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Sustainable Reports Make Firms Reliable

For most Chinese listed companies, the main obligation of information disclosure is their financial status.

 

But as the world is putting increasing attention on the sustainability of growth, financial figures will not be the only indices to judge the performance or prospect of a business.

 

A sustainability report may tell more.

 

Such a report, combining the analysis and information about a company's environmental, social and economic performance, offers a full scenario of the company to investors, government institutions as well as non-government organizations. And it has become more widely accepted by overseas rating companies and financial markets.

 

"The unprecedented economic growth of China also brings consequent environmental and social issues," said Roger Adams, Technical Executive Director of the Association of Chartered Certified Accountants (ACCA), an international accountancy body.

 

Both the government and companies should be more concerned about such issues, he said.

 

Right now, sustainability reports are rarely used by Chinese companies, who are often even blamed for insufficient information disclosure of their own financial figures.

 

But the situation is expected to change as the steadily growing Chinese economy and opening-up will force more enterprises to face the challenges of sustainable growth.

 

Sustainability reporting will be of particular importance to Chinese companies conducting foreign trade or those seeking overseas listing, Adams said.

 

A number of overseas stock exchanges, including the London Stock Exchange, have requested the submission of a sustainability report for listing applicants.

 

In Hong Kong, where the government cares much about the environmental and social duty of companies, many businesses have their own sustainability reports.

 

International investors also seek relevant indices to assess the long-term investment value of a company to minimize their risks in investment, Adams said.

 

Meanwhile, many multinationals are investing in China and bringing with them international-standard practices in environmental protection, labor safety, social obligations, etc.

 

As these companies are sourcing products from Chinese suppliers, they need to be ensured that the Chinese suppliers are following similar standards, Adams said.

 

Adams is also a board member of the Global Reporting Initiative (GRI), an organization that develops and disseminates globally applicable sustainability reporting guidelines and is also an official collaborating center of the United Nations Environment Program.

 

More than 600 multinational companies are using the guidelines to produce regular reports on social and environmental activities.

 

It took only several years for the world to acknowledge the importance of such non-financial reporting.

 

In China, the promotional campaign has just begun. And there may be some resistance from limited transparency, low efficiency and poor corporate governance.

 

But hopefully more Chinese businesses will become aware of the issue as they catch up with multinationals, Adams said.

 

To promote the application of such standards and reporting in China, ACCA just published the Chinese version of the latest Sustainability Reporting Guidelines, which were introduced overseas by GRI in 2002.

 

"This is only a small first step," Adams said.

 

ACCA will conduct a series of workshop with government departments and enterprises to discuss the ideology and cooperate with domestic organizations to promote the guidelines in the country.

 

Globally, a new set of guidelines on sustainability reporting is expected to be published by GRI in 2006.

 

The benefits to the companies adopting the standards are reduction of risk, cost-saving through improved efficiency and opportunities for new business and clients, Adams said.

 

In the future, the rating of a company will depend not only on its financial soundness, but also on its performance in sustainability growth.

 

Those who fail to satisfy the criteria will be discounted in their rating.

 

(China Daily November 8, 2004)

Sustainability, Environmental Protection Urged in Development
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