CIRCULAR NO. CFD/DIL/8/2012, DATED 13-8-2012
1. At a time and age when enterprises are increasingly seen as critical components of the social system, they are accountable not merely to their shareholders from a revenue and profitability perspective but also to the larger society which is also its stakeholder. Hence, adoption of responsible business practices in the interest of the social set-up and the environment are as vital as their financial and operational performance. This is all the more relevant for listed entities which, considering the fact that they have accessed funds from the public, have an element of public interest involved, and are obligated to make exhaustive continuous disclosures on a regular basis.
2. Ministry of Corporate Affairs, Government of India, in July 2011, came out with the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business’. These guidelines contain comprehensive principles to be adopted by companies as part of their business practices and a structured business responsibility reporting format requiring certain specified disclosures, demonstrating the steps taken by companies to implement the said principles.
3. In line with the above Guidelines and considering the larger interest of public disclosure regarding steps taken by listed entities from a Environmental, Social and Governance (“ESG”) perspective, it has been decided to mandate inclusion of Business Responsibility Reports (“BR reports”) as part of the Annual Reports for listed entities. Therefore, in line with the objective to enhance the quality of disclosures made by listed entities, certain listing conditions are hereby specified by way of inserting Clause 55 in the equity Listing Agreement as given in Annexure-1.
4. Certain key principles to assess the fulfillment of listed entities and a description of the core elements under these principles are detailed at Annexure-2.
5. Applicability
a. The requirement to include BR Reports as part of the Annual Reports shall be mandatory for top 100 listed entities based on market capitalisation at BSE and NSE as on March 31, 2012. BSE and NSE shall independently draw up a list of listed entities to whom the circular would be applicable based on the said criteria and disseminate the same in their websites respectively. Other listed entities may voluntarily disclose BR Reports as part of their Annual Reports.
Those listed entities which have been submitting sustainability reports to overseas regulatory agencies/stakeholders based on internationally accepted reporting frameworks need not prepare a separate report for the purpose of these guidelines but only furnish the same to their stakeholders along with the details of the framework under which their BR Report has been prepared and a mapping of the principles contained in these guidelines to the disclosures made in their sustainability reports.
b. The provisions of this circular shall be applicable with effect from financial year ending on or after December 31, 2012. However, listed entities who are yet to submit their Annual Reports for financial year ended on March 31, 2012 may also include BR Reports as part of their Annual Reports on a voluntary basis.
6. The above listing conditions are specified in exercise of the powers conferred under Section 11 read with Section 11A of the Securities and Exchange Board of India Act, 1992. The said listing conditions should form part of the existing Listing Agreement of the stock exchange.
7. All stock exchanges are advised to ensure compliance with this circular and carry out the amendments in their Listing Agreement as per the Annexure to this circular.
8. This circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework” and “Issues and Listing”.
Annexure-1
Amendments to Listing Agreement
1. A new Clause 55 shall be inserted to read as under, viz., “Listed entities shall submit, as part of their Annual Reports, Business Responsibility Reports, describing the initiatives taken by them from an environmental, social and governance perspective, in the format suggested as under:
Business Responsibility Report – Suggested Framework
Section A: General Information about the Company
1. Corporate Identity Number (CIN) of the Company
2. Name of the Company
3. Registered address
4. Website
5. E-mail id
6. Financial Year reported
7. Sector(s) that the Company is engaged in (industrial activity code-wise)
8. List three key products/services that the Company manufactures/provides (as in balance sheet)
9. Total number of locations where business activity is undertaken by the Company
i. Number of International Locations (Provide details of major 5)
ii. Number of National Locations
10. Markets served by the Company – Local/State/National/International/
Section B: Financial Details of the Company
1. Paid up Capital (INR)
2. Total Turnover (INR)
3. Total profit after taxes (INR)
4. Total Spending on Corporate Social Responsibility (CSR) as percentage of profit after tax (%)
5. List of activities in which expenditure in 4 above has been incurred:-
a.
b.
c.
