ESG (Environmental, Social and Governance) is committed to building measurable corporate sustainability performance, and regards environmental standards, labor standards and corporate governance as key elements of corporate sustainability.

In recent years, ESG has shown an explosive development trend, with the total assets covered by it reaching nearly US$39 trillion in 2023, and major financial markets in China and the world require listed companies to regularly disclose ESG performance.

ESG emphasizes that enterprises must respect the rights and interests of workers, establish a good and compliant internal governance system, and at the same time, establish an effective mechanism for expressing workers' demands, so that workers can fairly share the fruits of enterprise development.

The emergence of ESG has expanded the field of traditional trade union work and helped trade unions work.

As a newly emerged market-oriented tool to protect the rights and interests of workers, ESG standards and indicators are still in the process of being formulated and improved, and the practical ways and practices of trade unions to participate in ESG have not yet been formed.

At the enterprise level, the ESG corporate governance system does not include a trade union governance mechanism, and even regards enterprise human resource management and enterprise labor unions as an antagonistic mechanism for enterprise labor relations, which creates new labor conflicts.

The Singapore Workers' Union Congress (NTUC) has actively promoted the Singapore government and financial regulators to introduce disclosure standards related to ESG workers' rights and interests, and required international core labor standards and the work conditions of enterprise trade unions to be mandatory ESG disclosure standards, so as to integrate diversified forces to work together to improve the rights and interests of local workers.

The new NTUC's approach has produced some experience that is worth studying.

Disclosure requirements for Singapore's financial markets and the implementation of ESG workers' rights

The Singapore government is very concerned about new developments in the international economic and financial fields, and in the mid-2010s, Singapore became one of the first countries to propose and implement ESG. Singapore integrates ESG and the United Nations Sustainable Development Goals (SDGs) to encourage dialogue and cooperation between employers and employees at multiple levels.

In 2016, the Singapore Exchange (SGX) implemented a mandatory reporting regime for listed companies to "comply or explain", requiring all listed companies to provide ESG sustainability reports by the end of their financial year, and should due diligence disclose ESG performance, demonstrate their short-, medium- and long-term ESG business objectives, as well as material ESG risks and opportunities. If a listed company is unable to fully meet the ESG requirements, it must provide a valid reason for non-compliance and a timetable for future improvements. As a result, ESG has become a core business strategy for Singaporean companies, reflecting stakeholder expectations for sustainable and responsible corporate behavior.

Government departments such as the Monetary Authority of Singapore (MAS) regard ESG as an institutionalized means to integrate the internal and external aspects of enterprises, and believe that ESG can resolve long-term risks of enterprises. In IPO and M&A transactions, the environmental impact, labor practices, diversity and inclusion policies, and corporate governance frameworks must be assessed when valuing a company, with labor practices being the implementation of workers' rights.

The benefits of incorporating ESG into M&A valuations are manifold. The first is risk management, which improves the level of risk management by discovering ESG-related management loopholes, the second is to ensure high-quality competitive advantage, ESG integrates the forces of multiple stakeholders within and outside the enterprise, which can better play the effectiveness of labor-management collaboration, so that enterprises can get rid of low-level price competition and improve their market competitive advantage, and thirdly, the introduction of ESG indicators can make the target company more attractive to potential acquirers and investors, thereby increasing its valuation and increasing its access to capital.

Through the introduction of ESG, corporate listing and financing, mergers and acquisitions are no longer simple capital behaviors, but should include workers' rights and environmental protection issues, so as to achieve the growth of social value while expanding capital, and ensure the sustainable development of Singapore's city-state.

Trade unions and ESG practices in Singapore

Singapore's trade unions are active promoters of ESG. In terms of labour relations governance, Singapore's labour-management tripartite mechanism is based on mutual benefit and mutual consultation, and at the level of corporate labour relations, Singapore's trade unions aim to protect the dual interests of enterprises and workers.

Since the rise of ESG in the 2010s, NTUC has worked with the Singapore government to integrate the SDGs into Singapore's tripartite mechanism. NTUC proposed that the process of developing ESG standards and indicators must highlight the key role of trade unions and require all stakeholders to recognise the central role of trade unions in the field of workers' rights. With the help of international labor standards and the rigid provisions of the domestic labor law system, NSU emphasizes the legal requirements for trade unions to participate in ESG practices. NCFSU believes that Singapore's labour laws, such as the Employment Act and the Workplace Safety and Health Act, empower trade unions to participate in workplace rule-making. The content of ESG related to the implementation of workers' rights and interests covers fair employment, employee welfare, labor safety and employee growth, which are all within the authority of trade unions granted by law, so ESG must have a trade union perspective. NTUC proposed that the corporate governance structure and corporate rules should include trade union elements, clarify the responsibilities of the enterprise union, and the union should act as an ESG supervisor to monitor and report on compliance with labor laws and policies that affect the well-being of employees. The revision of corporate regulations must seek the opinions of labor unions and employees, and the consultation process must become an indicator of the company's ESG performance disclosure.

