Latest ESG analysis on Taiwan’s 556 companies is out. The green economy’s u-shaped value chain fails at both ends.
CSRone, as a leading CSR think tank & consultancy firm, has published the latest annual research “Taiwan and APAC Sustainability Reports Analysis 2020” with 7 key findings of interests to business and society.
In middle of the fearless novel coronavirus (COVID-19) growing pandemic, CSRone, a leading CSR think tank & consultancy firm based in Taiwan has published its latest annual research on: “Taiwan and APAC Sustainability Reports Analysis 2020”. This year marks the 8th edition of CSRone’s state-of-the-art research on the sustainability reporting from 556 Taiwanese companies. This press release is intended to share 7 key findings of interests to business and society at large.
At present, Taiwan’s Financial Supervisory Commission (FSC) stipulates that companies with over NT$5 billion in paid-in capital or those companies in the food, chemicals, financial and insurance sectors are mandated to publish an annual sustainability report. For companies publishing a sustainability report not only represents a compliance exercise, but also helps company to improve their brand image and reputation, understand their operational risks, value creation process, take stock of their performance and implement environmental footprint reduction targets, build trust with society through transparency, among other benefits. As a result, several Taiwanese companies have been willing to spend between NT$800,000 to NT$1,000,000 a year, plus additional NT$150,000 to NT$250,000 in third-party assurance fees, to compile and publish a sustainability report for the purpose of building trust.
In the process of preparing a sustainability report, sustainability practitioners need to mobilize and communicate with staff across different departments, integrate upstream and downstream data, rack their brains to identify performance highlights, which all can be time and effort consuming. Nowadays benchmarking the sustainability performance, management approach, strategies, activity planning and even analyzing reporting language have become mainstream practices by companies to silently compete and learn from other organizations.
CSRone has collected over 3600 domestic and international sustainability reports as of the end of 2019. Since 2016 CSRone has received resources and strong support from National ChengChi University (NCCU) SinYi Business School, PwC in Taiwan’s Sustainability Services Corporation and Taiwan Institute for Sustainable Energy (TAISE). Moreover, this piece of research has become a trusted source for benchmarking and understanding the state of CSR/ESG reporting among Taiwanese and APAC’s largest corporations.
The research period lasted 8 months, and comprised of a team of 23 researchers whom analyzed 642 sustainability in total reports (556 Taiwanese reports, and 86 APAC reports) across 846 ESG indicators. Below we provide a brief outlook to 7 major trends.
1. Out of the 556 reports, 92.3% of them are published by listed-companies. For the first time over half of them (54.7%) are certified by third-party assurance bodies
According to this year’s research, in 2019 there were 559 sustainability reports published in Taiwan, describing the sustainability performance of organizations for FY2018. Among them most of the reporting companies correspond to the food, chemicals, financial and insurance sectors. Out of the 556 reports, 92.3% of them are published by listed-companies, and for the first time over half of them (54.7%) are now certified by third party assurance bodies.
According to the data, among the top 100 companies in Taiwan in terms of revenue, there are only 9 companies that have not published a sustainability report to date. In addition among the fifth Corporate Governance Evaluation =winner companies annually held by Taiwan Stock Exchange Corporation (TWSE) , there are 8 companies (one listed company, and 7 unlisted public companies) that have not published a sustainability report to date.
The report also found that among the 556 companies; there are 414 companies (74.5%) that have already established a CSR-dedicated committed, 409 companies (73.6%) have set up CSR-related policies, as well as 246 companies (44.2%) mention direct reporting from CSR committees to the Board of Directors.
Furthermore, 204 companies (36.7%) are implementing employee satisfaction surveys. In the midst of a growing wave for better labor rights around the globe, issues such as how to effectively listen and meet employees needs, support work-life balance initiative and equal opportunities, as well as recognize professionally employees and get support towards CSR initiative, are all critical areas that business leaders must pay attention to.
2. 69 companies with more than 2 billion in paid-in-capital are getting prepared for future regulations and 54 companies have done so for over three years
In 2014 Taiwan’s Financial Supervisory Commission (FSC) started to require selected listed companies and those with paid-in capital over NT$10 billion to publicly publish a sustainability report, and gradually has been expanding the scope of its regulations. Currently companies with paid-in capital over NT$5 billion as well as others in selected industries are required to follow suit.
