This article was originally published in BDO Spotlight - October 2024
In today’s rapidly evolving business landscape, sustainability has become a critical focus for companies worldwide and the role of sustainability reporting and assurance in the accounting and auditing sectors is becoming increasingly significant.
What is Sustainability Assurance?
Sustainability assurance involves an independent evaluation of a company's sustainability reports and practices to ensure their accuracy, reliability, and adherence to relevant standards. In Singapore, this process is crucial for validating a company’s disclosure about its environmental, social, and governance (ESG) performance.
Why is Sustainability Assurance Important in Singapore?
1. Investor Expectations: With a growing emphasis on ESG considerations among investors, particularly in Singapore’s financial sector, sustainability assurance provides the credibility and confidence needed for informed investment decisions.
Listed Issuers on Singapore Exchange (SGX) are required to publish their sustainability reports within four months after their financial year end, unless external assurance is obtained for the sustainability report. In that case, these listed issuers are given an additional month to publish their sustainability reports (i.e., five months after FYE).
Based on SGX and NUS Centre for Governance and Sustainability’s Sustainability Reporting Review 20231:
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537 listed issuers on the SGX were reviewed
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99.6% of these companies publish sustainability reports
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6% (30 issuers) of these sustainability reports were subject to external assurance
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The 5 most cited assurance framework are SSAE 3000, SSAE 3410, AA1000AS, ISAE 3000 and ISAE 3410
2. Regulatory Requirements: Singapore has introduced various regulations and guidelines to promote transparency and accountability in ESG reporting. Companies in Singapore are required to disclose sustainability reports in accordance with the baseline climate disclosures (CRD). The proposed implementation timeline for external assurance on sustainability reports in Singapore is outlined below.
Table 1: The proposed implementation timeline for external assurance on sustainability reports in Singapore, as recommended by the Sustainability Reporting Advisory Committee2.
Through a press release on 23 September 2024, the Singapore Exchange Regulation (SGX RegCo) will start to incorporate the latest international standards into its sustainability reporting regime. For ease of reference, a summary table of the amendments is set out as follows:
Table 2: Extracted from SGX RegCo’s press release dated 23 September 20243.
(1) The other primary components of a sustainability report are:
- Material ESG factors;
- Policies, practices and performance;
- Targets;
- Sustainability reporting framework; and
- Board statement and associated governance structure for sustainability practices
To reduce compliance burden for businesses in Singapore, subsidiaries will be exempted from full CRD reporting if both of the following conditions are met:
- Its immediate, intermediate or ultimate parent (local or foreign), as determined in accordance with FRS/ SFRS(I) accounting standards in Singapore, is minimally preparing climate or sustainability reports in accordance with the prescribed CRD in Singapore or deemed equivalent.
- Its activities are included in that parent’s report, which is available for public use.
The Sustainability Assurance Standard
IAASB has approved an exposure draft (ED) in June 2023 for the International standard sustainability assurance (ISSA) 5000.
The scope of the ISSA 5000 ED covers both reasonable and limited assurance engagements and applies to all type of sustainability information. The standard is principles-based and it was drawn on the requirements and guidance from existing assurance standards, such as ISAE 3000, ISAE 3410 and etc. It is also intended to be framework-neutral, allowing the use for assurance over all types of sustainability topics and aspects of topics.
In September 2024, IAASB has finalised its decisions around the ISSA 5000 and a final ISSA 5000 is scheduled to be made available later this year. This will be served as a global baseline for sustainability assurance moving forward.
Challenges and Considerations
While the adoption of sustainability disclosure and assurance standards is on the rise, challenges remain:
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Evolving Standards: ISSB S1, S2 and ISSA 5000 are the first of what is anticipated to be a new series of ISSB and ISSA. A broader scope of ISSB and ISSA sustainability assurance standards is expected.
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Skill Gaps: There may be a shortage of professionals with specialised expertise in both auditing and sustainability, which could impact the quality of disclosures and corresponding assurance services. Practitioners are advised to stay updated with the latest requirements.
Looking Ahead
As Singapore continues to lead in sustainability, the importance of robust sustainability disclosure and assurance will grow.
Accounting and auditing professionals in Singapore must stay abreast of the various sustainability-related developments and emerging standards to effectively support this global initiative.
Wherever you are on your sustainability journey, BDO Singapore can help ensure your disclosures meet international best practices, address all material sustainability risks and maximise opportunities.
Please feel free to contact us for further assistance.
Kenneth Ng, Audit Partner
References:
1SGX and NUS Centre for Governance and Sustainability’s Sustainability Reporting Review 2023: https://bschool.nus.edu.sg/cgs/wp-content/uploads/sites/7/2023/11/CGS-SGX-Sustainability-Reporting-Review-2023_Report.pdf
2Consultation Paper, July 2023: Turning Climate Ambition into Action in Singapore - Recommendations by the Sustainability Reporting Advisory Committee: https://www.acra.gov.sg/docs/default-source/default-document-library/legislation/listing-of-consultation-papers/pubic-consultation-on-srac%27s-recommendations/consultation-paper-recommendations-by-srac.pdf?sfvrsn=b1e6936c_2
3SGX RegCo to start incorporating IFRS Sustainability Disclosure Standards into climate reporting rules: SGX RegCo to start incorporating IFRS Sustainability Disclosure Standards into climate reporting rules - SGX Group