 13, 2024 12:24 pm GMT
Singapore’s stock market has taken a significant step towards greater environmental accountability. Starting from the financial year 2025, all listed companies will be required to disclose their greenhouse gas emissions in what is being hailed as a transformative change in sustainability reporting.
Mandatory Reporting Begins in 2025
The Singapore Exchange Regulation (SGX RegCo) announced this new mandate on September 23, which aims to align local reporting standards with the International Sustainability Standards Board (ISSB) framework. This initiative is designed to enhance transparency in how companies manage their environmental impacts.
- Scope 1 and Scope 2 emissions: Companies must report:
– Scope 1: Direct emissions from sources owned or controlled, such as company vehicles and heating systems.
– Scope 2: Indirect emissions from the generation of electricity, steam, heating, and cooling consumed by the company.
Despite these requirements, the regulator has opted to delay the obligation for companies to disclose Scope 3 emissions—essentially all other indirect emissions from a company’s value chain—originally expected by 2026.
Why the Delay on Scope 3 Emissions?
In a media release, SGX RegCo cited feedback from its recent public consultation, where smaller companies expressed significant challenges regarding Scope 3 emissions. Many suggested that changing methodologies for measuring and reporting these emissions is particularly complex and burdensome.
“Smaller issuers highlighted evolving measurement challenges,” stated SGX RegCo, acknowledging that even a one-year grace period may not suffice for many firms.
Instead, SGX plans to prioritize larger firms in developing guidelines for Scope 3 reporting, expressing its intent for these larger companies to report starting in FY2026, contingent on readiness.
Challenges Ahead
The need for coherence and clarity in climate reporting has never been more pressing. A survey by the country’s national accountancy body revealed that 90% of local firms have yet to fully measure Scope 3 emissions.
- Only 27% of companies aiming to reduce their Scope 3 emissions expressed confidence in achieving their targets.
- For comparison, around 40% felt secure in meeting targets for Scope 1 emissions, while 31% shared the same confidence for Scope 2.
These figures indicate a considerable gap in preparedness for comprehensive emissions reporting.
Global Context and Comparisons
Singapore’s new regulations are aligned with a broader global movement towards mandatory climate reporting. Similar initiatives have been announced in regions such as:
- Hong Kong: Required reporting for Scope 1 and 2 emissions starts in 2025.
- Australia: New legislation mandates climate reporting for large firms, expanding to Scope 3 in 2026.
- China, Japan, and Malaysia: Each has begun consultations on implementing analogous rules.
As highlighted by Tan Boon Gin, CEO of SGX RegCo, “The disclosure of Scope 1 and Scope 2 greenhouse gas emissions is an important step to enable larger issuers to report their Scope 3 emissions.” This reflects a growing recognition that comprehensive climate reporting is vital for risk assessment and opportunities in sustainability.
Future Developments and Industry Responses
In 2026, SGX plans to require additional components of sustainability reports, covering factors related to environmental, social, and governance (ESG) performance. A key element of this transition is ensuring that companies that forego external audit for their sustainability reports will have to publish these alongside their annual reports.
- Firms choosing to conduct audits will benefit from extended publishing deadlines, allowing for a more integrated view of financial and sustainability performance.
The reception to these new rules has been largely positive among investors and stakeholders. Png Chin Yee, Chief Financial Officer of Temasek International, emphasized the importance of addressing Scope 3 emissions for the economy’s transition to net-zero. “Addressing Scope 3 emissions is critical for all stakeholders,” she noted.
Conclusion: A New Era for Sustainability Reporting
The introduction of mandatory greenhouse gas emissions reporting marks a pivotal moment for Singaporean businesses, steering them towards greater accountability and environmental responsibility. While the delay on Scope 3 emissions is a concession to current industry capabilities, the focus on Scope 1 and Scope 2 emissions establishes a foundation for future reporting improvements.
As companies get ready for these changes, they will need to do more than just follow the rules. They should also work hard to engage in real sustainability practices that match global standards. Singapore’s promise to be open and honest could be a great example for other countries, helping to push forward a worldwide effort for sustainability.
