WITH the pandemic still raging, affecting lives of people all over the world, many think that sustainability may be sidelined in favor of survival.
Regulators, however, are pushing forward with the sustainability agenda, and are bent on making it mandatory for publicly-listed companies to submit a separate report on their sustainability efforts.
Securities and Exchange Commission (SEC) commissioner Kelvin Lester K. Lee said the agency is pushing through its with its rule on mandatory submission of sustainability report for listed companies starting 2022, and possibly expanding it to other institutions that deal with public companies such as brokers and lenders.
He said regulators should think about sustainability, especially when the world is at a reset, rather than wait for things to return to normal.
“This is the best time to focus on sustainability; there’s a focus on it because of Covid. Now is the perfect time. It is not something we set aside to move forward and say we’ll focus on that. No. It seems that the interest is there; the focus is there. So it is clear that we have to do it, why not now. Sustainability is everyone’s responsibility,” Lee said.
In 2019, the SEC issued a memorandum to mandate the listed companies to submit a separate report on sustainability outside of the annual report that they are also required to file with the agency.
The report should follow the guidelines set by SEC, which mainly came from the standards set by the Global Reporting Initiative (GRI). The regulator had already implemented the rule for the financial year 2020, but on a comply-or-explain approach first: here, companies are required to submit the sustainability report and if the information is not yet available, it would have to explain to regulators why data is not yet there.
Now, auditors would have to check if data in these reports are really happening and not just on paper.
New territory for CPAs
The country’s certified public accountants are gearing up to perform assurance work on sustainability reports. But this is a new territory even for the CPAs themselves, as they must go beyond crunching the numbers and audit what they termed as the triple bottom line of companies.
“To remain relevant, accountants must acquire the knowledge and skills to show clear links between sustainability issues with financial performance. The skills needed go beyond traditional accounting and auditing as the role requires the ability to quantify and evaluate risks, as well as opportunities related to the environment and to society or the two other bottom lines in profit, people, planet,” Chris Ferareza, partner in the advisory services division of audit firm P&A Grant Thornton, said.
He admits these reports are yet to be at a level of expected quality, and for now may be a mere compliance with the regulation.
“It’s still a far cry from those in other developed countries such as Japan, as we’re just in the nascent stage in sustainability reporting and much still needs to be improved,” Ferareza said.
For the Aboitiz group, both the regulators and companies should continue to pursue discussing sustainability issues despite the pandemic.
“The ESG ([nvironment, social and governance] reporting helps increase transparency, and recognizes the responsibilities of the business sector to improve its sustainability practices.
The pandemic really tested the resiliency of companies and their practices. It also highlighted a lot of issues in the business sector, the readiness in terms of digital transformation, adequacy of medical benefits and review of current workplace safety protocols,” it said.
“ESG programs are focused on setting practices that would contribute to solutions to enable all of us to adapt to the potential problems of the future like climate change, resource scarcity, changing social and workplace dynamics. ESG is an important component in building corporate resiliency to business risks now and in the future,” it said.
More than half of the business of the Aboitiz group comes from power generation.
Regulators are pushing for ESG initiatives due mainly to the worldwide frenzy on looking at—and measuring—a company’s green and social initiatives, which should go beyond corporate social responsibility, which for years was used as a tax shield by corporates.
They needed to be certified compliant with the ESG guidelines, which are then used by some banks before they can lend them money, or by regulators before they allow a company sell bonds to the investors.
Companies such as the SM of the Sy family and the Ayala groups have vowed to lower their carbon emissions. For now, it merely involves measuring the trash that the company produces as well as their emissions. They can either reduce the trash or, if not, plant a certain number of trees to match the amount of oxygen that the trees produce with their carbon emissions. This is what they term as carbon neutral.
For the power usage, SM Prime Holdings Inc., the shopping mall operator, targets to increase the share of renewable energy in its electricity consumption by more than 50 percent across all of its business segments by end of next year. This is in support of the Department of Energy’s program of moving up the renewable energy supply component of the country to 35 percent by 2030. On top of diversifying energy suppliers, the company will also expand the use of solar roof decks in its various properties to partly meet the electricity requirements of its business operations.
Reducing carbon emissions may be too vague for some, but some companies turn into plastic waste, in which the Philippines is notoriously one of the world’s top polluters.
A report of OurWorldinData.org last May showed that Pasig River has emerged as the eighth top plastics polluter of oceans in the world, dumping some 38,000 tons of plastics in the seas. Our World in Data is a collaborative effort between researchers at the University of Oxford and UK-based non-profit, Global Change Data Lab.
Years before, however, many local government units have already copied each other’s efforts to ban plastic bags for consumers when shopping, which until today many cities and municipalities are still implementing.
This effort, however, failed to solve the situation as companies produced more trash such as ecobags and paper bags they give out to consumers when they shop.
Plastic neutral
Some firms like the Po family’s Century Group and Shakey’s Pizza have secured a Plastic Credit Exchange certification for it to become plastic neutral, or recovering the same amount of plastic waste that it produced and dump it properly.
Consumer manufacturing companies, however, are still bracing themselves for the impending legislation that seeks to ban single-use plastics, which will heavily impact on the sachet economy, everything from shampoos to juices and even in softdrinks.
Chemical manufacturer D and L Industries Inc. said with the looming ban on single-use plastics, the company has developed Biorez and Biomate, which are proprietary lines of plastic materials and additives that can make plastics compostable and biodegradable.
“As a big proponent of ‘green chemistry’ in the country, D&L is also capable of assisting its customers make their products sustainable to stay ahead of the shift in consumer preference towards sustainability. D&L, through its various subsidiaries, offer sustainable product solutions from coconut-derived raw materials for personal and home care products, environmentally-friendly chemicals for industrial and construction applications, organic fertilizers to wholesome food ingredients,” it said.
Coca-Cola Bottlers Philippines Inc. has vowed to exit the sachets business next year, killing its powdered juice drink Eight O’Clock, a brand popular in the 90s, in the process.
“We have made a bold decision to completely exit from our sachet business by 2022. Our reason for these is that we have been in a long long time faced significant challenges in plastics recovery in straws and sachets,” Gareth McGeown, the company’s president and CEO, said.
McGeown, however, said that they will argue with the legislators that the PET bottles, where a chunk of its products are placed, are not single-use and can be recycled or be used again for other purposes, such as Christmas ornaments.
PET—short for polyethylene terephthalate—is the chemical name for polyester. It is a clear, strong and lightweight plastic widely used for packaging foods and beverages, especially convenience-sized soft drinks, juices and water.
“What is super important for us is the definition of single-use plastics. I think we have evidence that our PET packaging, our cans packaging are 100 percent recyclable. Hence, we are investing P2.2 billion with our partners to make that site [bottle-to-bottle plastic recycling facility] work. Our single-use plastics are straws and sachets, but we’re exiting those businesses anyway. The largest part of our business remains is on returnable glass and we’ll continue to invest in that moving forward,” McGeown said.
With all these efforts, companies such as the Aboitiz group believe that ESG, which previously was just a buzzword, will become part of the main corporate agenda of businesses for the long term.
“ESG programs are focused on setting practices that would contribute to solutions to enable all of us to adapt to the potential problems of the future like climate change, resource scarcity, changing social and workplace dynamics,” it said.
“The regulators and the business sector need to have a collaborative approach to sustainability and endeavor to work on a unified agenda. The role of the regulators and the business sector is to identify and push for the common goals for the country’s development.”