Annual Report Awards show class

The awards offer recognition to companies creating quality end of year reports in an effort to highlight the need
for corporate transparency

The award ceremony will take place at Ho Chi Minh City’s Sheraton hotel on July 25 to honour 50 out of the competing 694 companies listed on the Ho Chi Minh Stock Exchange (HoSE) and Hanoi Stock Exchange (HNX).

The World Bank’s private sector arm IFC and the Britain-based Association of Chartered Certified Accountants (ACCA) joined the judging panel for the first-time as part of the Sustainability Reporting Awards, which will honour those performing best in terms of environmental and social issues. 

VIR Editor-in-chief Dr.Nguyen Anh Tuan, co-head of the organising board, said this year’s competition saw almost 40 companies enter sustainability reports, despite the fact that sustainability reporting is yet to be made compulsory under Vietnamese law.

“This illustrates the fact that more listed companies have recognised the inherent value of making an annual report closer to international standards. Doing so honestly and professionally is the best way to build their image and investor trust in both difficult and benign market climates,” he said.

Another new element in this year’s programme, he added, was that listed companies had to observe standards stipulated by Ministry of Finance circular 52/2012/TT-BTC replacing the ministry’s 09/2010/TT-BTC as guidelines on publishing information in the stock market. The new circular is viewed as higher level in terms of information publishing.

He also said some specialists and regulators suggested the annual competition should be extended to publicly-traded unlisted companies, and even to state-run groups and corporations. “This shows the programme’s expansions and the widespread and urgent calls to improve transparency.” 

Having started in 2008, the programme aims to encourage listed companies in Vietnam to further improve their professionalism, norms and transparency in making annual reports. It is co-organised by HoSE, HNX and VIR’s sister publication Dau tu Chung khoan, and exclusively sponsored by fund management Dragon Capital Group.

Dragon Capital CEO Dominic Scriven said: “Responsible investment is the backbone of Dragon Capital’s investment philosophy. International institutional and individual investors are showing increasing interest in understanding the approach and commitment of companies in managing sustainability aspects of their operations, particularly providing stakeholders real insight into how environmental, social and corporate governance practices are being integrated into their core business process and strategy.

“Thus, sustainability reporting is needed to further strengthen the company’s competitiveness to attract stable and long-term capital flows,” he said.

This year’s contest saw 132 entries qualify for the final round, 11 more than that last year. The top 10 showed more sustainable development content and more corporate governance details, said Phan Thi Tuong Tam, head of the judging panel and CEO of HoSE.

However, there were entries that failed to meet the basic regulations of the circular, she said, adding that those reports did not include insightful information and featured poor layout. “I think an annual report should include analyses on other companies in its sector and on the whole industry. It also needs to show an overall picture of business operations, governance, mid-term and long-term strategies, as well as the company’s sustainable development targets.”

She added, “As for next year’s judging, we’ll give more prominence to publicity and  transparency. The contestants will be required to include sustainability reporting and detailed corporate governance. We’ll announce the norms for next year before we start advertising the 2014 contest.”

Explaining why sustainability performance matters, Ian Crosby, East Asia and Pacific business line manager for Sustainable Business Advisory, IFC, said there was a clear link between good environmental, social, and governance performance and the ability of companies to be profitable and survive turbulent times.

“As our research and global experience show, companies that see beyond the immediate equation of shareholders-management-customer-profit to consider their business in a broader context of many stakeholders - including society and the environment - are better able to spot long term trends and opportunities, better able to operate in an increasingly complex and interlinked world, and better able to attract top talent, employees and customers.”

“Never before have international capital markets been so interested in how management responds to issues relating to environmental and societal change,” he elaborated. “With clear links between good environmental and social performance and long-term profitability, it will be those companies that take the lead in sustainability reporting that are better positioned for greater investment and engagement from international investors.”

Last year, IFC, in collaboration with the State Securities Commission of Vietnam launched the Handbook on Sustainability Reporting for listed companies. It acts as a guideline for companies to follow common environmental, social and governance standards.

The IFC, in partnership with ACCA Vietnam, is providing technical assistance to the development and promotion of the evaluation criteria and processes for the sustainability section in the annual reports of listed firms.

ACCA Vietnam member Nguyen Viet Thinh, advisory partner at PwC Vietnam, said this year’s competition saw reports mentioning environmental and social issues, not just charity activities as seen previously. He added various reports include details on the use of electricity, oil, gas, water use and re-cycling, together with waste. In addition to these were sections on salary, bonuses, development policies and working conditions. Some companies even made a separate sustainability report outside the annual report. The guidelines used are those of the Global Reporting Initiative (GRI) and IFC’s guiding principles.

About corporate governance, Nguyen Nguyet Anh, an officer at IFC Vietnam’s corporate governance programme, said the criteria for this year’s contest were more detailed and stricter, reflecting new regulations from Circular 52. The entries were largely more satisfactory in both the quantity and quality of information disclosed.

As an example, she cited, information on shareholder structure, composition and structure of the board of directors, supervisory board, senior management, and detailed remuneration for these members has been well reflected by many companies in their annual reports.

“We realise that some companies seem to have been aware of the importance of disclosure through the annual report in line with the best international practices on corporate governance as they have demonstrated the commitment to approaching these best practices in the reports,” said Anh.

Nevertheless, many other companies still adopted a stereotypical approach to report-based disclosure of information, and unfortunately, a few companies even confused corporate governance with management’s day-to-day routine, according to Anh. Some companies failed to provide information on the supervisory board’s activities and their reviews, and provided little information on related parties as well as detailed remuneration of the members of the board of directors, supervisory board, senior management, and as a result, lost significant points in the assessment.

Meanwhile, Dr. Tran Ngoc Tho from the University of Economics Ho Chi Minh City, a member of the 2013 annual report selection panel, said for next year and later, the organising board should work out ways to rank the reports in the award winning group because this would help the winning companies keep improving their entries year after year.