Nigeria’s new SEC guidelines to boost sustainability reporting


There has undoubtedly been a massive growth in mandatory and voluntary sustainability reporting requirements across the globe, particularly between 2006 and 2016. Of course, growth is expected to slow down as all countries establish these standards, but there is still room to grow, especially in the enforcement of mandatory requirements and the shift from voluntary to mandatory requirements.

A 2016 global study by GRI, UNEP, Centre for Corporate Governance in Africa and KPMG on sustainability instruments shows this growth clearly - from 60 mandatory and voluntary reporting instruments in 2006 to 383 in 2016! This progress should be celebrated.

So far, this growth in sustainability requirements has been driven by government regulations. But stock exchanges and financial market regulators have increased their level of engagement and activity since 2016, and together, were responsible for about a third of all sustainability reporting instruments. This is also the case in Nigeria.

What’s the new sustainability instrument in Nigeria?

Of course, environmental reporting requirements have since been set by the government (Federal Ministry of Environment with enforcement by NESREA). But more recently in 2015, the Central Bank of Nigeria, the financial market regulator, released the Nigerian Sustainable Banking Principles (NSBPs). This is a guideline for sustainability reporting that financial institutions have been following with varied success. Since 2015, there has been a lot of learnings and even though the CBN carries out periodic monitoring, it’s still being seen as a learning curve.

However, the recent sustainability reporting guideline by Nigeria’s Stock Exchange Commission (SEC) shows that sustainability reporting is here to stay, and will get even more stringent over the next 5 years. The SEC released its guidelines in late 2018 mandating all companies on the stock exchange to report on its social and environmental activities (whether in the annual report or a separate sustainability report (though annual reports seem more popular). These guidelines come as no surprise as the SEC has been involved in various business sustainability conversations, and had been organising an annual session (with EY) over the past four years.

With this, Nigeria has joined South Africa as the only two African countries with mandatory sustainability reporting instruments for companies on its stock exchange!

What does the guideline cover?

The SEC Sustainability Disclosure Guidelines cover economic (contribution to the larger economic system), environmental (such as natural resource use, emissions and waste), social (such as relationship with communities, labor practices, human rights) and governance (around clear E&S responsibilities at the Board level) themes.

Nine principles have been described to guide the activities and actions of the companies. These are:

  1. Businesses should conduct and govern themselves with Ethics, Transparency and Accountability

  2. Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner

  3. Businesses should provide products and services that are safe and contribute to sustainability throughout their life cycle

  4. Businesses should engage with and provide value to their customers and consumers in a responsible manner

  5. Businesses should promote the wellbeing of all employees

  6. Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized

  7. Businesses should respect and promote human rights

  8. Businesses should support inclusive growth and equitable development

  9. Business should respect, protect, and make efforts to restore the environment

Similarly, indicators have been specified across all themes, and companies are expected to report their performance along the lines of the indicators:

  • Economic indicators are around standards for selecting suppliers and purchasing, and the ethical impact of products and services on stakeholders

  • Social indicators are around workplace diversity (including management), inclusive work environment (e.g. fair remuneration, employability, etc., occupational health and safety, human rights, and company’s impact on society and local communities

  • Governance indicators are around activities to combat corruption

  • Environmental indicators are around the environmental impact of products and services, waste management, water consumption, energy consumption and compliance to environmental laws

How is this different from the GRI standards?

Depending on their reporting maturity, a few companies have started to report in accordance with the GRI standards. The standards are still more robust than the national SEC disclosure guidelines. For one, GRI mandates that the context within which the business operates is detailed – from location, to strategy, governance, materiality, and that the management approach be explained. Reporting requirements around economic, social and environmental themes also cover more robust areas. However, it should be noted that GRI doesn’t expect companies to report on every indicator it has described, but only those material to it.

The SEC disclosure guidelines on the other hand, expect companies to touch on all the indicators described…but within the relevance to the company. The indicators are aptly generic to allow for reporting of each one. But i has made explicit reference to the GRI and asked that companies also refer to the standards as they report, and has asked that they refer to such standards to identify broader areas of relevance.

Still, for a company starting out its reporting, the indicators outlined in the guidelines are a useful starting point which can later be built upon as sustainability reporting maturity increases.

The bottom line

The issuance of these guidelines by SEC means that companies on the Nigerian stock exchange will be forced to carry out activities to show their progress and contribution towards sustainable development. Experience with the CBN NSBPs has shown that over the next few years, SEC may focus more on knowledge sharing and hand-holding to sensitize company boards and management, and address issues arising across industries. But this step definitely shows that the country is on the right track to promoting responsible businesses.

Photo Credit: Florian Klauer and Joyce McCown on Unsplash