Transparency and Accountability in ESG Reporting: A Catalyst for Positive Change

 

I have been an examiner for Malcolm Baldrige Performance of Excellence since 2005. I have thorough, yet fun experience in assessing and reporting the current portrait of a company performance and its capacity to develop further in the future. The process itself is thorough and details. We have to check every section of the company and assess whether they link to each other based on our performance standards. The current trend in sustainability reporting is the same in sense that it takes portrait of a company and its relevance to its capability to be sustained by emphasizing on environmental, social and governance issues.

In today's rapidly evolving business landscape, companies are under increasing scrutiny to demonstrate their commitment to environmental, social, and governance (ESG) principles. Transparency and accountability have become watchwords, guiding organizations towards a more sustainable and responsible future. ESG reporting, in particular, plays a pivotal role in not only enhancing transparency within organizations but also in the eyes of the public. In this blog, we delve into the profound impact of ESG reporting on transparency and accountability.

The Growing Emphasis on ESG Reporting

ESG reporting is no longer a mere addendum to a company's annual report; it's a fundamental component of corporate strategy. Businesses are recognizing the importance of disclosing ESG performance to a wider audience, including investors, customers, employees, and regulators. This shift is driven by several factors:

1. Investor Expectations

Investors are increasingly considering ESG factors when making investment decisions. They recognize the long-term risks and opportunities tied to ESG issues, and they demand transparent information from companies to assess these factors effectively.

2. Regulatory Mandates

Regulatory bodies across the globe are imposing stricter reporting requirements related to ESG issues. These mandates force companies to disclose their sustainability efforts, ensuring a higher degree of transparency.

3. Stakeholder Pressure

Customers, employees, and communities are holding companies accountable for their actions. They expect businesses to not only meet financial targets but also operate ethically, sustainably, and transparently.

Enhancing Transparency within Organizations

ESG reporting serves as a powerful tool for fostering transparency within organizations. Here's how:

1. Data Collection and Management

ESG reporting necessitates the collection and analysis of vast amounts of data related to environmental impact, social practices, and governance structures. This process encourages companies to develop robust data management systems, ensuring accuracy and consistency.

2. Identifying Gaps and Weaknesses

When companies assess their ESG performance, they inevitably uncover areas where they fall short of their sustainability goals. This self-awareness drives organizations to address weaknesses and implement improvements, resulting in increased transparency about their challenges and commitments.

3. Engaging Stakeholders

ESG reporting often involves engaging with various stakeholders, including employees, suppliers, and community representatives. This interaction fosters a culture of openness, where feedback and concerns can be addressed proactively.

Boosting Public Trust and Accountability

ESG reporting not only benefits organizations internally but also enhances their standing in the eyes of the public:

1. Building Trust

Transparent ESG reporting builds trust with stakeholders, assuring them that a company is committed to responsible practices. This trust can translate into customer loyalty, investor confidence, and positive brand perception.

2. Accountability to the Public

By publicly disclosing ESG efforts and results, organizations become more accountable to the public. This accountability encourages them to uphold their commitments and respond to societal and environmental challenges more effectively.

3. Competitive Advantage

Companies that embrace transparency through ESG reporting gain a competitive edge. They are better positioned to attract ethical investors, top talent, and socially conscious customers, ultimately contributing to their long-term success.

Conclusion

In an era defined by increasing demands for transparency and accountability, ESG reporting emerges as a cornerstone of responsible business practices. It not only fosters transparency within organizations by promoting data-driven decision-making but also enhances public trust and accountability. As companies navigate the complex landscape of ESG issues, robust reporting mechanisms will continue to serve as a catalyst for positive change, driving them toward a more sustainable and responsible future.

SR Indonesia

OJK (Indonesia Financial Service Authority) regulation no. 51/2017 on Sustainability Reporting for financial service institutions, issuer, and public companies has been welcomed with mixed reception. While some accepted it as a great achievement of Indonesian Government in the effort of insisting harmonious stability of economic, social, and environmental aspects of national economic, others look at it as new challenge as it is still new in the country and very little reference could be used as comprehensive guidance or best practice.

