Business Responsibility Reporting (BRR) or Corporate Sustainability Reporting is in focus in recent times. According to non-profit organisation Global Reporting Initiative, a sustainability report provides information on economic, environmental, social and governance performance — essentially, it enables organisations to report sustainability information similar to financial reporting.

Today, many large international companies voluntarily produce such reports due to the expectations of various stakeholders such as investors, shareholders, regulators, analysts, and employees. For instance, Nike and Apple were made answerable for their lack of transparency and accountability, due to the labour practices adopted by some of their suppliers.

A number of countries have made sustainability reporting mandatory, including Sweden, Norway, the Netherlands, Denmark, France, and Australia. As a result, the number of companies issuing BRRs has increased exponentially. According to CorporateRegister.com, an independent reference source, less than 500 companies issued sustainability reports in 1999. By 2010, the number was well over 3,500.

In August 2012, the Securities and Exchange Board of India made Business Responsibility Reporting mandatory for the top 100 entities by market capitalisation on the Bombay Stock Exchange and National Stock Exchange. The BRRs should be included in the annual report filings for the financial years ending on or after December 31, 2012.

The SEBI requirements are based on the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business’ issued by the Ministry of Corporate Affairs in July 2011. This consists of nine key principles for business practices — conduct with ethics; transparency and accountability; provision of goods and services that are safe and contribute to sustainability; employees’ wellbeing; responsiveness to stakeholders, especially disadvantaged, vulnerable or marginalised; protection of human rights and the environment; and so on.

The guidelines also include a structured reporting format outlining specific disclosures, demonstrating the steps taken by companies to implement the principles. The requirements range from policy-based disclosures (such as ethics, bribery and corruption), to specific quantitative information (such as number of child labour/ forced labour/ sexual harassment cases) filed during the year as well as those pending at the financial year-end. Where a particular requirement has not been met, companies should provide reasons for non-compliance.

It should be noted that if a company is already submitting a BRR to an overseas agency/ stakeholder under an internationally accepted framework, it can furnish the same by mapping the SEBI guidelines to the disclosures in the existing report(s).

The BRR requirement from SEBI is a welcome move and brings India Inc to the forefront of this global emerging practice. The phased applicability, with the top categories of companies first in line, is especially useful to build experience in the industry as well as set a benchmark for the quality of reports. It should also be noted that Companies Bill 2012 may require companies above a certain size to mandatorily spend a certain percentage of their profits on Corporate Social Responsibility activities.

(The author is Associate Director, Financial Reporting Advisory Services, Grant Thornton India LLP)

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