Section C: Other Details
1. Does the Company have any Subsidiary Company/ Companies?
2. Do the Subsidiary Company/Companies participate in the BR Initiatives of the parent company? If yes, then indicate the number of such subsidiary company(s)
3. Do any other entity/entities (e.g. suppliers, distributors etc.) that the Company does business with, participate in the BR initiatives of the Company? If yes, then indicate the percentage of such entity/entities? [Less than 30%, 30-60%, More than 60%]
Section D: BR Information
1. Details of Director/Directors responsible for BR
(a) Details of the Director/Director responsible for implementation of the BR policy/policies
- DIN Number
- Name
- Designation
(b) Details of the BR head
| S.No. | Particulars | Details |
| 1. | DIN Number (if applicable) | |
| 2. | Name | |
| 3. | Designation | |
| 4. | Telephone number | |
| 5. | e-mail id |
2. Principle-wise (as per NVGs) BR Policy/policies (Reply in Y/N)
| S.No. | Questions | P 1 | P 2 | P 3 | P 4 | P 5 | P 6 | P 7 | P 8 | P 9 |
| 1. | Do you have a policy/policies for…. | |||||||||
| 2. | Has the policy being formulated in consultation with the relevant stakeholders? | |||||||||
| 3. | Does the policy conform to any national /international standards? If yes, specify? (50 words) | |||||||||
| 4. | Has the policy being approved by the Board?
Is yes, has it been signed by MD/owner/CEO/appropriate Board Director? |
|||||||||
| 5. | Does the company have a specified committee of the Board/ Director/Official to oversee the implementation of the policy? | |||||||||
| 6. | Indicate the link for the policy to be viewed online? | |||||||||
| 7. | Has the policy been formally communicated to all relevant internal and external stakeholders? | |||||||||
| 8. | Does the company have in-house structure to implement the policy/policies. | |||||||||
| 9. | Does the Company have a grievance redressal mechanism related to the policy/policies to address stakeholders’ grievances related to the policy/policies? | |||||||||
| 10. | Has the company carried out independent audit/evaluation of the working of this policy by an internal or external agency? |
2a. If answer to S.No. 1 against any principle, is ‘No’, please explain why: (Tick up to 2 options)
| S.No. | Questions | P 1 | P 2 | P 3 | P 4 | P 5 | P 6 | P 7 | P 8 | P 9 |
| 1. | The company has not understood the Principles | |||||||||
| 2. | The company is not at a stage where it finds itself in a position to formulate and implement the policies on specified principles | |||||||||
| 3. | The company does not have financial or manpower resources available for the task | |||||||||
| 4. | It is planned to be done within next 6 months | |||||||||
| 5. | It is planned to be done within the next 1 year | |||||||||
| 6. | Any other reason (please specify) |
3. Governance related to BR
- Indicate the frequency with which the Board of Directors, Committee of the Board or CEO to assess the BR performance of the Company. Within 3 months, 3-6 months, Annually, More than 1 year
- Does the Company publish a BR or a Sustainability Report? What is the hyperlink for viewing this report? How frequently it is published?
Section E: Principle-wise performance
Principle 1
1. Does the policy relating to ethics, bribery and corruption cover only the company? Yes/ No. Does it extend to the Group/Joint Ventures/ Suppliers/Contractors/NGOs /Others?
2. How many stakeholder complaints have been received in the past financial year and what percentage was satisfactorily resolved by the management? If so, provide details thereof, in about 50 words or so.
Principle 2
1. List up to 3 of your products or services whose design has incorporated social or environmental concerns, risks and/or opportunities.
i.
ii.
iii.
2. For each such product, provide the following details in respect of resource use (energy, water, raw material etc.) per unit of product(optional):
i. Reduction during sourcing/production/ distribution achieved since the previous year throughout the value chain?
ii. Reduction during usage by consumers (energy, water) has been achieved since the previous year?
3. Does the company have procedures in place for sustainable sourcing (including transportation)?
i. If yes, what percentage of your inputs was sourced sustainably? Also, provide details thereof, in about 50 words or so.
4. Has the company taken any steps to procure goods and services from local & small producers, including communities surrounding their place of work?
If yes, what steps have been taken to improve their capacity and capability of local and small vendors?
5. Does the company have a mechanism to recycle products and waste? If yes what is the percentage of recycling of products and waste (separately as <5%, 5-10%, >10%). Also, provide details thereof, in about 50 words or so.
