Driving corporate accountability in Asia: Q and A with Anthony Cheung

This year our annual Allies Assembly – a global sustainability conference focusing on the role of business action towards the Sustainable Development Goals – will take place in Bangkok, Thailand. With this event on the horizon, Anthony Cheung, member of our supervisory board and Vice Chairperson at Friends of the Earth (HK) shares his thoughts about the current state of corporate accountability in the region and what stakeholders can do to drive it.

What does ‘corporate accountability’ mean to you – especially within the Asian business landscape?

Corporate accountability on sustainability is a two-way street between corporations and their stakeholders. It goes beyond a company’s corporate social responsibility policies and requires businesses, investors, governments, and civil society to identify common ground and work together to build a fairer and more sustainable world. There is also a continuous cycle of assessing and re-assessing companies’ performance to identify areas for improvement on an ongoing basis. The beauty of corporate accountability is that it recognises and therefore encourages companies’ good practices while applying pressure on laggards to seek more robust and timely actions.

In Asia, this process is in its early stages and is challenging due to drastic differences in sustainability standards across multiple regions and countries. For example, the deadline for achieving net zero in carbon emissions varies from one place to another, while some countries are only aiming for carbon neutrality (as opposed to net zero). It’s difficult to hold companies accountable to standards about their impact on people and the planet when there’s no consensus on what those standards should be.

Do Asian stakeholders face unique challenges when striving for corporate accountability in the region?

How could these challenges be addressed effectively?

The differing priorities and timelines across Asia complicate efforts to align investor objectives with global corporate sustainability agendas. This also leads to a divergent sense of urgency on certain sustainability issues. Asian corporates sometimes see sustainability accountability primarily as a compliance task rather than a strategic commitment, leading to a more cautious approach where they passively wait for peers to act first.

The absence of universal standards and gaps in knowledge about sustainability issues are hampering Asian corporates’ journey towards sustainability accountability. To surmount such obstacles, corporations need to first understand the ways that material sustainability issues can affect their business, stakeholders, and longevity. This could help shift their mindset towards seeing sustainability accountability as a key risk management tool.

The next step is to build capacity to mitigate risks and seize opportunities associated with material sustainability issues. The development of industry-specific guidelines and a showcase of best industry practices can help corporations enhance their understanding and implementation of accountability measures. By embracing these strategies, Asian corporations can pave the way for meaningful contributions to sustainable development in the region.

From the perspective of investment firms, limited coverage and quality of sustainability disclosures make it challenging to effectively assess companies and hold them accountable. As in other parts of the world, investment firms may also have limited influence over certain companies, particularly those with government or majority shareholder control. In this regard, we see an increasing number of collaborative engagements between investor, corporates, and data vendors to call for more transparent, comparable and comprehensive disclosures in line with global corporate sustainability agendas.

Considering the distinct cultural, regulatory and economic landscape in Asia, what could be done to promote corporate accountability in the region?

Unique strategies tailored to Asia’s variety of landscapes are crucial. One method involves adopting a balanced ‘carrot and stick’ approach: rewarding companies that are displaying leading practices or showing good progress over time by increasing investment in them, and calling out companies that are persistently falling behind expectations. In addition to exclusion and divestment, shareholder actions (such as co-filing resolutions) are becoming more widespread in Asia as a new way of escalation when changes are not forthcoming through corporate engagement.

That said, stakeholders need to recognise that corporations operating in different jurisdictions encounter unique challenges. Therefore, before handing out ‘sticks’, it’s essential for stakeholders (especially investors) to collaborate closely with corporations, patiently listening to their constraints, motivating change by highlighting tangible opportunities and incentives rather than solely relying on penalties.

In addition, sharing best practices within specific markets and sectors can provide valuable insights for corporations to understand their impact, assess financial materiality, and identify effective mitigation strategies. Through these tailored strategies, stakeholders can foster a collective culture of accountability and drive sustainable business practices across Asia.

How will, Japan, Hong Kong, Malaysia, Singapore and the Philippines’ decision to introduce mandatory climate reporting rules set out by the International Sustainability Standards Board (ISSB) affect corporate accountability?

What are the potential implications of these regulations on corporate behaviour and stakeholder expectations in Asia?

This decision will significantly impact corporate accountability in Asia, but it will take time to implement and will also open doors to new challenges for corporations in the near term.

In the past, a number of jurisdictions across Asia introduced certain climate or sustainability related reporting requirements with differing levels of comprehensiveness and enforcement. Mandatory climate reporting in line with the ISSB Standards is expected to bring together the fragmented puzzle of disclosures in Asia and foster better synergy among companies with a set of streamlined disclosure requirements. Over time, as the ISSB Standards continue to grow, this will further increase transparency in the region and enable stakeholders to hold companies accountable.

The adoption of ISSB standards is expected to enhance the quality and coverage of climate-related data, providing a solid foundation for more robust corporate sustainability assessments. As shown in WBA’s white paper on corporate accountability, standardised reporting can facilitate benchmarking and comparisons, leading to more informed decision-making by investors and other key stakeholders such as civil society organisations, consumers and even peer companies.

These measures have the potential to shape corporate behaviour towards greater transparency and responsibility in Asia, meeting heightened stakeholder expectations for sustainability and accountability.

How can stakeholders in Asia leverage the insights and research offered by organisations such as the World Benchmarking Alliance to effectively hold companies accountable for their impact on people and the planet?

These benchmarks, insights and research can help all Asian stakeholders facilitate stakeholder assessment and help establish a common ground for evaluation.

Benchmarks enable the identification and recognition of leading practices, promoting the sharing of sector- and market-specific insights and best practices. If used and referred to by multiple key stakeholders in Asia, companies will have an incentive to take actions that are beyond what’s legally required of them. Examples of best practices help businesses to better understand how they contribute to positive impact, how these contributions affect the company’s financial performance, and ways to mitigate any risk.

Additionally, collaborative engagement initiatives such as the World Benchmarking Alliance’s collective impact coalitions play a crucial role in advancing sustainability discussions and agendas. By leveraging these benchmark resources and participating in collaborative efforts, stakeholders in Asia can effectively drive corporate accountability and contribute to positive environmental and social impact.