In recent years, NTSU has raised the issue of ESG and fair pay. Requiring executive compensation to be linked to measurable improvements in the rights and interests of middle and lower-level workers, companies must disclose their compensation systems in their ESG performance and set out the year-over-year trends in pay gaps within the company. Collective bargaining should be included in the disclosure of corporate ESG performance, and companies that do not engage in collective bargaining should explain the reasons to investors and the public, so as to exert external pressure on the enterprise to establish a mechanism for the gradual growth of employee income through collective bargaining. Taking into account the different characteristics of the company's financial environment, NTUC proposed a variety of solutions, in particular, the company should increase investment in employee training and launched the corporate training committee project. Under the project, there is a pool of trade union training funds, which can be used as matching funds to invest in the company's employee skills improvement projects. NTUC believes that the expansion of training funds is also a measure to reduce the income gap between labor and management, and the information of the corporate training committee must be included in the ESG performance disclosure. If the company does not have a corporate training committee, it is necessary to explain the objectives and implementation status of the employee skills improvement plan developed by the company. At present, nearly 40% of SGX-listed companies have disclosed the work of trade unions such as collective bargaining and corporate training committees, and another 20% of listed companies have reported on the implementation steps of forming trade unions and improving trade union work.

NTUC has also used ESG as a platform to successfully intervene in the government's environmental protection policy and emission reduction agenda. By integrating ESG environmental standards with workers' rights and proposing the Singapore Workplace Carbon Footprint Reduction Initiative, trade unions have taken center stage in Singapore's environmental agenda. The NTUC's workplace carbon footprint reduction initiative involves multiple levels, first emphasizing that the ultimate goal of environmental protection is to benefit all workers, the green transformation of the economy must be in line with the interests of workers and trade unions, green industries and green technologies must be controlled, and the exit of high-emission industries and types of work cannot be rushed, and the emission reduction process must be matched by the speed of creating green jobs, otherwise, it will create a policy-based confrontation between labor and management, which is not conducive to the realization of environmental governance goals. Under the impetus of NTUC, Singapore has adopted labour standards as one of the assessment indicators for green buildings, so that labour standards are directly integrated into Singapore's sustainable urban development plan. The second is to integrate safe production and cleaner production, and put forward that environmental standards and occupational safety and health standards are complementary to each other, and the trade union has rich experience in occupational safety and health in the workplace, and the trade union drives the formulation of environmental standards, which can better ensure that the workplace meets environmental health standards. The third is to promote work-life balance with the concept of environmental protection, and NTSU has been advocating for work-life balance among Singaporean workers, and the union has proposed that ESG disclosure by companies should include the promotion of remote working arrangements where feasible, as a measure to reduce emissions and contribute to carbon neutrality. At present, more than 70 listed companies have stated in their ESG performance reports that employees are allowed to choose one to two days a week to work from home, which not only implements the task of reducing emissions, but also enables employees to take care of family needs.

Based on workers, Singapore's trade unions fully emphasize the responsibilities of their workers' representative organizations, use labor laws, collective bargaining, corporate training committees and other means to intervene in the formulation process of ESG standards and indicators, and integrate workers' rights and interests into the corporate governance and environmental protection agenda, and promote the Singapore government to take union participation as a core principle of ESG.

Challenges and Implications of ESG Practices for Trade Unions in Singapore

Trade unions play an irreplaceable role in Singapore's ESG practices, which reflects the harmonious and collaborative nature of Singapore's labour relations. In practice, it is emphasized that the three parties jointly formulate development strategies and avoid expanding the interests of the other two parties at the expense of one party.