Principle 3
1. Please indicate the Total number of employees.
2. Please indicate the Total number of employees hired on temporary/contractual/casual basis.
3. Please indicate the Number of permanent women employees.
4. Please indicate the Number of permanent employees with disabilities
5. Do you have an employee association that is recognized by management.
6. What percentage of your permanent employees is members of this recognized employee association?
7. Please indicate the Number of complaints relating to child labour, forced labour, involuntary labour, sexual harassment in the last financial year and pending, as on the end of the financial year.
| S.No. | Category | No of complaints filed during the financial year | No of complaints pending as on end of the financial year |
| 1. | Child labour/forced labour/ involuntary labour | ||
| 2. | Sexual harassment | ||
| 3. | Discriminatory employment |
8. What percentage of your under mentioned employees were given safety & skill up-gradation training in the last year?
• Permanent Employees
• Permanent Women Employees
• Casual/Temporary/Contractual Employees
• Employees with Disabilities
Principle 4
1. Has the company mapped its internal and external stakeholders? Yes/No
2. Out of the above, has the company identified the disadvantaged, vulnerable & marginalized stakeholders.
3. Are there any special initiatives taken by the company to engage with the disadvantaged, vulnerable and marginalized stakeholders. If so, provide details thereof, in about 50 words or so.
Principle 5
1. Does the policy of the company on human rights cover only the company or extend to the Group/Joint Ventures/Suppliers/Contractors/NGOs/Others?
2. How many stakeholder complaints have been received in the past financial year and what percent was satisfactorily resolved by the management?
Principle 6
1. Does the policy related to Principle 6 cover only the company or extends to the Group/Joint Ventures /Suppliers/ Contractors/NGOs/others.
2. Does the company have strategies/initiatives to address global environmental issues such as climate change, global warming, etc? Y/N. If yes, please give hyperlink for webpage etc.
3. Does the company identify and assess potential environmental risks? Y/N
4. Does the company have any project related to Clean Development Mechanism? If so, provide details thereof, in about 50 words or so. Also, if Yes, whether any environmental compliance report is filed?
5. Has the company undertaken any other initiatives on – clean technology, energy efficiency, renewable energy, etc. Y/N. If yes, please give hyperlink for web page etc.
6. Are the Emissions/Waste generated by the company within the permissible limits given by CPCB/SPCB for the financial year being reported?
7. Number of show cause/ legal notices received from CPCB/SPCB which are pending (i.e. not resolved to satisfaction) as on end of Financial Year.
Principle 7
1. Is your company a member of any trade and chamber or association? If Yes, Name only those major ones that your business deals with:
a.
b.
c.
d.
2. Have you advocated/lobbied through above associations for the advancement or improvement of public good? Yes/No; if yes specify the broad areas (drop box: Governance and Administration, Economic Reforms, Inclusive Development Policies, Energy security, Water, Food Security, Sustainable Business Principles, Others)
Principle 8
1. Does the company have specified programmes/initiatives/projects in pursuit of the policy related to Principle 8? If yes details thereof.
2. Are the programmes/projects undertaken through in-house team/own foundation/external NGO/government structures/any other organization?
3. Have you done any impact assessment of your initiative?
4. What is your company’s direct contribution to community development projects-Amount in INR and the details of the projects undertaken.
5. Have you taken steps to ensure that this community development initiative is successfully adopted by the community? Please explain in 50 words, or so.
Principle 9
1. What percentage of customer complaints/consumer cases are pending as on the end of financial year.
2. Does the company display product information on the product label, over and above what is mandated as per local laws? Yes/No/N.A. /Remarks(additional information)
3. Is there any case filed by any stakeholder against the company regarding unfair trade practices, irresponsible advertising and/or anti-competitive behaviour during the last five years and pending as on end of financial year. If so, provide details thereof, in about 50 words or so.
4. Did your company carry out any consumer survey/ consumer satisfaction trends?
Annexure-2
Principles to assess compliance with Environmental, Social and Governance norms
Principle 1: Businesses should conduct and govern themselves with Ethics, Transparency and Accountability
1. Businesses should develop governance structures, procedures and practices that ensure ethical conduct at all levels; and promote the adoption of this principle across its value chain. Businesses should communicate transparently and assure access to information about their decisions that impact relevant stakeholders.