After its announcement and validity on July 2017, OJK sets out with the implementation by put it mandatory for the first 40 of 114 banks (nationals and multi-nationals) to be scheduled to hand over their Rencana Aksi Keuangan Berkeberlanjutan (RAKB) or Sustainability Finance Action Plan by March 2018 and the latter by early January 2019. One might question what happen with the (listed) public companies? Are they required to report too? Or is it just focusing on financial institution and issuer only? The answer is yes! People maybe forgetting that in attachment II (2) of the regulation it is stated that a full sustainability reporting is required as separate part of mandatory annual report of issuer and public companies.

The RAKB itself should reflect the institution’s short and middle range plan (up to five years). By setting the five years plan, the RAKB is able to serve as guidelines for the annual report. However, in the first implementation, the RAKB is only apply specifically to financial institutions where for the issuer and public company they only need to prepare the annual and sustainability report within the timeline set by OJK. The timeline of course is not coinciding with other specific industry mandatory report such as environmental and mining.

The fact that findings from Ernst & Young in 2017 in their “Sustainability Reporting: Key Insights from the Indonesia Stock Exchange Top 100” shows only 32% of the IDX top  100 report on their sustainability performance should not discourage the spirit of the movement. In fact, it show that many of the top executive still has limited understanding about many aspects of sustainability activity and the value of its reporting. By planning sustainability activity and disclosing it, companies may achieve several internal and external objectives. KPMG international in their 2005 survey concluded that disclosing sustainability activity would achieve as follows:

a)     Evaluating the organisation’s performance on sustainable development in relation to established regulations and voluntary initiatives.
b)     Highlighting the relationship and influence on each other among organisations, and expectations created around the sustainable development.
c)      Comparing the performance of an organisation with other companies, as well as analysing its evolution over time.
d)     Reducing the risk level in managing the social and environmental aspects that affect corporations.
e)     Reducing costs through improving management mechanisms and increasing profits by accessing socially or environmentally-oriented markets.
f)       Increasing its stock market capitalisation due to the growing ethical investment.

Enforcement of the regulation is a word to avoid, since it is only giving administrative sanctions. What most important is to ensure that top executives of these companies is well informed about the action and not to look at it as another cost of business that does not yield any positive impact to the company. What to do next is to champion the cause by doing creative, relentless and extensive campaigning so public and relevant stakeholder will have comprehensive understanding as from my observation, the reception on sustainability is still poorly accepted.

Sustainability Reporting in Indonesia

Jakarta - Majalahcsr.

Of the top 100 companies listed on the Jakarta Stock Exchange (IDX), only 30% of companies make a Sustainability Report (SR) (Ernst & Young 2016). Whereas from 2000 to the present (2017), only 97 companies have reported through the Global Report Initiative (GRI).

GRI's Country Program Manager in Indonesia, Bob Eko Kurniawan explained that there was pressure from investors, especially foreign investors, so that the listed company would make a sustainability report. He explained that outside investors had begun to be educated in terms of sustainability. "They will prioritize their sustainability program, then they will invest their money," Bob explained.

By making this sustainability report, companies will find it easier to get investors. Its reputation will also be better for the company, so investors will be more interested in them.

In addition, companies are easier to obtain a license to operate from socio-economic communities, because of the more structured Corporate Social Responsibility (CSR) program. The company will also get more public approval and not interfere in its operations.

The government itself since 1999 has made many regulations regarding CSR. Initially only State-Owned Enterprises (BUMN) were required under the name of the Partnership and Community Development Program (PKBL), but then continued to the private company.

As for SR, the government has not yet made the regulation, until the Financial Services Authority (OJK) through POJK No. 51 dated July 27, 2017 issued the first regulation concerning the SR. "I think the government makes it not only for the sake of the report, but for the sake of running the company to sustain it," explained Bob.

