Nepal's Path to Sustainability Reporting

In 2015, the United Nations set out the Sustainable Development Goals (SDGs) a global call to action
to combat poverty, protect the environment and ensure prosperity and peace for all by 2030. It's a
moral imperative that has accumulated support from nations worldwide, including Nepal. However,
fulfilling these goals goes beyond rhetoric; it requires concrete actions, accountability and
transparency. In order to achieve the objectives outlined in the SDGs, each goal is accompanied by
specific targets that the government must strive to attain and each target have indicators to validate
the same. SDG 12 on Sustainable Consumption and Production is made up of 11 individual targets,
covering areas including policies, business, food, resource use, waste and behaviour. Each target has
its own indicators against which individual countries report and global progress is tracked. Target
12.6 encourages companies, especially large and multinational companies, to adopt sustainable
practices and to integrate sustainability information into their reporting cycle. The metric indicated
for this target is number of companies publishing sustainability reports.

Understanding Sustainability Reporting

Most of us are already aware of financial reporting made by the companies, where the companies
publish their financial performance & position in each reporting period either quarterly or annually.
Sustainability Reporting is an emerging concept. Sustainability reporting ensures reporting on
environmental footprint, fulfilment of social responsibility & good governance along with
accountability. What used to be monitored primarily by regulators is now a concern for a broader
range of stakeholders, including consumers, shareholders, investors and creditors. Today,
stakeholders aren't just interested in a company's profit margins; they also seek information on its
environmental footprint, fulfilment of social responsibility and governance practices. This shift is
driven by consumers and investors making more sustainable choices and wanting to support
companies that align with their values.

Sustainability Reporting in Nepal

Despite various legislations addressing environmental, social and governance (ESG) issues in Nepal,
comprehensive sustainability reporting, which includes disclosure of ESG impacts is not yet
mandated. Nepal Rastra Bank (NRB)'s Guideline on Environmental & Social Risk Management (ESRM)
require reporting by the banks and financial institutions to senior management and NRB but not to
external stakeholders. Similarly The Environment Protection Act, 2019 (2076) has various provision
of environmental study report to be submitted to regulators but fails to provide reporting
responsibilities to be made to other stakeholders. Some legal provisions, such as Section 54 of The
Industrial Enterprises Act, 2076 and Circular no. 11/073/74 issued by Nepal Rastra Bank require
setting aside a portion of annual net profits for corporate social responsibility but don't specify
comprehensive ESG reporting to external stakeholders. While a few Nepalese companies voluntarily
report on ESG aspects, there is no standardized framework, leading to inconsistency in reporting
practices.
The Way forward:

Many countries have already implemented reporting frameworks, prescribed by their regulators.
The European Union (EU) has issued the Corporate Sustainability Reporting Directive (CSRD) to
mandate the companies to disclose information through sustainability reporting. In the EU, the large
and listed companies are required to disclose information about environmental and social risks and
opportunities along with the companies’ impact on people and environment. The International
Sustainability Standards Board (ISSB) has recently issued global sustainability disclosure standards.
These standards aim to create a consistent, comparable, and uniform reporting framework
worldwide. Standard Setters from many countries like Australia, Canada, Japan, Hong Kong,
Malaysia, New Zealand, Nigeria, Singapore and the U.K. have already expressed their intention to
align the sustainability reporting standards in their country with standards issued by ISSB.
Furthermore, International Organization of Securities Commissions (IOSCO) has endorsed the ISSB’s
Standards. IOSCO which is recognised as global standard setter of securities sector has call it’s
member organisation to either adopt or consider the ISSB’s standard.

Internationally, there is a growing momentum for sustainability reporting standards, which can pave
the way for Nepalese standards in the future. However, compared to financial reporting, awareness
of sustainability reporting in Nepal is in its early stages. Given the resource-intensive nature of
sustainability reporting, initially, this responsibility should be assigned to larger companies only.
Nepal needs a consolidated and uniform framework or standards to enable sustainability reporting.
Nepal's commitment to the SDGs is undeniable and has been reaffirmed in its key policy documents.
Sustainability reporting is the way forward to ensure Nepal's commitment to the SDGs and provide
timely and high-quality ESG information to stakeholders. It's not just a matter of compliance but a
crucial step towards achieving the shared global vision of a sustainable future.

About Me:

I am Sushil Poudel, a Chartered Accountant by profession. Presently, I hold the position of Chief
Executive Officer at the Accounting Standards Board, Nepal. Views expressed here are my
personal opinions.

LinkedIn Profile: https://www.linkedin.com/in/casushilpoudel/