Annual reports take greener hue

December 29, 2021 | 12:58

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The selection of listed companies at the this year’s Vietnam Listed Company Awards, to be announced this week, has shown a significant improvement of companies in all aspects, including business performance, finances, corporate governance, environmental standards, and society-related issues.

Annual reports take greener hue - Vietnam Listed Company Awards 2021

The event, which takes place on Tuesday (see box), includes 500 companies in the country’s stock market. Compared to 2020, the number of assessed enterprises has increased by 30 per cent.

According to the organising committee, improvements in annual reports are seen in all aspects. Among those, the business and financial performance reports had the most significant score increases to 56.93 points, compared to 38.54 points in 2020.

In terms of performance, most of the listed companies presented very detailed and illustrative information. However, some businesses have not focused on investing in their brand building as well as transparent annual reporting.

Instead of utilising their annual reports as a marketing tool, many companies in the country have merely met the requirements prescribed by management agencies. Some enterprises have not presented detailed information yet, providing only a few indicators with minimal info about their financial capacity.

In addition, many companies have not reported investments, nor did they specifically present information on their projects’ situation, progress, and possible delays. Most businesses often only mentioned investments that have had a favourable effect on the company’s operations, while ignoring those with negative effects.

On content with corporate responsibility to the environment and society, 2021 recorded an increase in points, with 11.59 compared to 9.46 in 2020. However, compared to the maximum score of 30 points for this category, businesses still need to improve their information disclosure on social and environmental responsibility.

Up to a quarter of companies have not announced their sustainable development goals and main programmes for the short and medium term, and 42 per cent of companies have poorly reported, while only 33 per cent have announced their reports with detailed and complete explanations.

In 2021, for the first time, the organising committee added two more criteria related to whether companies disclose information about total direct and indirect greenhouse gas (GHG) emissions and whether they state their measures and solutions to reduce these. The assessment results showed that 5.4 per cent of companies had announced their total amount of GHG emissions, and 12.8 per cent of companies had announced measures to reduce them.

Nevertheless, the on-year improvement was visible as the annual reports are more responsive to information disclosure regulations with growth in professionalism. Annual reports serve as an important information channel for customers, suppliers, investors, and other stakeholders and are a vital activity.

Tran Anh Dao - Chairwoman of the Selection Council Deputy general director of Ho Chi Minh City Stock Exchange

The Selection for Listed Companies 2021 took place in the context of the complicated movement of the pandemic, when many provinces and cities had to implement social distancing, companies had to work remotely, and production and business activities were also strongly interrupted.

However, the numbers recorded from the evaluation results of this year’s selection are positive and the quality of annual reports has improved. The number of companies that made their sustainable development reports have increased and the strong commitment to ensuring safety and jobs for employees were reported. The risk management and control to adapt to new business conditions have been also recognised through companies’ reports.

In particular, Vietnam is one of the most severe countries hit by climate change, so companies being proactive and positive participation in response to climate change is necessary.

Prof. Dr. Tran Ngoc Tho - Member of the Selection Council

The selection closed with a worthy result for businesses that have carefully invested in content and performance on the standards of information disclosure.

The pandemic, however, revealed a new problem for businesses in disclosing information. One new investment and business channel opened up in the post-pandemic era is the digitalisation and greening economy. The existence and development of companies cannot be separated from this trend. They create opportunities but, on the other hand, also create unprecedented new challenges.

How will the risks of the digitalisation and greening process affect businesses in the future? Unfortunately, these risks have not been identified and analysed by listed companies in the 2021 annual report.

These risks will impact every business because they provide the opportunity to develop but also eliminate those who refuse to innovate their business model. Therefore, companies need to pay attention to this issue.

Dr. Nguyen Thu Hien - Member Preliminary Assessment Board of Corporate Governance

The corporate governance criteria assess two aspects of governance practice: compliance with legal requirements and good governance practices beyond compliance. Overall, businesses have better met regulatory requirements than in the previous year, with compliance requirements at 64.4 per cent in 2021 compared to 59.0 per cent in 2020. However, achieving higher scores compared with the required regulation is a challenge, especially when the level of compliance with standards sits at only 27.1 per cent, a slight decrease compared to 2020.

Meeting good governance practices remains a challenge for Vietnam’s listed companies. In the ASEAN Corporate Governance Assessment Project, Vietnam for many years had a limited score compared to other countries in the region. Companies in other countries are more familiar with the application of global management practices, while Vietnamese enterprises may not always be ready to put these into practice.

Dominic Scriven - Chairman Dragon Capital Group

Management boards of companies should begin to consider climate change risk management as stakeholders will soon question what they are doing. There are two main types of risk. One is physical risks, such as storms, floods, hot temperatures, and droughts that can affect factories, production, and business activities. The second is the legal risk if the government levies a tax on carbon emissions. Many countries require listed companies to have an annual disclosure that responds to this question.

Exporting enterprises must note that some markets, such as the EU, apply a tax on carbon emissions to companies supplying goods. This means that if a company has a large carbon footprint, it will be subject to higher taxes, which will reduce its competitiveness.

In Vietnam, there is a provision on corporate governance that companies must disclose their carbon emissions. Considering climate change risk will raise costs and impact the financial capacity of projects and companies.

Vietnam Listed Company Awards 2021 shapes stock market development

Vietnam Listed Company Awards 2021 continues to promote the key factors driving the development of the Vietnamese stock market post-COVID-19, including corporate governance, transparency, and sustainable development.

By Bich Ngoc

What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional