Prioritise sustainability reporting

The earth, the air, the land and the water are not an inheritance from our forefathers but on loan from our children. So we have to handover to them at least as it was handed over to us.” — Mahatma Gandhi

When the planet had an unlimited supply of resources, organisations could say that they were only concerned with profits. Times have changed, and today, organisations need to be concerned about the planet and people, along with profits.

Sustainable development does not mean discontinuing the use of natural resources but emphasising efficient and effective use, so that resources can be preserved for the future generations. Organisations committed to sustainable development have to adopt a holistic approach, and put in place systems to report environmental and other impact caused by their products and services.

According to the Global Reporting Initiative (GRI), a sustainability report gives information about economic, environmental, social and governance performance. GRI is a non-profit organisation that provides sustainability reporting guidance, and has pioneered and developed a comprehensive ‘sustainability reporting framework’ that is used globally. However, there are no mandatory rules and guidance standards for sustainable reporting. Furthermore, there is a debate over whether sustainability report should be part of financial statements, annual report, or disclosed separately. Practices followed by countries and companies vary in this regard. The GRI framework suggests the following to be included in sustainability reports:

A statement from the most senior decision-maker of the organisation (CEO or equivalent) on the relevance of sustainability to the organisation and its strategy

Organisation profile

Governance structure

Engagement with the stakeholders

Performance (through environmental, economic, social and integrated indicators)

The concept of stakeholders, rather than shareholders, has gained momentum. Stakeholders include community, civil society, customers, shareholders and providers of capital, suppliers and employees, other workers and their trade unions.

Trends in India

According to GRI, only 72 Indian companies have filed sustainability reports while their international counterparts are ahead (561 companies from the US, and 258 companies from China have filed such reports). Even among the BRIC countries, India has the lowest number of companies filing sustainability reports. Indian companies that have prepared sustainability reports on a voluntary basis include Infosys, BPCL, HPCL, Tata Steel, ITC, Reliance Industries, ACC, Dr. Reddy’s, and Sterlite.

Considering lack of awareness in India, the Government and regulators have taken a lot of measures to enable sustainable reporting. The Companies Bill, 2012 requires that every company with net worth of Rs 500 crore, turnover of Rs 1,000 crore, net profit of Rs 500 crore should include the board’s report on corporate social responsibility (CSR) policy. Furthermore, such companies have to spend 2 per cent of their average net profit of the past three years on CSR activities. The Securities and Exchange Board of India issued a circular in August 2012, which requires top 100 listed entities to publish business responsibility reports as part of their annual reports on a compulsory basis.

The time has come for Indian companies to take initiatives for sustainable development — and rather than ending with the publishing of a report, it should provide substantial benefits to the environment and society.

Shrenik Baid is Partner-Price Waterhouse & Co.

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