Importance of Sustainability and Segment Reporting for Engro Corporation Limited

This report analyzes the importance of sustainability and segment reporting for Engro Corporation Limited, a leading provider of building materials. It examines the company's compliance with Global Reporting Initiative and IFRS 8 operating segments, and the usefulness of its reporting to end-users.

Financial Accounting
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Introduction
The present report is developed for providing an analysis into the importance of
segment and sustainability reporting for a business organization to ensure its ongoing growth
and development. This is done on the basis of the use of latest annual report of the selected
company in order to gain an analysis into the sustainability and segmental reporting
information. It analyses to the extent to which the selected company sustainable reporting
complies with the Global Reporting Initiative and IFRS 8 operating segments. It also
discusses the usefulness of sustainable and segmental reporting of the company to the users.
The company selected is Engro Corporation Limited, listed on Singapore Exchange, a leading
provider of delivering high quality building materials. It is having more than 40 years of
operational experience in manufacturing and distribution of cement based building materials.
As such, this report will provide information in relation to the sustainable and segment
reporting of the selected company in order to facilitate the end-users of report to take
pertinent decisions.
Sustainability Reporting
Sustainability reporting is a process used by business organizations for
communicating with the end-users about their social, economic and environmental
performance. This is required for building trust among the business stakeholders that is
required to promote the long-term growth and development of a business entity. It provides
an opportunity to the business organization to implement continual process improvement in
its core business areas and improving its sustainable performance. Also, the disclosure of
non-financial information related to the business sustainable practices in addition with the
financial information promotes the goodwill of an organization among its major stakeholder
groups. In this context, the Global Reporting Initiative (GRI) has provided international
independent standards to the business organizations for development of the sustainability
reports to ensure that all required information in relation to sustainability issues are disclosed
to the end-users (G4 Sustainability Reporting Guidelines, 2016).
Engro Corporation Limited places high emphasis on ensuring the protection of
environment from the negative impact of its daily business operations. In this context, it has
continued to strengthen its performance in the green initiatives to reduce the mission of
poisonous gases into the environment. It adopts the use of sustainable construction practices
by adopting the use of Singapore Environment Council’s or Singapore Green Building
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Council’s green cement and green concrete. This helps the company in development of green
buildings and reducing the significant impact of the carbon emissions on its daily
construction activities. The use of eco-labelling is helping the company to reduce the carbon
content of its cement products. It adopts the use of low-carbon ground granulated
blastfurnace slag (GGBS) tat is comparatively lower in carbon as compared with the
Ordinary Portland Cement. The company for reducing the emission of greenhouse gases has
also actively engaged in Singapore Institute of Manufacturing Technology. It complies
effectively with the ISO 14040/44 and the product carbon footprint guidelines as per the PAS
2050. It is also complying with the ISO 14001 environmental management system that has
provided the international accepted standards for efficient management of the environment
performance of business organizations (About Engro, 2018).
The company has also actively participated in a pilot study for analyzing the emission
of greenhouse gases as per the reporting standards of ISO 14064 carried out in support of the
Singapore Manufactures Association and Spring Singapore. This is mainly done in order to
report the greenhouse gas emissions in relation to its Singapore based operations. It is also
effectively following the ISO 14064 standard in order to achieve carbon neutrality and
achieving a balance between commercial and environmental considerations. It has also
developed Friends of Building Sustainability (FBS) that is an interactive platform provided
by the company for sharing the information in relation to the adoption of green practices. The
platform in support of Singapore Chinese Chamber of Commerce & Industry (SCCCI) has
initiated a seminar to discuss the use of low-carbon building materials in the construction
activities for meeting the needs of Singapore population (About Engro, 2018). The seminar
also discussed the cost-effectiveness of such materials and emphasizes on the use of green
steel and green concrete for construction activities that will protect the environment
degradation and will also improve the operational efficiency of construction companies
(Djajadikerta and Zhang, 2015).
The company also places high focus on developing the human capital in order to
improve its social performance. The social performance of the company takes into account
the activities carried out by it for promoting the social welfare of its employees, customers
and communities at large. Engro focuses on developing sustainable development of its
employees with placing focus on enhancing the well-being of employees by providing them a
safe and healthy environment. The Singapore operations of the company has achieved ISO
14001 and OHSAS 18001 certification in order to minimize the occurrence of any hazardous
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activities that can negatively impact the well-being of its employees. The company by
adopting an effective Occupational Health and Safety Management Systems for ensuring the
employees protection at workplace. The OHSAS system will helps in risk assessment for
identification of any uncertain condition and advance and developing safety procedures for
reduces its chances of occurrence. Also, the company provides full support to its employees
for tehri active involvement in social welfare activities to promote the community growth in
which it operates. In addition to this, it has undertaken education programs for providing
access to education to children and promoting their social growth. The Scholarship Program
of Engro is aimed at providing support to undergraduates in Singapore Institute of
Technology (SIT) pursuing full-time degree programs in the areas of sustainable
infrastructure engineering and systems engineering. The safe and responsible practices of the
company are aimed at providing high quality products to the customers and meeting their
changing expectations effectively (Engro: Building Sustainability, 2017).
Thus, it can be analyzed with the sustainable reporting information of the company
that Engro is complying with the Singapore standards for reporting its sustainable
performances. The various business procedures and activities are carried out in accordance
with the international standards of sustainability for improving its social, economic and
environmental performances. The company by adoption of international best standards for
reporting the sustainable information is also complying effectively with the GRI framework.
