Singapore Seeks Climate Reporting Delay For SMEs

Singapore Business Federation (SBF) has officially requested a 12- to 24-month phase-in period to the obligatory climate disclosure rule under the International Sustainability Standards Board (ISSB) regime for smaller companies listed on the Singapore Exchange (SGX). Under current regulation, all listed companies are mandated to start disclosing climate-related financial information in line with ISSB guidelines for financial years starting on or after January 1, 2025.

This follows growing fears that the majority of the smaller companies are unready to deliver on the soon-to-be-reached deadline. In sessions of engagement with almost 40 SGX-listed companies, which were conducted by SBF, the federation indicated that just 4% of firms surveyed were confident that they would be ready to deliver on the ISSB requirements by 2025. Firms mentioned engagements of incomplete awareness, lack of certainty of materials, and the requirement to set up internal processes from scratch as key constraints.

Smid-caps and small-cap firms, collectively representing about 84% of SGX's total listings, are being most baffled by the new ISSB standards. While most of these firms had already started getting used to the earlier suggested Task Force on Climate-related Financial Disclosures (TCFD) template, the ISSB standards are more extensive in scope and more comprehensive. SBF, for its part, noted that this kind of jump from TCFD to ISSB is a heavy compliance load on such companies, particularly those who are fiscally and technically challenged.

To de-burden the same and facilitate more effective compliance, SBF has recommended incremental and facilitative steps. In particular, the federation considers the 1–2 year lag would provide sufficient time to smaller firms to develop in-house sustainability skills, create robust data collection systems, and monitor larger peers' climate reporting behaviors. Additionally, the longer lead time would qualify more firms for Singapore's Sustainability Reporting Grant (SRG) whose availability is limited to only before mandatory climate disclosures. The SRG provides funding support for companies to build reporting ability, but the impending 2025 deadline restricts how many companies can feasibly benefit from it.

While ISSB standards do incorporate proportionality provisions aimed at small players, SBF has complained that such provisions are poorly explained or insufficiently applied. The federation has called on regulators to step up awareness campaigns, reminding them that enforcing in a proportional way the standards is necessary so as not to burden smaller firms with overbearing requirements. SBF maintains that making smaller firms meet the same level of disclosure requirements as behemoth multinationals is not feasible nor fair, considering the immense disparity of organisational capability.

To further simplify the compliance process, SBF has suggested the issue of Singapore-specific guidelines that are sector-specific in nature to address the requirements of different sectors. Today, the lack of national-standardized templates or scenarios compels each company to come up with its own climate-related disclosure methodologies, which will ultimately lead to duplicative effort and higher chances of inconsistency. SBF is of the view that developing cross-sector and sector-based frameworks will accelerate reporting, eliminate confusion, and usher in more uniformity in the market.

Another high-level recommendation is for the implementation of a national digital climate reporting platform. While, previously, financial information has been aggregated and readily comparable, sustainability data is still patchy and hard to compare for analysts, investors, and regulators. SBF reasons that a national climate reporting framework would allow more benchmarking and enhanced transparency by sector. It would also offer desperately needed infrastructure for smaller firms to report and leverage information without having to rely on patchy, expensive systems.

SBF head Kok Ping Soon explained that the federation's suggestion must not be interpreted as a backtracking on Singapore's climate targets. Rather, he positioned the extension as a realistic move to enable smaller businesses to make meaningful contributions to the country's quest for sustainability. "This is not a step back from climate ambitions but a practical move to enable smaller firms to comply meaningfully," he said. We must promote awareness of proportionality arrangements, provide more tailored advice, and provide access to a central data point in order to allow smaller firms to utilize the additional time to best effect—if granted.

The federation reaffirmed its intention to operate hand-in-hand with SGX RegCo, the Accounting and Corporate Regulatory Authority (ACRA), Enterprise Singapore, and other relevant stakeholders toward building corporate readiness and proper enforcement of climate reporting requirements across the sector. By way of the proposed extension and related supporting measures, SBF seeks to build an ecosystem where sustainability disclosures are credible and within reach of firms of all sizes.