Corporate sustainability is an idea that is fast evolving at the global and national level. There is heightened awareness among all stakeholders on the need to integrate sustainability strategies into the core business and disclose the performance.
Business houses globally have adopted the sustainability reporting principles of the Global Reporting Initiative Guidelines (GRI), United Nation’s Global Compact, United Nation’s Principles of Responsible Investment, ISO 26000, Carbon and Water Disclosure Projects, and several Indian companies too are adopting the emerging mandates.
According to the GRI database, of the more than 14,300 sustainability reports submitted to it till April 2013, over 200 are from India. While the Ministry of Corporate Affairs has released the National Voluntary Guidelines on Environmental and Social Governance (ESG), its principles were adopted by the Securities and Exchange Board of India.
The market regulator recently mandated Business Responsibility Reporting for the top 100 companies (based on market capitalisation) and its inclusion in the annual report; failure to do so would be construed as non-compliance with Clause-55 of the Equity Listing Agreement.
SEBI encourages other companies too to voluntarily disclose BRR. It has prescribed the format for BRR, which should be furnished to the relevant stock exchange so that the sustainability performance of companies can be compared. Thus, SEBI has sent out a message to company chiefs that BRR is not just a compliance reporting but also a tool for improving ESG. The recently developed Integrated Reporting (IR) was in response to the demand for concise and integrated financial and non-financial performance of companies, steered by the International Integrated Reporting Council.
Over 90 global companies and 50 global investor organisations have partnered with IIRC for this, including Unilever, Tata Steel and Kirloskar Brothers. According to Vancity, “By approaching the integrated report in this way, we believe it will be more accessible to lay readers who do not have detailed technical or financial knowledge. The focus of the report has instead been on how money is made and value created.” The IR framework will soon be officially launched after public consultations.
While all sustainability frameworks are driven by certain categories of stakeholders and have a lot of overlaps, the core principle emphasises stakeholder consultation and identification of material issues.
Hence, companies globally are integrating and mapping all sustainability reporting frameworks under a common umbrella.
While the financial framework is quite robust in India, corporates are realising that mere certification for management systems — such as ISO 14001, OHSAS 18001 and SA 8000 — do not facilitate effective sustainability disclosure; they are now opting for sustainability frameworks.
However, as the concept is still evolving, especially in India, the challenges include periodic assessment of material issues; measurement and translation of qualitative issues into quantitative performance metrics; comparison against peers, primarily on material issues; designing appropriate sustainability strategies; development of appropriate documentations, such as operating procedures, management programme and information systems for monitoring and enhancing performance; identification of a mechanism for extending the company’s environmental and social (E&S) parameters to its supply chain; understanding the legal imperatives and implications of E&S parameters, as it is related to compliance with non-financial parameters; and, finally, the choice of assurance standard and the auditor for obtaining an independent assurance on the sustainability report for greater credibility, taking the stakeholders and credit rating agencies into confidence, besides boosting the brand/ image.
Rajib Kumar Debnath is Director, Tejas Saolapurkar is Manager and Avinaw Prasad is Deputy Manager, Deloitte Touche Tohmatsu India Pvt Ltd