Companies in the Asia-Pacific region saw both progress and challenges in sustainability reporting, according to a study by PwC Singapore and the Centre for Governance and Sustainability (CGS) at the National University of Singapore (NUS) Business School.
The third edition of the study, Sustainability Counts III: Sustainability Reporting in Asia Pacific, saw that while more Asia Pacific companies have set net zero targets, only 18% underpin these ambitions with targets verified by the Science-Based Target initiative (SBTi).
The report also found that there is a recognition that existing standards and guidance are undergoing reviews and updates. The SBTi is in the process of reviewing the Corporate Net-Zero Standard, and similarly, the GHG Protocol has conducted surveys to inform the scope of updates for its standards and guidance.
Additionally, the PwC-NUS study revealed an increase in the disclosure of Scope 3 emissions, though greater room for more information on relevant Scope 3 emissions categories remains.
Other key findings from the study include:
Companies applying double materiality lens
This year’s study further examines the materiality assessment approach, whether it is impact materiality, financial materiality or double materiality. 51% of companies stated that they adopted the double materiality approach – a concept that combines both impact materiality and financial materiality - followed by the impact materiality approach (18%), indicating that companies not only focus on their financial viability, but also their impact on the society and environment.
Companies built more “muscles” in identifying climate-related risks and opportunities, but quantification of such risks remains underway
Across Asia Pacific, 81% of 650 companies studied have disclosed their process for managing climate-related risks and/or opportunities, an increase from 74% of 700 companies from last year’s report. Furthermore, out of 13 jurisdictions, nine have seen an increase in disclosures of the process for managing climate-related risks and opportunities compared to last year’s report.
While there’s a growing demand for companies to quantify the impacts of potential climate scenarios - in addition to providing qualitative analysis – the report found that nearly half (45%) of 650 companies that carried out climate scenario analysis have disclosed both quantitative and qualitative scenarios. Meanwhile, a similar half (46%) have disclosed only qualitative scenario analysis. This is indicative that developing and disclosing a quantitative scenario analysis presents several challenges, including a lack of accurate and comprehensive data on climate impacts, emissions, and financial metrics, which may be difficult to obtain.
Nature and biodiversity reporting making healthy appearance, but TNFD framework application remains at the nascent stage
Nature and biodiversity issues are increasingly important as part of an organisation’s non-financial disclosures, especially as the link between nature and climate becomes better understood. Although over half (62%) of companies studied have included sections on nature and biodiversity in their sustainability report, only 7% disclosed that they currently refer to the TNFD framework for their nature and biodiversity reporting, while 11% plan to align with it in the future.
Progress in disclosure of Scope 3 emissions despite complexities
The study reveals an increase in the disclosure rate for Scope 1 and Scope 2 emissions, which has risen from 80% of 700 companies in the previous year to 88% of 650 companies this year for both areas. Although the disclosure rate for Scope 3 emissions remains lower, it has shown notable improvement, climbing from 50% to 63%. Despite these advancements, many companies still focus on disclosing their Scope 3 emissions in less complex areas, such as business travel.
Progress in boards’ responsibility and sustainability performance-linked remuneration disclosures
The study highlights continued improvements in sustainability reporting, with 86% of companies now disclosing the boards’ responsibility for sustainability, reflecting increased governance as jurisdictions mandate climate-related disclosures. Furthermore, 42% of companies have tied executive remuneration to sustainability performance or targets, up from 33% from last year’s report, showing stronger alignment of leadership incentives with sustainability goals. However, only 6% of companies have disclosed a specific percentage of remuneration linked to climate performance or targets, falling short of recommendations under IFRS S2 Climate-related Disclosures.
Stakeholder demand driving up sustainability assurance
The demand for reliable sustainability information, such as from investors, has led to an increase in external assurance of sustainability reports. The study shows that 60% of companies sought external assurance, up from 49% from last year’s report, despite assurance regulations only commencing in later years. However, 78% of companies with external assurance have only sought limited or moderate assurance, indicating room for improvement in the robustness of assurance practices. As investors seek greater clarity and consistency, more jurisdictions are considering or mandating assurance over sustainability information, with plans to progress towards reasonable assurance.
