SOLID FRAMEWORK - JSE MAGAZINE

SOLID FRAMEWORK

The JSE’s ESG reporting tools are designed to help businesses address some of today’s most pressing challenges

SOLID FRAMEWORK

Not addressing climate change is likely to carry a far greater cost for an organisation down the line than dealing with it today, since climate risk amplifies many other sustainability risks and challenges. Yet most businesses in SA are not quite sure how to go about it. The alphabet soup of acronyms surrounding sustainability and ESG (environmental, social and governance) issues, and the associated measurement and reporting frameworks, remains confusing, even if efforts to converge and standardise global sustainability frameworks are gaining momentum.

The JSE’s Sustainability and Climate Change Disclosure Guidance consultation papers aim to help companies navigate this complex space and assist them in making sense of how to think about – and report on – sustainability and climate-change issues. The papers were launched in December 2021 for public comment, with the final version to be released in 2022. ‘The intention is a guidance tool – not a requirement – to help JSE-listed companies find their way through the mostly voluntary sustainability frameworks in order to improve their own ESG disclosure and performance in line with international best practice,’ says Shameela Soobramoney, JSE Group Chief Sustainability Officer. ‘It consists of an overarching Sustainability Disclosure Guidance, and an associated Climate Change Disclosure Guidance, which is a more detailed guidance on climate-change disclosure.’

The JSE’s Disclosure Guidance is aligned with the newly established International Sustainability Standards Board’s (ISSB) prototypes, as well as other major frameworks. The existence of the ISSB is a notable development as it aims to set a common global baseline of sustainability disclosure standards, says Soobramoney. ‘It’s a work in progress, a set of prototypes, in which the International Financial Reporting Standards Foundation has consolidated its own standards with those of the Climate Disclosure Standards Board and the Value Reporting Foundation. At the same time, [it] also intends to align with other important sustainability-disclosure frameworks, including those by the Global Reporting Initiative, the EU Corporate Sustainability Reporting Directive, the Taskforce on Climate-related Financial Disclosures, the International Integrated Reporting Council and King IV.’

Essentially, the JSE wants to help companies cut through the plethora of acronyms, metrics and standards, guiding them to understand, disclose and address sustainability issues in an integrated way. This will also enable the investment community to make better-informed decisions. ‘Even some of our larger issuers are struggling to navigate these issues,’ says Soobramoney. ‘Not every company has the luxury of employing big teams or consultants to address these issues. Yet these issues are critical to the long-term resilience of these companies, the South African economy and our pension funds that are invested in the stock market. Issuers need to help their stakeholders understand why sustainability issues matter and how their organisation plans to tackle them. South Africa is one of the leading countries in terms of sustainability disclosure, particularly in the listed context.

‘A key challenge is to apply the mind collectively and in an integrated manner, at the highest level, to understand to what extent sustainability issues are material and salient.’

To this end, the JSE Disclosure Guidance has adopted a double-materiality approach, which considers both the impact on enterprise value and the organisation’s impact on the wider environment and society.

‘We need to transition our economy now, and it needs to be a socially and environmentally just transition,’ says Soobramoney. ‘The way issuers understand and manage their sustainability risks and opportunities is ultimately going to affect their own longevity and how we attract foreign direct investment.’

The JSE has long been recognised for its pioneering role globally in promoting strong governance, and its Sustainability and Climate Change Disclosure Guidance is building further on this leadership role.

By Silke Colquhoun
Images: Gallo/Getty Images