The Capital Markets Authority's current exploration of setting mandatory regulatory requirements for the disclosure of sustainability reports by listed companies is a significant step towards promoting sustainable development in Kuwait. While sustainability reports are currently submitted voluntarily by some listed companies, the proposed mandate would ensure a commitment to sustainable practices, positive community impact, and transparency.
Under Law No. 7 of 2010 and its executive bylaw, as well as their subsequent amendments, companies are permitted to present sustainability reports to the public. Currently, 21 listed companies choose to issue sustainability reports voluntarily, following the standards set by the Global Reporting Initiative (GRI), with one exception. These standards align with regulatory rules for sustainability reporting, as outlined in Article (1-17-2) of Book Twelve "Listing Rules of the Executive Bylaw".
The sustainability reports submitted by these companies are not only in compliance with international standards but also reflect their alignment with the United Nations Sustainable Development Goals and Kuwait's Development Plan 2035. It is commendable that these companies are striving to positively contribute to various fields and have a significant social impact through their sustainable practices.
Among the listed companies that voluntarily submit sustainability reports, 8 have received sustainability ratings from international rating agencies, indicating their commitment to transparency and accountability. It is noteworthy that the banking sector stands out as the most prolific in issuing sustainability reports compared to other sectors. Additionally, companies listed on the Premier Market demonstrate a higher rate of report issuance compared to those on the Main Market, showcasing a stronger commitment to sustainable practices and transparency.
Moreover, it is encouraging to see that three locally listed companies are included in the components of global sustainability indices, highlighting their global recognition for their sustainable practices. This demonstrates their alignment with international standards and best practices in sustainable development.
What are the potential benefits of setting a mandatory regulatory requirement for the disclosure of sustainability reports by listed companies?
1. Increased transparency: Mandatory disclosure of sustainability reports would provide stakeholders, including investors, customers, and communities, with better insight into a company's environmental, social, and governance (ESG) practices. This increased transparency can help build trust and credibility with stakeholders.
2. Improved accountability: Setting a regulatory requirement for sustainability reporting can hold companies accountable for their ESG performance. By publicly disclosing their sustainability efforts, companies may be more motivated to align their practices with stakeholder expectations and industry standards.
3. Enhanced risk management: Sustainability reporting can help companies identify and manage ESG risks, such as climate change, supply chain issues, and regulatory compliance. By disclosing this information, companies can proactively address potential risks and vulnerabilities that may impact their long-term viability.
4. Competitive advantage: Companies that demonstrate strong ESG performance through sustainability reporting may gain a competitive advantage in the marketplace. Investors and consumers are increasingly looking for sustainable and responsible companies to invest in or support, and mandatory reporting can help companies differentiate themselves from competitors.
5. Long-term value creation: By disclosing sustainability information, companies can demonstrate their commitment to long-term value creation and sustainable business practices. This can attract long-term investors who are interested in companies with strong ESG performance and potential for sustainable growth.
6. Improved decision-making: Sustainability reporting can provide companies with valuable insights into their operations and impact on society and the environment. This information can help companies make more informed decisions that align with their values, mission, and long-term sustainability goals.
7. Positive impact on society and the environment: By requiring companies to disclose their sustainability efforts, regulators can help drive positive change by encouraging companies to adopt more sustainable practices and reduce their environmental and social impact. This can contribute to a more sustainable and resilient economy for future generations.
The move towards mandatory sustainability reporting for listed companies by the Capital Markets Authority is a positive step towards fostering a culture of sustainable development and accountability within the business community. By mandating sustainability reports, companies will be held accountable for their environmental, social, and governance practices, ultimately driving positive change and innovation in the market.
