What is The Guide to Annual Reports?
Welcome to the 2nd edition of The Guide to Annual Reports in Singapore, Black Sun’s annual flagship research. The Guide identifies trends and best practices in corporate reporting, and assesses how companies are responding to challenges and changes within the reporting landscape. Through The Guide, we hope to stimulate debate around what constitutes ‘best practice’ and contribute to the wider development towards long-term thinking, disclosure, and transparency.
Reporting in a new era
Disruptions challenge the way businesses are run and stakeholder expectations for greater transparency is rising. In Singapore, regulation on reporting has evolved significantly, from the mandatory sustainability reporting requirement by the Singapore Exchange (SGX) to the recent revisions of the Singapore Code of Corporate Governance (SCCG).
Where do companies stand amidst these changes?
ONE: SETTING THE SCENE
Overall, STI30 companies are outlining their corporate values more clearly which is an important step towards aligning corporate culture with the company's purpose. There is also a significant improvement observed in discussions on competitive advantages.
We are seeing more companies having separate CEO and Chairman statements, but companies continue to find it challenging to differentiate the topics covered between the CEO and Chairman.
THREE: BUSINESS MODEL
STI30 companies have demonstrated better integration of strategy and sustainability into their business models. Whilst there are a few describing how the company creates value, the majority have yet to embrace this approach.
Overall, discussions on the market environment have not changed significantly. The majority provide an overview of the market but there are opportunities for improvement in reporting the impact of the trends on the company and the mitigating actions taken.
Although there are no significant changes year-on-year, we are seeing more STI30 companies incorporating sustainability into strategy. Two areas of opportunity for STI30 companies: (1) discuss strategic targets and performance; and (2) articulate how stakeholders have been involved in strategic decisions.
We have observed an improvement in performance reporting, where more STI30 companies are discussing KPIs and linking them to strategy and sustainability. More progress is needed in discussing the link between KPIs and remuneration.
Overall, STI30 companies are better at discussing the relationship between risk and strategy. More progress is needed in linking risk and sustainability, and discussing how companies are addressing opportunities.
More STI30 companies are producing standalone sustainability reports but sustainability disclosures in the annual report have diluted. An area of opportunity for STI30 companies is to have richer stakeholder engagement discussions in the annual report.
Governance disclosures among STI30 companies have not differed significantly from last year. Looking forward, STI30 companies have much more ground to cover in the areas of remuneration, diversity and stakeholder engagement.