What is Business Responsibility Report ?
The Securities and Exchange Board of India (SEBI) decided to mandate listed entities to submit business responsibility reports, as a part of their annual reports, describing measures taken by them along the key principles enunciated in the 'National voluntary guidelines on social, environmental and economic responsibilities of business,' framed by the Ministry of Corporate Affairs (MCA). SEBI Circular on Business Responsibility and Sustainability Report
Business Responsibility Report is a disclosure of adoption of responsible business practices by a listed company to all its stakeholders. This is important considering the fact that these companies have accessed funds from the public, have an element of public interest involved, and are obligated to make exhaustive disclosures on a regular basis. SEBI has prescribed a format for Business Responsibility Report as a mandatory requirement for top 100 listed companies by SEBI's Circular dated August 13, 2012. Other companies are encouraged to use the Business Responsibility Report for making disclosures to their stakeholders. Business Responsibility Report must be submitted as a part of the Annual Report.
What is Sustainability Reporting ?
A sustainability report is an organizational report that gives information about economic, environmental, social and governance performance. Sustainability reporting is not just report generation from collected data; instead it is a method to internalize and improve an organization's commitment to sustainable development in a way that can be demonstrated to both internal and external stakeholders.
What do you mean by Sustainability Reporting
A sustainability report is a report published by a company or organization about the economic, environmental and social impacts caused by its everyday activities. It also presents the organization's values and governance model, and demonstrates the link between its strategy and its commitment to a sustainable global economy. An increasing number of companies and organizations want to make their operations sustainable and contribute to sustainable development. Sustainability reporting can help organizations to measure, understand and communicate their economic, environmental, and social and governance performance. Sustainability, the ability for something to last for a long time, finely it is based on performance in these four key areas.
Systematic sustainability reporting helps organizations to measure the impacts they cause or experience, set goals, and manage change. A sustainability report is the key platform for communicating sustainability performance and impact whether positive or negative. To produce a regular sustainability report, organizations set up a reporting cycle, a program of data collection, communication, and responses. This means that their sustainability performance is monitored on an ongoing basis. Data can be provided.regularly to senior decision makers to shape the organization's strategy and policies, and improve performance.
Sustainability reporting is therefore a vital resource for managing change towards a sustainable global economy, one that combines long term profitability with ethical behavior, social justice and environmental care.
Overview of Sustainability Reporting
A Sustainability Report Sustainability reporting is the practice of measuring, disclosing, and being accountable to internal and external stakeholders for organizational performance towards the goal of sustainable development. 'Sustainability reporting is a broad term considered synonymous with others used to describe reporting on economic environmental and social impacts (e.g triple bottom line, corporate responsibility reporting. etc.). A sustainability report should provide a balanced and reasonable representation of the sustainability performance of a reporting organization-including both positive and negative contributions. Sustainability reports based on the GRI Reporting Framework disclose outcomes and results that occurred within the reporting period in the context of the organization's commitments, strategy and management approach. Reports can be used for the following purposes among others :
- Bench marking and assessing sustainability performance with respect to laws, norms, codes, performance standards, and voluntary initiatives
- Demonstrating how the organization influences and is influenced by expectations about sustainable development; and G3 Reporting Framework;
- Comparing performance within an organization and between different organizations over time.
What are the Stages of Sustainability Reporting ?
Sustainability Reporting are 3 Stages of Maturity : There are different levels of maturity within sustainability reporting. Understanding where company is in the process and the important considerations at each stage can help ensure sustainability initiatives accurately reflect objectives.
Stage 1 : Companies that are not collecting and reporting information :
If company is not yet collecting, or is in the early stages of collecting, and reporting sustainability information, important questions to consider may
include :
- a) What are the company's competitors doing in this space?
- b) Company's customers starting to make decisions based on sustainability data and/or metrics?
- c) Are there meaningful benchmarks against which they are assessing their vendors?
- d) Have considered the likelihood of future regulation regarding reporting sustainability-related data?
- e) If asked by stakeholders, could company create or find reliable internal data related to company's carbon or water footprint?
Stage 2 : Companies that gather and/or publish climate sustainability data with no independent verification :
If company is currently using or reporting data without independent assurance, important questions to consider may include :
- a) How confident is CFO/leadership in the source and accuracy of sustainability data/information?
- b) Have there been restatements of this data in the past?
- c) It considered the potential impact to on brand credibility if sustainability information is found to be inaccurate?
- d) Does sustainability data stand up to the same level of scrutiny as financial data. Particularly if it's being used to make decisions based on credibility and controls?
- e) Company aware of potential risks associated with collecting and reporting data or of sharing/publishing data that is not subject to strong controls?
Stage 3 : Companies issuing reports that are verified by a third party other than an independent, certified public accountant (e.g., presently using an environmental consulting or engineering firm) :
If company's sustainability reports are currently "verified" by someone other than an independent certified public accountant, important areas for consideration may include :
- a) Does the verifier have the infrastructure, experience and resources to ensure data integrity across multiple entities in multiple jurisdictions around the world?
- b) Does the verifier understand the link between the sustainability data and the financial performance of company, including compliance and tax related opportunities?
- c) Does the verifier understand the broader business implications of data integrity and can they help to company move toward integrated reporting?
- d) Does the organization have significant experience in analyzing processes and internal controls?
- e) Do they follow robust professional standards including independence, documentation, quality control and peer
- review?
Challenges Before Sustainability Reporting
1) Challenges of Natural Resources :
India has seen unprecedented economic growth in recent years resulting in growing demand for natural resources and has affected the environment as well. It has become impossible to have business success and economic growth without environmental sustainability. This is a major challenge for fast-growing emerging economies such as India. This concept was given high priority.
2) Challenges of Reporting :
Sustainability Improvement, speaks about the challenges of reporting within an organization as it demands a lot of organizational effort to gather and monitor data. This can make it a challenging, time-consuming and costly exercise.
3) Challenge of verification and assurance of report :
Another challenge is the need for independent verification and assurance of reports to provide comfort to stakeholders, management and the board in mitigating the risks posed by sustainability issues. Only a fraction of reports are independently assured, however, just like reporting itself, the trend is positive and gives rise to optimism.
4) Challenges of Sustainability Issues :
British Telecommunications revealed that the overall performance of Indian Corporate Reporting is not satisfactory when compared with companies from European Union, China and Japan According to their findings, although Indian companies are proactive towards sustainable issues, there are still many issues inclusive employment, education, employment creation, health, corporate/ government collaboration, land and displacement, natural resource management, climate change, corporate governance, solid waste and water to be addressed by them. In fact, Indian companies are failing to come out with innovative approaches for addressing sustainable issues.
But, the progress of sustainability reporting in India is slow, but a significant and sound start has been made.
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