PUBLICLY LISTED companies fell short when it came to publishing sustainability reports as part of their good corporate governance initiatives, amid increasing awareness on the importance of sustainability to move businesses forward.
This is according to the 2nd Corporate Governance Study by the Good Governance Advocates & Practitioners of the Philippines in partnership with PwC Philippines (GGAPP-PwC). The group cited non-financial and sustainability reporting as among the areas for development PLCs can improve on, alongside board committees and risks and controls.
The group found that while 89% of companies recognized and placed importance on sustainability — higher than the first study’s 76% — only 22% were able to publish sustainability reports in accordance with globally recognized standards, such as the guidelines set by the Organisation for Economic Co-operation and Development (OECD).
“The Philippines is actually very much behind in sustainability reporting, not only globally but also our ASEAN neighbors,” Securities and Exchange Commission Corporate Governance and Finance Department Assistant Director Rosario Carmela B. Gonzales-Austria said in during the 6th Annual GGAP forum in Pasay City yesterday in reaction to the study.
Ms. Gonzales-Austria noted that Malaysia, Thailand, and Indonesia have been releasing sustainability reports from the early to mid-2000s, with all three companies, along with Singapore, already equipped with their own sustainability reporting guidelines.
The GGAPP-PwC study evaluated 246 listed firm in the period ending Aug. 31, based on integrated annual corporate governance reports submitted to the Philippine Stock Exchange and Securities and Exchange Commission (SEC).
PwC Chairman and Senior Partner Alexander B. Cabrera explained that the gap between awareness and actual reporting is due to the lack of commitment and sturdy guidelines in the country.
“You need resources to prepare the sustainability report. You need teams of two or three with certain expertise. So first is the commitment, second is framework. If the study is your framework, then you can reduce that to an informed report,” Mr. Cabrera said in an interview on the sidelines of the forum.
Speaking in a panel discussion during the forum, Ayala Corp. (AC) Group Risk Management & Sustainability Head Ma. Victoria Tan highlighted that firms should monitor their non-financial performance such as sustainability since it also contributes to the overall growth.
“Because when the financial performance that you have is growing, it’s because of the non-financial performance that actually contributes to that. The natural resources that we use, those are not unlimited. We have to put that into the equation,” Ms. Tan said during the panel.
University of Asia & the Pacific Professor and Executive Director for the Center of Corporate Social Responsibility Colin Legarde Hubo identified the chief financial officer (CFOs) as the top executive who should most pay attention to sustainability issues, taking cues from AC which was the first listed conglomerate to come up with a sustainability report.
To note, AC CFO Jose Teodoro K. Limcaoco also acts as its chief risk officer and chief sustainability officer.
“CFOs nowadays are becoming the darlings of sustainability. Now CFOs are making decisions on the basis of intangibles,” Mr. Hubo said, noting that only 17% of CFOs based their investment decisions on intangible factors in the 1970s compared to 2015’s 84%.
“Globally, there is a trend to align executive compensation with sustainability performance and bonuses,” Mr. Hubo added.
One Meralco Foundation Chief CSR Officer Jeffrey O. Tarayao noted the same, emphasizing the importance of placing leaders in charge of sustainability programs.
“We look at two critical points, the first one is that who in the organization is responsible for sustainability both at the strategic and operational areas. And second, is sustainability part of performance evaluation, and implementing sustainability performance into the management incentive system?,” Mr. Tarayao explained.
Right now, AC’s Ms. Tan said the SEC has been enforcing the importance of starting sustainability reporting among companies.
“The first thing really is to start reporting. You can only manage what you can measure, and you can only measure what you know. And we can only know if you start collecting… we are far in terms of reporting, but I think it is already in the business model,” Ms. Tan said. — Arra B. Francia