The framework is developed for providing the best practices globally on reporting the various
ranges of economic, environmental and social impacts of a business organization. As such,
the company has also adopted international independent standards as analyzed above in
communicating the information in relation to its sustainability issues and the measures
adopted by it for promoting its performance on the aspects of social and environmental
(Zopounidis, 2012).
Segmental Reporting
Segment reporting is regarded as presenting the information in relation to the
operational section of a company in the notes to financial statement section. This has been
mandated by the International Financial Reporting Standards (IFRS) for the public-held
entities in order to provide detailed disclosure regarding the financial performance of its
various operating segments to the end-users. IFRS 8 has required the business entities that are
publicly traded for disclosing the information in relation to its operating segments for
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facilitating the users of financial statements for evaluating the performance on the basis of
different geographical section (IFRS 8 — Operating Segments, 2017).
Engro Corporation Limited has four operating segments that are regarded as its
strategic business units. The different operating segment of the company is involved in
providing different products and services that are managed separately. The four operating
segments of the company are classified as cement and building materials, specialty polymer,
investment and food and beverage in its annual report. The cement and building materials
section is involved in manufacturing and selling of cement, concrete and building materials.
The polymer reportable segment is involved in production and distribution of synthetic resin
and plastic materials. The investment operating segment is involved in trading of equity
securities, debt securities while the food and beverage section is engaged in operating the
food and beverage outlets under a franchise system (Engro: Building Sustainability, 2017).
The financial results obtained from each of the reportable segment of the company is
provided in detail in its annual report. The financial performance of each of the operating
segment is analyzed on the basis of segment profit before tax that is used by the CEO of the
Group for reviewing the financial outcomes of each of its reportable segment. The segment
profit is used by the management as a most relevant indicator of the financial performance of
the entity. The operating results on the basis of each segment helps the management in
identifying which of its section is performing best as compared to others. This facilitates the
management in taking effective decisions for improving the operating performance of the
sections that are not able to achieve the determined benchmark of financial outcome. The
assets and liabilities in segment reporting include the items that can be directly attributable to
a segment while unallocated items include headquarter expenses and supporting expenses of
the associates and joint ventures (Engro: Building Sustainability, 2017).
The company mainly carries out is operational activities in Singapore, Malaysia and
China. The segment reporting of the company also provides required information in relation
to the geographical segments also. The segment revenue is categorized on the basis of
geographical location of customers . It has also identified its major customer on the basis of
its segment reporting information. The reportable segment providing highest segment
revenue, that is, specialty polymer is regarded to be major customer of the company. The
company has effectively complied with the financial reporting standards of Singapore that is
SB-FRS 14 equivalent to IFRS 8 for reporting of segmental performance. It has provided the
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information in relation to the operating segments by communicating the necessary
information about the different types of products and services and the various geographical
areas in which it operates. As per the standards, the reportable segments of the company has
enabled in gaining a better understanding of the company performance and its risk and
returns. The reportable segmenting has provided required information of the different
products and services provided by its various geographical areas. It has enabled the
management in gaining the information in relation to differing profit levels, growth prospects
and risks present in different geographical areas (Statutory Board Financial Reporting
Standard, 2008).
Usefulness to Users
The reporting of sustainable and segment information is every essential for the
company to meet the varying needs and expectations of the stakeholders. The sustainable
information enables the end-users of the reports to analyze the future growth prospects of the
company. The information gained in relation to different aspects such as social and
environment facilitates the users in taking effective decisions by the end-users. The
sustainable information provides qualitative data to the end-users such as investors, creditors,
lenders, customers and other stakeholder groups in taking important decisions such as
investment and purchasing decisions. In addition to this, the segmental information facilitates
the end-users to taking decisions on the basis of financial growth of its various segments,.
Thus, the end-users can identify the major growing segment of the company for investment
purposes or buying the relative product or services on the basis of the major segment
(Brockett and Rezaee, 2012).
Conclusion
It can be stated on the basis of overall report that sustainability and segmental
reporting is essential for business companies at present to sustain their long-term growth and
development. Engro Corporation Limited is presenting information in relation to its
sustainability performance and reportable segments on the basis of GRI and IFRS 8
standards. The information is highly relevant to the end-users such as investors and customers
to identify the future growth prospects and take their respective decisions on its basis.
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References
About Engro. 2018. Retrieved 10 June, 2018, from http://engro-global.com/green-initiatives/
Brockett, A. and Rezaee, Z. 2012. Corporate Sustainability: Integrating Performance and
Reporting. John Wiley & Sons.
Djajadikerta, H. and Zhang, Z. 2015. A New Paradigm for International Business:
Proceedings of the Conference on Free Trade Agreements and Regional Integration
in East Asia. Springer.
Engro: Building Sustainability. 2017. Annual Report.
G4 Sustainability Reporting Guidelines. 2016. Retrieved 10 June, 2018, from
http://www.ey.com/Publication/vwLUAssets/G4-Sustainability-Reporting-
Guidelines/$FILE/G4-Sustainability-Reporting-Guidelines.pdf
IFRS 8 — Operating Segments. 2017. Retrieved 10 June, 2018, from
https://www.iasplus.com/en/standards/ifrs/ifrs8
Statutory Board Financial Reporting Standard. 2008. Retrieved 10 June, 2018, from
http://www.assb.gov.sg/docs/attachments/SB_FRS_14_2008.pdf
Zopounidis, C. 2012. New Operational Approaches for Financial Modelling. Springer
Science & Business Media.
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