ESG reporting: are we ready? / Muhammad Hariz Hamid

Corporate disclosure serves as a means to communicate the performance and governance of a company to its shareholders and other stakeholders. It can be classified into two broad categories: mandatory and voluntary. Traditionally, the mandatory disclosure (also known as “statutory disclosure”) has aided key executives in reporting their company’s financial performance to the intended users, that is, the financial capital providers. In fact, the management has used this process strategically to validate their stewardship function. The scope of this traditional reporting framework, however, is somewhat narrow. Particularly, the context of the general-purpose financial reporting is by far limited to financial information only, whereas both existing and potential investors would require information beyond accounting numbers. In other words, in order to evaluate the overall business performance, a more robust and wide-ranging corporate reporting framework that also incorporates voluntary disclosure is needed. This concern has led to the proposition of the environmental, social and governance (ESG) framework.