Seeking consensus has created an institutional and cultural environment conducive to the overall promotion of ESG principles. From the very beginning, Singapore's trade unions have positioned themselves as key stakeholders in ESG, coordinating the ESG goals of all parties through tripartite cooperation between the government, trade unions and employers, influencing the direction of ESG policies from the perspective of workers, and ensuring that the interests of workers are not ignored in ESG. At the same time, ESG has also helped trade unions, giving rise to new working models and working methods, and strengthening the workplace influence of trade unions. When promoting the implementation of ESG, NTUC pays special attention to the implementation of ESG in key areas, and cooperates with the Singapore government and related industries to achieve sustainable development. In the current economic and business environment, new technologies have put forward new requirements for workers' skills, and workers must have the necessary knowledge and skills. Singapore is a city-state, with a large number of workers working in the service sector, and new technologies have a greater impact on the skills of existing workers. For example, BreadTalk, a Singapore-based company that upgrades the hardware and operating procedures of its smart bakery equipment every two years, has a limited level of education and struggles to keep up with the rapid pace of technological change. In the past, companies would lay off existing employees and hire new ones to operate the equipment. The ESG performance disclosure under the auspices of the trade union includes indicators of the application of new technologies, employee training, and long-term development planning of employee skills. As a listed company, the layoffs will affect its stock price performance. To this end, the company cooperated with NTUC to establish a corporate training committee, formulated an employee skills improvement plan, and the NTUC and the company jointly bear the cost of on-the-job training for employees, which improved the overall quality and technical knowledge of employees, and front-line employees have put forward dozens of on-site technical improvement proposals in recent years, and the company's performance growth and employee income increase have exceeded industry expectations.

NSU faced a number of challenges in engaging with ESG practices. On the one hand, the promotion of ESG by trade unions will inevitably conflict with the interests of enterprises. When trade unions promote ESG workers' rights issues, they often encounter resistance from the corporate side. Especially in the short term, ESG measures such as improving employee benefits and increasing investment in training are likely to increase the cost of enterprises, affect the current financial performance of enterprises, and lead to conflicts between the goals of labor unions and enterprises pursuing immediate economic benefits. Many small and medium-sized enterprises complain that ESG has raised the threshold for companies to go public, which is not conducive to the listing and financing of start-ups. Researchers from Singapore universities also pointed out that employment flexibility is accompanied by digitalization and intelligence, and the content of ESG's labor rights and interests is intended to consolidate the traditional labor relationship and employment relationship model, which cannot meet the needs of current economic growth. The debate around trade unions' involvement in ESG continues, and there is a lot of work to be done by NTUC to ensure that Singapore's trade unions play a key role in ESG. On the other hand, trade unions are often constrained by both resources and knowledge. Singapore's trade unions have a strong will to actively promote ESG, but ESG is still an emerging concept that is still in the stage of exploration and trial and error. The lack of sufficient expertise and planning capacity among various stakeholders, including trade unions, is a major obstacle in the development of ESG standards and metrics. Moreover, the influence of trade unions comes from the collective strength of workers, and the vast majority of Singaporean workers do not yet have awareness and participation in ESG, and the degree of understanding and support for ESG directly affects the effectiveness of trade union strategies. At present, although the Singapore government has launched a series of policy measures in the field of ESG, the relevant policies, regulatory frameworks, and specific operational indicators are full of uncertainties, and ESG policies are constantly vacillating in the process of game and trial and error among all parties.

Singapore's trade unions promote ESG time: Implications for mainland trade unions. In recent years, China's financial regulators and securities markets have successively issued requirements for ESG performance disclosure of listed companies, and central and state-owned enterprises (SOEs) and large private enterprises have established ESG strategy committees to coordinate their ESG work. The concept of ESG is widely accepted, and the concept of ESG in mainland China is biased towards the narrative around corporate social responsibility, rather than establishing a systematic indicator system. ESG standards and indicators are relatively general, and listed companies do not have corresponding detailed requirements for disclosing ESG performance, which cannot measurably display the relevant performance of enterprises. As the mainland government continues to push forward with ESG, the above issues will be gradually resolved. In this process, it is necessary for Chinese trade unions, as key stakeholders in ESG, to actively participate in the formulation of ESG policies and the promotion of practices. We can refer to the experience and lessons of Singapore's trade unions, based on Chinese-style modernization, integrate the work of trade unions in the new era into China's ESG process, and take employee well-being as the baseline standard for the mainland to move towards greener and more sustainable economic development. Giving full play to the institutional advantages of trade unions in the new era, helping relevant departments to issue quantifiable ESG performance data that meets the needs of employees' interests, and taking labor standards as the core indicators for the evaluation of corporate environmental performance and green growth, will help us solidly promote intelligent progress, strengthen sustainable employee skill improvement behaviors and sustainable investment behaviors, and make ESG labor standards an indispensable part of business strategies and investment decisions.

Source: Workers' Daily

(If there is any infringement, please contact us to delete)

Share cutting-edge information, provide consultation and cooperation on ESG topic research, ESG standard construction, ESG reporting, ESG forums, ESG training, etc.

Business Cooperation-ESG Industry Research Institute