Indonesia's ranking is indeed greater than South East Asia, Latin America and Africa, because Indonesia's population is quite large and its corporate level is more advanced. But the number is still struggling compared to Europe and America.

(Translated from 2017 edition of Majalah CSR magazine website, all copyrights belongs to www.majalahcsr.id)
please follow this link: https://majalahcsr.id/sustainability-report-sr-di-indonesia-sepi-peminat/

Sustainability Reporting for Managing Good Company Reputation (this is from an interview back in 2017 made by CSR Magazine Indonesia)

https://www.youtube.com/watch?v=khqhRgMkWI0

Kelurahan/Sub District Empowerment Initiatives in Climate Change Adaptation

Analysis
Jakarta as the capital city of Indonesia is one of the densest city in Asia. Divided into five municipalities and one administrative regency (Central, North, East, West, South Jakarta and Kepulauan Seribu Regency), total of the area is 661.52 km2 with around 35 km of coastal area in the north. With various areas under sea-level of 3 up to 7 meters; the north part of Jakarta is practically prone to flood by sea-level rise. The eastern part of the city which consisting of several large rivers, also prone to flooding caused by the upstream flows.

To overcome this, the government of Jakarta had done some significant efforts such as dredging the river floor and dams, constructions of pump house in flood prone areas including mobile pumps, large canal construction on east and west side of the city, and socializing through clean campaign in solid waste management to the people. But all of this effort still doesn’t answer the challenge of climate change adaptation since it calls for more comprehensive way of tackling the urgency ahead.
The community in urban poor context nowadays has the opportunity and capacity to manage themselves to be more self-sufficient. The fact that the local government staff limited knowledge on some urban technical development aspects and management, lack of knowledge from the community in project management presents the need to bridge the gap and to accompany the knowledge transition.

A program for climate adaptation in community context is called for. In concept, the program is addressing the challenge to create a balance between community engagement and government role in supporting the facility. The main concern of the program is how to educate the community and local government officer in the sub district to be able to self-sustain when it comes to climate change adaptation. New ideas and innovations will likely be introduced in the program and the aim is that both the community and local government official could produce and fully utilize the Local Resilience Action Plan (LRAP). The LRAP will provide a framework to establish a pragmatic and comprehensive action plan for the community to better manage DRR in the short term, and climate change adaptation in the long term.

*) This abstract is presented during 2011 World Water Week in Stockholm.

Interrelations of Water and Traditional Food Production

While the government has limitation over the issue of water and sanitation, this does not mean that the Government of Indonesia is not interested in providing water, hygiene and sanitation facilities. In fact, the Ministry of Public Works has expressed interest in contributing to such infrastructure, preferably combined with community mobilization around utilization and maintenance. However, there is an urgent need for coordination, capacity building around participatory planning and implementation, and a demonstrated model of how hardware and software can be integrated across existing government programs. Furthermore, the above effort could also be developed into an idea of a way of creating a sustainable income for the people in the urban poor areas with the support of donors and NGO with their capacity building programs.


The recent development in watsan aid program in Bekasi area has led some of tofu and tempe producers to applied cleaner production process. The programs also educate the community with healthy environment awareness and introduce them to a way to use their own waste disposal such as sludge into a converted biogas. One of the traditional producers has renovated his tofu factory, so that some of equipment has been using stainless steel drum, biogas and steam boilers for tofu production. Access to clean water has provided him with an efficient production process and cleaner waste material. This program sets a standard in bridging capacity building between the local community and local government in clean water & sanitation provision. The program also educate the local traditional food producers to have a healthy environment, hence a competitive products to compete with the modern food.

