New transparency rules in ESG reporting

IN 2024, organisations around the world will face new rules aimed at increasing transparency in their environmental, social and governance (ESG) reporting.

For many, this will entail gathering more granular data from across their operations and value chains to show the impact and progress of their ESG and sustainability initiatives.

Granular data reporting involves the use of data broken down across multiple dimensions.

By then, the Corporate Sustainability Reporting Directive will come into force across Europe, which means that a lot of companies will need to seriously report on their ESG and sustainability measures.

Many organisations already voluntarily issue sustainability reports on their timetable and against self-selected parameters.

The new policies will require robust ESG reporting on a public and audited basis that discloses their impact on the environment, communities, employees and consumers, while describing their corporate governance practices and performance.

To generate reliable reports, organisations will need to reimagine how they are collecting and analysing their data.

Rather than being seen as a burden, this should be embraced as an opportunity, as greater visibility into activities across the business will help decision makers improve their ESG and business performance while boosting their long-term competitiveness.

Tenaga Nasional Bhd (TNB), which achieved high scores in transparency in ESG and sustainability reporting, is moving towards effective management of data required to track and report ESG risks and progress.

The group was given high scores by the Global ESG Monitor, which benchmarks its study on transparency in ESG and sustainability reporting among listed companies on the FBM KLCI.

For its disclosure strategies, TNB includes commonly used global standards such as:

> Bursa Malaysia Sustainability Reporting Guidelines 3rd edition which provides specific guidance on the information that should be disclosed when producing a sustainability statement in the annual report, in accordance to Bursa Malaysia’s listing requirements.

> Global Reporting Initiative; an independent, international organisation that provides the most widely-used sustainability reporting standards.

> Taskforce on Financial-Related Climate Disclosure; these relate to voluntary recommendations set around four themes for disclosure – governance, strategy, risk management as well as metrics and targets.

> United Nation’s Sustainable Development Goals that address five critical areas of importance by 2030 – people, planet, prosperity, peace and partnership.

> World Economic Forum Common Metrics and Consistent Reporting of Sustainable Value Creation; a publication that discussed the framework developed by the Big Four accounting firms, on a universal set of metrics and recommended disclosures towards a more comprehensive global reporting system.

TNB also follows issue-specific standards such as the Greenhouse Gas Protocol that provides standards and tools to help track progress towards climate goals, and Equal Employment Opportunity (EEO-1) diversity disclosure.

Governance practices are ensured across the group, adapting to the latest Malaysian Code on Corporate Governance guidelines.

TNB seeks to earn trust by holding itself accountable and publicly reporting on its policies, practices and performance; its centralised ESG disclosure provides a consolidated, comprehensive view of its ESG reporting and data.

Its stakeholders – investors, customers, employees, suppliers, non-governmental organisations and local communities – increasingly expect companies to be transparent about their ESG impact and performance.

Sustainability-related issues can significantly affect an organisation’s risk profile, potential liabilities and value.

By demonstrating transparency in ESG and sustainability reporting, TNB can meet these expectations and maintain the trust of its stakeholders.

Transparency in ESG and sustainability reporting can drive sustainability performance by providing a clear understanding of sustainability goals and progress in achieving them.

The utility has incorporated relevant ESG rating indicators – FTSE ESG Index and MSCI ESG Rating – to enhance its sustainability disclosure.

This helps TNB to identify areas for improvement and take action to address sustainability challenges.

In terms of enhancing reputation, this focus on transparency demonstrates the group’s commitment to sustainability and responsible business practices.

It will increase the appeal of the group to customers and investors who prioritise sustainability, and also help TNB differentiate itself from others.

“At TNB, we believe we have a pivotal role to play in energy transition for the nation and are constantly committed to managing and reporting on ESG matters, considering the assessments of the rating agencies as an important opportunity to improve our sustainability performance,’’ said president and CEO Datuk Indera Baharin Din.

TNB has been publishing its sustainability statement as part of its annual reporting since 2016, and additionally, its sustainability report since 2017, in accordance to the main market listing requirements of Bursa Malaysia.

By reporting its ESG data and demonstrating transparency in addressing ESG concerns and opportunities, the group ensures compliance with requirements and mitigates potential legal or reputational risks.

TNB aims to reduce its emission intensity by 50% in 2030, and also to ensure that its revenue from coal generation plants does not exceed 25% of its total revenue, by investing in renewable energy sources.

In terms of social sustainability efforts, it ensures increased efforts towards employee well-being, safety and health while promoting diversity and inclusion, and supporting the growth of local communities.

Under governance, TNB promotes ethical behaviour, ensures transparency and accountability while maintaining strong governance structures.

As a leading Malaysian utility company in Asia with an international presence, the group works in almost every industry and sector – commercial, industrial and residential.

The trust placed on the group is incredibly important as it charts its long-term performance strategy by integrating economic, environmental and societal performance.

Yap Leng Kuen is a former StarBiz editor. The views expressed here are the writer’s own.

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