The research team found that in 2019, among 274 listed-companies with paid-in capital between NT$2 billion to NT$5 billion, without including 27 companies which are subject to regulations due to their operating sectors, 69 companies out of the remaining 247 companies are already voluntarily publishing a sustainability report.
This means that out of the NT$2-5 billion segment, roughly a quarter (25.2%) are proactively responding and preparing for future potential regulations. Moreover, out of these 69 companies, over 80% of them are already reporting under the GRI Standards reporting framework as required by the FSC, and 54 of them have been publishing a report for more than three years. The awareness and readiness of business ahead of future compliance risks is quite evident.
3. The average EPS and ROE of companies publishing sustainability reports surpasses the industry average for five years consecutively
The research report also shows that the average EPS (Earnings-per-share) of companies that publish sustainability reports is NT$ 3.69, which is higher than the average EPS of the overall-listed companies (NT$ 2.49) and than the average EPS of companies that do not publish sustainability reports (NT$ 2.14). This trend has been consistent in the past five years.
Similarly in the last five years, the average ROE (Return-on-equity) signals the same trend, companies publishing sustainability reports have an average ROE of 8.66%, surpassing the average ROE of the overall-listed companies (5.72%) and of the average ROE of companies that do not publish sustainability reports (4.50%).
4. The green economy’s value chain fails at both ends making a u-shaped like curve
Nowadays global companies are actively thinking how to optimize the design and production processes of green products and services to reduce carbon emissions. This year’s research found that Taiwanese 556 companies are failing at both ends of the green economy’s entire value chain (design, procurement, production, packaging, transportation, marketing, after-sales services and recovery) making a u-shaped like curve. Companies pay most attention to stages in the middle, but they are still not paying enough attention to the front end of design, nor to the end point of recovery. These two ends are of uttermost importance to close-the-loop.
5. 50% of Taiwanese companies are exposed to supply chain violations-related risks
In 2019 the dumping of waste-sludge by a domestic food production company has aroused great concern from the society and it has shown how supplier management issues can affect directly a company’s brand value. Our research indicates that out of 556 companies, there are only 282 (50.63%) companies that are assessing their supplier-related risks. At the same time, 50.18% of companies are already helping their suppliers to comply with sustainability-related norms. Moreover, according to this ratio, half of the companies in Taiwan are exposed to supplier-related CSR and ethical behavior violations and risks, which can harm a company’s brand value and reputation.
6. The top three SDGs Taiwanese companies pay most attention to are: SDG 8: Decent work and economic growth, SDG 13: Climate Action, and SDG 4: Quality Education
Research data shows that out of 556 companies there are 328 companies (59%) that mention the SDGs within their content of their sustainability report, and there are 133 companies (24%) that their leaders describe a link between the SDGs and their future prospects. At the same time, 245 companies (44%) have implemented an aggregate total of 2,107 action plans or initiatives. Most of the companies are focusing on the following three goals: SDG 8: Decent work and economic growth, SDG 13: Climate Action, and SDG 4: Quality Education.
7. Climate-related risks rises to the top 4 spot, regulations become more stringent and management must step up
In view of the climate change danger levels escalating to a state of climate crisis, the world faces an unprecentended wave of more frequent extreme weather events, natural disasters, higher global temperatures and heat waves, air pollution and reduced crop yields. The Taiwanese government amended its regulation on January 2nd, 2020 requiring listed companies to mandatorily disclose information on their climate-related risks and opportunities, including descriptions on their identification process, governance mechanisms and potential impacts.
The research team found that climate change has already been listed among the top 4 risks that Taiwanese companies are paying most attention to, demonstrating how companies increasingly see climate-related risks as a business risk. Furthermore, the research team examined the actual responses of companies on these issues, using a 10 points scale, we discovered that the average score of companies is just of 4.4 points. Even the best performing sector, technology scored only an average of 4.8 points., and on the opposite end the services sector scored an average of 3.8 points. Over 60% of companies (334 companies) have not disclosed any information on energy management systems, and over 70% of companies (389 companies) have not elaborated yet on the state of their carbon footprint and stocktaking.
| Assessment of Taiwanese companies management on climate-related issues in 2019 | |||||
| Sector | Overall 549 companies | Technology 203 companies | Traditional 208 companies | Finance 53 companies | Services 85 companies |
| Degree of management (Out of 10 pts.) | 4.4 pts. | 4.8 pts. | 4.3 pts. | 4.2 pts. | 3.8 pts. |
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Photo credit to: Noah Buscher
