The Importance of ESG Information for non-publicly accountable entities in Thailand

Investor expectations

Growing demand for transparency

Investors are increasingly prioritizing companies that demonstrate a commitment to sustainability and responsible practices. As global awareness of ESG issues rises, investors are more likely to favour companies that provide transparency regarding their ESG impacts.

Attracting investment

Companies that proactively disclose ESG information can enhance their attractiveness to socially conscious investors. This is particularly relevant as investment funds focusing on sustainable and responsible investing (SRI) continue to grow.

Competitive advantage

Market positioning

By adopting ESG practices and reporting, nonpublicly accountable entities can differentiate themselves in the marketplace. This can lead to improved brand reputation and customer loyalty, which are crucial for long-term success.

Risk management

Understanding and managing ESG risks can help companies mitigate potential liabilities associated with environmental regulations, social unrest, or governance failures. This proactive approach can safeguard against reputational damage and financial losses.

Regulatory trends

Anticipation of future regulations

While current regulations may not mandate ESG disclosure for non-publicly accountable entities, regulatory landscapes are evolving globally. Preparing for potential future requirements can position companies favourably ahead of any legal obligations.

Regulatory pressure from financial institutions

As banks and financial institutions are increasingly required to engage with their clients on ESG matters, non-publicly accountable entities will likely face pressure to demonstrate their commitment to sustainable practices. The Bank of Thailand has introduced policies encouraging financial institutions to consider environmental perspectives in their operations, which include assessing the ESG performance of their clients. This shift means that non-publicly accountable entities seeking financing may need to provide relevant ESG data to meet the expectations of lenders and investors.

Stakeholder engagement

Enhanced stakeholder relationships

Engaging with stakeholders on ESG issues fosters trust and collaboration. Companies that effectively communicate their ESG strategies are more likely to build strong relationships with customers, employees, and communities.

Corporate responsibility

Embracing ESG principles reflects a commitment to corporate social responsibility. This can lead to improved employee morale and attract talent who prioritize working for responsible organizations.

How to start gathering and disclosing ESG information

For non-publicly accountable entities looking to begin their ESG journey, here are actionable steps:

1.  Identify relevant ESG metrics: Determine which environmental, social, and governance factors are most relevant to your business operations. This could include energy consumption, waste management, employee welfare, diversity, and governance practices.

2.  Utilize existing frameworks: Leverage established reporting frameworks, such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), or the Task Force on Climate-related Financial Disclosures (TCFD). These frameworks provide guidelines on what to report and how to structure disclosures.

3.  Data collection: Implement systems for collecting data on identified metrics. This may involve setting up processes for tracking energy use, employee engagement surveys, or governance practices. Ensure that data collection is consistent and reliable.

4.   Engage stakeholders: Involve key stakeholders – such as employees, suppliers, and customers – in discussions about ESG priorities. Their insights can help shape your ESG strategy and improve data accuracy.

5.   Report findings: Create a report that summarizes your ESG efforts and performance. This can be included in annual reports or published as a standalone document. Ensure that the report is clear, accessible, and provides actionable insights.

6.    Seek external assurance: Consider obtaining third-party verification of your ESG data to enhance credibility. This can help build trust with investors and stakeholders who rely on accurate information.

7.    Continuous improvement: Treat ESG reporting as an iterative process. Regularly review and update your metrics, data collection methods, and reporting practices based on stakeholder feedback and evolving standards.

Conclusion

In summary, while non-publicly accountable entities in Thailand are not currently required by law to disclose ESG information, the benefits – ranging from attracting investment to enhancing competitive advantage – mean that it is prudent to consider doing so for sustainable business growth. By proactively gathering and disclosing ESG information, these entities can prepare for future regulatory requirements while enhancing their operational resilience and market competitiveness through improved transparency and accountability.

References:

• Katihar, N., Sutthachai, S., & Saenchaiyathon, K. (2023). ESG disclosure in Thailand: An analysis of hard and soft disclosures. Retrieved from Journal of Accounting Profession (in English)

• Policy Statement of Bank of Thailand: Internalizing Environmental and Climate Change Aspects into Financial Institution Business. Retrieved from Bank of Thailand (in Thai)