In 2012, the Securities Exchange Board of India (SEBI) passed a circular amongst the top 100 companies, regarding market capitalisation, making it mandatory for firms to report their environmental, social and governance initiatives. This report, Business Responsibility Report (BRR), has to be filed as part of their annual reports based on nine principles of National Voluntary Guidelines (NVG). At the time of introduction, only the top-100 BSE-listed firms were required to present BRRs as part of annual reports. In 2016, after signing a memorandum of understanding (MoU) with Global Reporting Initiative, the mandate was extended to top-500 BSE listed companies.
These nine principles aim to cover all aspects which hold significant importance in business operations and sustainability. The principles complement the guidelines and further act as a pathway for flexible and quality reporting standards.
A recent report by KMPG, titled Business Responsibility Reporting, studied the reporting trends and performance reviews of the top 100 companies as per market capitalisation in FY 2012-2013. It was reported that, amongst the companies surveyed, 96% of the companies prepare and publish their BRR in the public domain.
The nine guiding principles are important for reporting, but it was found that three out of five companies had policies for each principle. Only 57% of the companies provided related links to these principles to be available in the public domain.
Most companies (four out of five) opted to make BRR a part of its annual report, but only three out of five companies used the guidelines suggested by SEBI to publish the report.
It was noted that almost all companies (nine out of ten), have policies in place for sustainable sourcing of goods and services for manufacturing and distribution purposes. It was found that only 20% of these companies disclose the percentage of products responsibly sourced.
Climate change is a major area of concern and India Inc. was not shy to address the issue. The report revealed that nine in ten companies “have identified environmental risks and 97% of them have reported that they have identified various initiatives to address this and combat climate change.”
About 95% of the companies have products/services, which qualified for the purpose of addressing environment (49%) and social concerns (5%), risk and/or opportunities (46%). The reason why only 5% social concerns were highlighted could be “that companies often fail to take into account the entire gamut of product influence from the cradle to grave and only focus on what they think is appropriate for their business,” the report said. “A look at the value chain can provide some understanding of the social concerns among suppliers, working conditions of contractors, and scope of improvement in the livelihood of local communities.”
Meanwhile, 85% of the companies were found to be using sustainable sourcing methods. The financial sector only had 40% companies using sustainable methods to source business related materials. In this regard, it could largely be due to the nature of the business and sector. Nine out of ten construction companies in the construction sector opted for a more descriptive form of data representation to show from where the materials were sourced. The report suggested, “More information on the percentage of materials sourced sustainably can be beneficial to stakeholders.”
The main purpose behind BRR was to help companies self-identify how sustainable and responsible their business is and for that the nine principles of NVG hold real importance. These reports also present insights about a company’s overall approach, economically and socially, helping various stakeholders make wiser decisions. As of result, it helps provide a more transparent and participatory method through which information can be more accessible and credible if followed according to prescribed standards.
The CSR Journal Team