It is that time of year when the work of management board meetings are at its peak – wrapping up a year’s worth of effort, analysing financial results and initiating targets for the coming year. Indian organisations publish an annual report, outlining their financial and non-financial progress. While the report in itself has to comply with Companies Act 1956, the content is often viewed by shareholders and interested stakeholders, requiring a balance between strong financials and corporate responsibility.
Corporate Social Responsibility reporting dates back to the early 1980s, wherein chemical companies had trouble with their business image. Several multinational companies had to fight tough law suits on non-compliance with environmental standards and showing disregard to social well-being.
They sought to resolve this by developing CSR activities that demonstrated corporate responsibility towards the environment and the society. This trend was adopted by other branches of other large companies and across sectors.
Over the last two years, Corporate India has gradually recognised the economic value in Sustainability Reporting; it presents an opportunity for supplementary revenues and reflects a more holistic business approach by seeking to
measure and report the progress on Environmental and Social, as well as the Economic, status of the business. Increasing foreign interest in Indian companies has also spurred Corporate India to increase its efforts in this area.
In 2010-11, the total FDI inflow in India peaked at US $34.62 billion! In this light, the Securities and Exchange Board of India (SEBI) mandate requiring top NSE/BSE-100 to submit a Business Responsibility (BR) report with their annual financial report is a step further in seeking a rise in
business transparency among Indian companies to their stakeholders. However, Indian companies need to do much more if they are too match the degree of transparency that foreign Investors are increasingly looking for.
The BR requirement which came into effect from 31st December 2012, has unfortunately had little impression on the affected companies. A study conducted in November 2012 by Carbon Masters, a carbon management consultancy, indicated that 64% of the affected companies are not prepared for BR reporting, not having reported by GRI or the recommended National Voluntary Guidelines (NVG). While evidentially these companies could suffer penalties for non-compliance, more importantly they are missing out on the opportunity for identifying significant cost savings, demonstrating effective environmental measures and eliminating long term risks.
A credible non-financial report is expected to be transparent in its content, revealing a balanced view of the company’s status, indicating clear, comparable and reliable data year-on-year to measure progress. Even though 13 of the 25 top BSE-100 companies are currently reporting to the internationally recognised
GRI guidelines, the climate change section addressing greenhouse gas emissions (NVG Principle 6) are rather weak.
An estimated 43% of the top quarter of BSE listed companies have not mentioned their baseline carbon emissions to compare their annual carbon reduction. 24% have not quantified a company-specific carbon reduction target within a set timeframe. However, 80% currently are involved in carbon reduction schemes through the UNFCCC’s CDM mechanism, among others. Therefore, while companies may be actively reducing emissions, a year-on-year reduction cannot be established without a baseline nor can the company demonstrate its interest in continual emission reduction without setting company-specific reduction targets.
Sustainability reporting vis GRI or BR reporting is still in its infancy and is evolving with each financial year. However, like CSR reports, a BR report is a document that reveals the core values that the company upholds. While the content for a quality report may be present, companies should also be reviewing gaps in their report and utilising this data monthly to engage with board members. Comprehensive and coherent data should be collected which will enable the management team to identify opportunities for improvement and to review the impacts of the choices it makes on a short and medium term basis. In revealing a company’s current status and the projects/programs it intends to develop, the report demonstrates to shareholders and stakeholders that the company is taking its responsibility for the long term health of the business seriously. This will bring many benefits, not least of which the increased loyalty of shareholders and stakeholders.
Carbon Masters currently offers an end-to-end Business Responsibility Reporting service. Our approach ensures high quality, accurate and comprehensive overview of your company’s initiatives.
Carbon Masters is a carbon management consultancy which helps organisations in the public and private sector to measure, manage, reduce and report their carbon emissions.