Listed firms under spotlight | Business Times

 

PHILLIMON MHLANGA

 

Companies that are listed on the two stock exchanges in the country, the Zimbabwe Stock Exchange (ZSE) and Victoria Falls Stock Exchange (VFEX)  are under increased pressure to disclose business sustainability issues in accordance with new rules  designed to help investors track  down on environmental, social, and governance (ESG) issues, Business Times can report.

The new rules come into force this financial period going forward.

A growing number of investors globally are screening potential investments using ESG standard criteria, and as a result, business sustainability has become a big deal.

Apparently, the ZSE gazetted the new rules in 2019, but  more than 90% of listed entities have been defying the reporting requirements, which means that non-financial information makes up less than  10% of annual reports  for listed companies.

The ZSE CEO, Justin Bgoni (pictured), asserts that listed businesses should incorporate the corporate sustainability business model into their financial disclosure as a means of achieving long-term success , value creation, and competitiveness.

The ZSE has modified its listing requirements to require listed companies to implement policies addressing environmental, social and governance issues.

Apart from the ZSE listing requirements, local companies are required by other laws to implement sustainability reporting.

These include Statutory Instrument 113 of 2019 (Securities and Exchange (ZSE Listing Requirements) (Section 399-404: Sustainability information and disclosure), Companies and other business Entities Act (24:31) Section 220, and Public Entities Corporate Governance Act which was enacted in 2018.

This means sustainability reporting is here to stay in one way or another.

In fact, ESG has already taken centre stage in many countries across the world, which means that investors are beginning to recognise the value of sustainability reporting and are choosing to take environmental concerns and other values into account when choosing investments, rather than only   on an opportunity’s potential for a profit or risk.

All companies are now required to adhere to the standard, which is designed so that investors can access a fuller picture of the sustainability impact  of companies  they are investing in.

“In line with sections 399 to 404 of ZSE Listing Rules issuers must disclose, in their Chairman’s statement of annual report, sustainability information and the organisation’s strategy for addressing sustainability issues,” ZSE CEO, Justin Bgoni said.

He added: “Since the gazetting of ZSE Listing rules   in 2019, the ZSE allowed for a transitional period for issuers to adopt the  aforesaid requirement and offered area specific training before enforcement of the requirement.

“Despite the reprieve, other issuers have already made efforts to adopt and report on sustainability. In light of the training sessions that have been conducted by the ZSE over the years, the ZSE now requires all issuers to adopt sustainability reporting. This requirement is effective from the financial period commencing January 1, 2024 going forward.”

According to Bgoni, the ZSE has developed core sustainability disclosure criteria for adoption as a minimal starting point, taking into consideration the IFRS Sustainability Standards and the Global Reporting Initiatives (GRI) Standards. Issuers are, however, not limited to these fundamental disclosure requirements and are free to submit other data, such as industry-specific information.

Issuers are still required to conduct materiality evaluations.

The amount of money donated or spent on initiatives or programs targeted at enhancing the neighborhood, lowering poverty, creating small jobs, constructing clinics, and many other goals is disclosed in a number of ways.

A description of the approach taken by the companies to manage their tax affairs, the amount paid by the tax head, contributions made to company-based pension schemes, the National Social Security Authority (NSSA), and expenditures on both domestic and foreign suppliers should also be disclosed.

Additionally, companies must also reveal how much energy, coal, diesel, and gasoline they use overall.

Together with the head count of newly hired staff, they should also report turnover (departures), excluding contract staff. Employees of the company and contractor employees should be disclosed individually. Businesses must also reveal the proportion of current total employees by gender (male and female).

The proportion of female and male directors, the breakdown of directors into non-executive, executive, and independent categories, and the qualifications, experience, skills, and other responsibilities of board members such as other directorships in other businesses must all be disclosed. Additionally, the companies are required to submit a compliance statement outlining any major legal disputes or fines they have paid.

Rodney Ndamba, the CEO of the Institute of Sustainability Africa, an independent think-tank and research institute, said: “Sustainability Reporting is now a business and economic competitiveness driver for attracting sustainable investors. The move by ZSE to enforce sustainability is a strategic to ensure the exchange is anchored by sustainable issuers or companies that can attract responsible investors who are now prioritising sustainability before investing. Sustainability reporting is a comprehensive business strategy aimed at driving sustainable value creation whiling minimising negative impacts on the economy, environment and society. The leading sustainable companies and economies in the world have build their competitive advantages around sustainability, which is why ZSE had to take the bold move consistent with many other countries in the region. “

 

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