CA Rubneet KaurCA Rubneet Kaur

B.Com, M.Com, MBA

Introduction

Corporate Social Responsibility is not a new concept. However it has been statutorily recognised when the said provisions came into the picture at the time of advent of much revolutionary emergence of COMPANIES ACT 2013. The statute not only has mandated the spending for society by our so called big business giants but also has made people realized what they actually were forgetting in the race of earnings and maximizing their profits. With this provision in place ,India has become one of the first countries to prescribe expenditure for(qualifying) companies towards CSR.

Statutory Provisions mandating the spending under Corporate Social Responsibility

Sec 135 of Act says

“Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director”

“Every profession bears the responsibility to understand the circumstances that enable its existence.”-Robert Gutman

“Corporate sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic ,environmental and social developments” (-Wikipedia)

The most widely adopted framework has been the Global Reporting Initiative (GRI) Sustainability Reporting Framework.

Evolution of Corporate Social Responsibility and Corporate Sustainability Reporting

Undoubtedly, India is one of the fastest growing economies even with its moderate growth over the last few years. And over the long span of struggling, India has realized that certain pressures also come your way when you are struggling for growth and development.  Such pressures usually constitute as pressure on resources, social inclusion and environmental stability.

The Ministry of Corporate Affairs has well understood the fact and realized to streamline the responsibilities arising in terms of growth and development of nation. The private players of the country are indeed mandatorily required to be responsible towards their society and to go beyond their activities, i.e. going beyond their financial performance and thereby contributing positively to the social, economic and environmental well-being of the nation and society at large.

Already financial reporting in India includes mandatory reporting on environment and social matters such as on consumption of energy, use of raw materials and intermediaries, conservation efforts, accounting for environment costs, and disclosures on liability for environment issues.

The new and revised Companies Act 2013 requires that companies adopt a CSR policy, constitute a board-level CSR committee for oversight and implementation, and disclose their activities. Further with another mandate (SEBI’s mandate of August 2012) in place on Business Responsibility Reporting (BRR) for the largest listed entities in India, definitely a paradigm shift is anticipated. Infact as per this circular of SEBI,One hundred and one companies were mandated to bring out a BRR in 2013, with about half of them reporting such information for the first time publicly.

“For an organisation or community to be sustainable (a long-run perspective), it must be financially secured (as evidenced through such measures as profitability), it must minimise (or ideally eliminate) its negative environmental impact, and it must act in conformity with society’s expectations” (Deegan, 1999)

Sustainability Reporting is emerging as the most common practice these days. Where once it used to be a part of a few green or community-oriented companies, today it has emerging as a part of one of the best practices to be followed by corporate giants for getting recognized in terms of socially responsible players and rewarded in terms of financials.

“Corporate sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic ,environmental and social developments” (-Wikipedia)

It is difficult to exactly define the corporate sustainability reports. As to what should be its constituents and how they are to be formatted, how extensive they should be, has been addressed by Global Reporting Initiative which says that,

“A sustainability report is an organizational report that gives information about economic, environmental, social and governance performance”.

However an effective report should convey disclosures on an organization’s impacts – be they positive or negative… and is often required to be produced and made available to the various stakeholders as a stand-alone document entirely separate from financial annual reports and other financial information.

Components of Sustainability Reporting

Components of Sustainability ReportingRelationship between Corporate Social Responsibility and Sustainability Development

Generally, both the concepts are used interchangeably by the organisations for achieving their targets and fulfilling their regulatory and social obligations. The other common nomenclatures which can be referred for the same are Green movement, corporate citizenship, social responsibility etc. Major companies these days are undertaking large scale initiatives to improve their business performance, they are indulge in reducing their costs, responding to the various needs of the stakeholders and finally complying with applicability regulatory requirements.

  
Corporate Social Responsibility

The company is sensitive to the needs of all stakeholders and not just shareholders.

Sustainable Development

The company aims to balance economic, environmental and social needs.

It appears from above, that CSR and CS are not exactly identical. CS seems to concentrate more on the impact of a company on its environment and vice-versa, whilst CSR seems to focus on such activities of the company which are indeed beneficial to the society.

Benefits of Sustainability Reporting in the Emerging Scenario

It would not be wrong to say that accurate sustainability disclosure will not only provide the company as a differentiator among other competitive players but also increase the confidence of stakeholders for their investments in the company.

The benefits of reporting include:

  • Better reputation
  • Meeting the expectations of employees
  • Improved access to capital
  • Increased efficiency and waste reduction
  • Avoiding or mitigating environmental and social risks
  • Delivering better business, social, environmental and financial value — creating a virtuous circle.

According to a report from the Carroll School of Management Center for Corporate Citizenship at Boston College, and Ernst & Young LLP, the top 4 motivations for companies to produce a sustainability report were

1) Transparency; 2) Competitive advantage; 3) Risk Management, and; 4) Stakeholder pressure.

While most of these benefits are difficult to quantify, there is no doubt that producing a report helps a company hold itself accountable to the goals that it has put into place in relation to sustainability, whether it has met those goals, and then enables management to communicate those goals and the progress it has made.

Reporting Practice Globally

Internationally, many entities now publish a report on their sustainability progress and policies on an annual basis, instanced as below-

Financial sectorRoyal Bank of Scotland ,HSBC , ING Santander
Consumer GoodsMarks and Spencer Group, Coca Cola, Johnson & Johnson, L’Oreal, Pepsico, McDonald’s
Health careBaxter
EnergyEDF Energy, Ofgem requirements for UK electricity suppliers, UK Power Networks
Technology & communicationVodafone, Apple, Nokia, Siemens, Telefonica
ServicesUPS, Waste Management
TransportationHeathrow Airport, Network Rail
Oil, Gas & engineeringBP, Shell,BHP Billiton, Oil and gas industry voluntary sustainability reporting guidance, ICL

 Trends in Sustainability Reporting In India

Indian companies have been reporting on sustainability since 2001 with the help of GRI framework. Since then the number of companies reporting on sustainability are increasing though relatively less as compared to the total players in the market.

As per the publication of the German Gessellschaft für Internationale Zusammenarbeit (GIZ), titled “Sustainability Reporting Practices and Trends in India, the mining, oil and gas, construction, and automotive sectors are among the leading adopters of sustainability reporting, including social, environmental and governance aspects of their performance, such as disclosure of greenhouse gas (GHG) emissions, energy consumption, labor practice and training opportunities. Around 80 companies were found to produce sustainability reports, with 60 declaring that they use GRI’s Sustainability Reporting Guidelines.

Conclusion

Sustainability reporting is a vital step for managing change towards a sustainable global economy—one that combines long-term profitability with social justice and environmental care.

‘What you can’t measure, you cannot manage. What you can’t manage, you cannot change’ —Peter Drucker, Writer, Professor and Management Consultant

Although corporate responsibility seems to be in the experimental phase in India as of now, significant progress in both the number of reporters and quality of information reported is expected, in the coming years

Disclaimer- the figures/ data/ reports have been referred from the respective relevant websites. Definitions produced have been marked by source.

(Author may be contacted at rubneet@gmail.com)

More Under Company Law

Posted Under

Category : Company Law (2998)
Type : Articles (10808)

Search Posts by Date

September 2016
MTWTFSS
« Aug  
 1234
567891011
12131415161718
19202122232425
2627282930