Tempe and tofu have become staple foods and enjoy widespread acceptance and consumption in Indonesia with increase of consumption up to 5% per annum (Disperindag, 2008). High concentrations of nutrients and protein, low price, and good taste have made these soy-based products a favorite food for most Indonesians.[1] At the same time, tofu and tempe value chains are key to the local economy, serving as a source of income to 85,000 businesses which support approximately 285,000 workers. These MSMEs (micro-, small-, and medium-enterprises) produce low quality tofu and tempe with smoke and liquid waste coming from the tofu and tempe production process that leads to environmental degradation. These traditional producers who mostly located in urban poor areas are common to use ground water which prone to bacteria contamination, due to lack of access of clean, pipe water.

External Security Vulnerability Assessment

Findings

external

The findings in the field of assessing the results are explaining the difficulties related with external issues. Issues with both environmental and community are concerning corporate social responsibility ( CSR ) of which will not very reliable unless planned and implemented in such sustainable way. Perceptions of local communities towards the company generally quite good, especially in terms of community development / community development ( comdev ) . Yet in terms of transparency of job opportunities tend to be negative and salty response, it has not accommodatie of the interests of CSR in the industrial relations system of corporate communication. Lack intense and open communication is also proved to be an obstacle to ensure a good relationship is maintained.

Internal 

In the analysis of in- depth interviews we also involve internal party companies in order to picture 360 degrees making it more thorough . Being in the security context and its current issue is employment and business opportunities we seek to explore the external terms with parts procurement / procurement of goods and services .
Based on interviews with procurement section we get the information that most of the company has adopted the SAP system or an on-line procurement that uses the concept of transparency in the assessment tender. In an effort to increase the capacity of local entrepreneurs the company apply CSMS Clinic with the aim that local entrepreneurs may at any time consult on matters things that needed to be bidders who qualify. In general agreement to use local labor is not translated into the company's official document , so it is only verbal communication alone .
In terms of the internal security forces discovered the fact that they are mostly non - organic employees have concerns about the sustainability of their work and the opportunity to get a clear career path.

Analysis

Analysis is performed in the rapid assessment is the Gap Analysis . Gap analysis is an event to compare current conditions with ' best practice ' in another place in the same context , in an attempt to identify ' gaps ' and the area that is to be repaired .

identify Gaps

From the results of the field assessment method through in- depth interviews in the picture can be quite thorough about the external conditions  in the context of the Security Management Plan ( SMP ) . Whole questions ( Questionnaire ) which delivered compiled by reference from SVA ( API ) that has been previously suggested . The list of questions can be found in the annex to this report .
As noted earlier report was compiled based on qualitative research that sensisitve against subjectivitas of respondents in interview.Oleh therefore we utilize as many respondents representing all stakeholders who are competent against potential security threats the company externally . Gap Analysis with the method we will be able to see / analyze the things what are the weaknesses in the management system that may result in the achievement of the ideal corresponding SMP Perkap 24/2007 . In a comprehensive analysis of the structure we divided into 5 main sections :

1 . Compliance
Keep in mind over the integrity in the efforts to meet all rules and regulations as one of the state-controlled company in this Indonesia. It is imperative to determine the potential threat of legal aspects and government support both local and national. As a state assessment results is sufficient to comply with all existing rules that negate the potential threat and the lack of support from the government in terms of Indonesian law & regulations.

2 . Safety and Work Environment
Workplace safety and environmental rules such as : EIA documents , waste disposal , safety procedures and proven good enough documentation exist and are used as the main part of the system safety . But in terms of the handling of sewage plant , states do not have a significant excess waste that can harm the environment or endanger public health around so that the process of consultation with the community is practically non- existent. Based on the reference from the consultation process just as the SVA should be routinely performed to the public in anticipation of the public misunderstanding of the potential risks such as environmental pollution since the facility lies in very close vicinity with local surroundings.

3 . Financial Liabilities
In general, the company had fulfilled all financial obligations to both local and national government . However, due to the internal rules of the company it is more difficult to prove in a given financial assessment process are confidential and contain the force of law so that we trouble to look at the financial statements .

4 . operational
Operational part is very important to look at the implementation of the daily activities of the company which is in contact with the surrounding community to better understand the potential threat of an external crisis management system. The company docs TKO handling Non-Physical  which focuses solely on security coordination both internally and with local authorities . TKO also turns to be burdened by anticipating development of local stakeholder concerns (society) , which should be done by more competent parties such as community development staff in order to avoid confusion of information and procedures for the treatment of community . While the Guidelines for Preparedness and Emergency Response

is more geared towards curative and not preventive so memorable only be done if an emergency had occurred and not before . It is feared that if performed by personnel who are not trained to empower people this will actually lead to misunderstanding and it is not possible upheaval of society .
In terms of working relationships with both local and national contractors , the company also not proved to have a good standard which ensures that CSR programs / social must also be considered . This is evident from the hamlet chief complaint around the company reported that never happened 12 times the local women who got pregnant without marrying aka abandoned by the contractor employees run the company . The head of this village is also difficult to check the data for workers contractors submit the matter to the contractor entirely without system / legal basis to make sure they will abide by the rules that exist in the workplace / village government .
The company also not shown to have cooperation with nearby industry in terms of handling external stakeholders same but has a driveway to access the District.
In terms of the company's operations related to the socialization of the environment and public safety, the company also do not have proof of periodically doing this directly and simply give each letter a new event to the operating activities of local leaders alone .

5 . Community / External
The company's community development program is already enough in appreciation of the local community and the system needs to be proven of its existence and not an anecdote, but this system is only set up as a charity and relief pattern does not regulate the empowerment of the community as a whole is based on the Community Need assessment which are ideally expected to create a sustainable community development program . Need assessment actually already been implemented in collaboration with academia but evidence integration with system / SOP community development can not be seen .

The company also unable to show system / SOP for handling public complaints and from field observations it is only done by a team of security without accompanied by a team of community development .

The company can not show proof of program integration efforts of community development / CSR to be implemented in the functions that are directly related to the management of community as contractors and job opportunities ( HR ) . Based on this interview conducted independently by each department .

fill Gaps

How to cope with the gap found in the field ? The answer is the opposite of any findings that exist , so in general the negative gap compared with the standard / best practice that there is a way we determine the best steps / action plan to fix it .
To answer point -point system crisis caused by external parties based on the findings and the fact that there are still prioritizing things that are curative and not preventive . This would be a latent threat if not managed properly . From existing best practice , preventive measures are the best addition to cost effective too long can prevent occurrences before they happen ( especially for the potential occurrence of a society : riots , etc. . ) the company in this regard should be able to strategize how to communicate more intensively with community and listen to their grievances in the form of drafting a more detailed organizational structure , especially the handling of external / public as well as CSR and confirmed in a more detailed form of SOP in order to accommodate the detail necessary SOP .
PGE also can anticipate problems community dissatisfaction with the business opportunity and employment opportunities to incorporate elements of CSR / community development in HSEC management system so that the function of the company is in contact with external parties and its risks can be minimize .
In terms of handling these external problems the company can also coordinate with nearby industries due to its location adjacent and have the same stakeholders .

Conclusion

In general, the performance of the department of Public Relations achieved to ensure good relations with the surrounding community has been running quite good.However undeniable good relationship that has been achieved is also influenced by social conditions and social customs around that would allow it to happen indeed . This will be different if the same structure and approach performed elsewhere . Based on the results of the above assessment implicitly ongoing condition now is not likely to be a time bomb if things become public lament not immediately addressed by the company .
Job and business opportunities for local people is the main thing that is found in the assessment and is becoming a key aspect that must be addressed by the company  systematically and thoroughly to negate efforts to solve the sporadic and temporary. Both of these , if not handled carefully by the Public Relations department with security in it would be a latent problems that may threaten the security of the company both from within and from outs