2. Businesses should not engage in practices that are abusive, corrupt, or anti-competition.
3. Businesses should truthfully discharge their responsibility on financial and other mandatory disclosures.
4. Businesses should report on the status of their adoption of these Guidelines as suggested in the reporting framework in this document.
5. Businesses should avoid complicity with the actions of any third party that violates any of the principles contained in these Guidelines
Principle 2: Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle
1. Businesses should assure safety and optimal resource use over the life-cycle of the product – from design to disposal – and ensure that everyone connected with it-designers, producers, value chain members, customers and recyclers are aware of their responsibilities.
2. Businesses should raise the consumer’s awareness of their rights through education, product labelling, appropriate and helpful marketing communication, full details of contents and composition and promotion of safe usage and disposal of their products and services.
3. In designing the product, businesses should ensure that the manufacturing processes and technologies required to produce it are resource efficient and sustainable.
4. Businesses should regularly review and improve upon the process of new technology development, deployment and commercialization, incorporating social, ethical, and environmental considerations.
5. Businesses should recognize and respect the rights of people who may be owners of traditional knowledge, and other forms of intellectual property.
6. Businesses should recognize that over-consumption results in unsustainable exploitation of our planet’s resources, and should therefore promote sustainable consumption, including recycling of resources.
Principle 3: Businesses should promote the wellbeing of all employees
1. Businesses should respect the right to freedom of association, participation, collective bargaining, and provide access to appropriate grievance Redressal mechanisms.
2. Businesses should provide and maintain equal opportunities at the time of recruitment as well as during the course of employment irrespective of caste, creed, gender, race, religion, disability or sexual orientation.
3. Businesses should not use child labour, forced labour or any form of involuntary labour, paid or unpaid.
4. Businesses should take cognizance of the work-life balance of its employees, especially that of women.
5. Businesses should provide facilities for the wellbeing of its employees including those with special needs. They should ensure timely payment of fair living wages to meet basic needs and economic security of the employees.
6. Businesses should provide a workplace environment that is safe, hygienic humane, and which upholds the dignity of the employees. Business should communicate this provision to their employees and train them on a regular basis.
7. Businesses should ensure continuous skill and competence upgrading of all employees by providing access to necessary learning opportunities, on an equal and non-discriminatory basis. They should promote employee morale and career development through enlightened human resource interventions.
8. Businesses should create systems and practices to ensure a harassment free workplace where employees feel safe and secure in discharging their responsibilities.
Principle 4: Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized.
1. Businesses should systematically identify their stakeholders, understand their concerns, define purpose and scope of engagement, and commit to engaging with them.
2. Businesses should acknowledge, assume responsibility and be transparent about the impact of their policies, decisions, product & services and associated operations on the stakeholders.
3. Businesses should give special attention to stakeholders in areas that are underdeveloped.
4. Businesses should resolve differences with stakeholders in a just, fair and equitable manner.
Principle 5: Businesses should respect and promote human rights
1. Businesses should understand the human rights content of the Constitution of India, national laws and policies and the content of International Bill of Human Rights. Businesses should appreciate that human rights are inherent, universal, indivisible and interdependent in nature.
2. Businesses should integrate respect for human rights in management systems, in particular through assessing and managing human rights impacts of operations, and ensuring all individuals impacted by the business have access to grievance mechanisms.
3. Businesses should recognize and respect the human rights of all relevant stakeholders and groups within and beyond the workplace, including that of communities, consumers and vulnerable and marginalized groups.
4. Businesses should, within their sphere of influence, promote the awareness and realization of human rights across their value chain.
5. Businesses should not be complicit with human rights abuses by a third party.
Principle 6: Business should respect, protect, and make efforts to restore the environment
1. Businesses should utilize natural and manmade resources in an optimal and responsible manner and ensure the sustainability of resources by reducing, reusing, recycling and managing waste.
2. Businesses should take measures to check and prevent pollution. They should assess the environmental damage and bear the cost of pollution abatement with due regard to public interest.
3. Businesses should ensure that benefits arising out of access and commercialization of biological and other natural resources and associated traditional knowledge are shared equitably.
4. Businesses should continuously seek to improve their environmental performance by adopting cleaner production methods, promoting use of energy efficient and environment friendly technologies and use of renewable energy.
5. Businesses should develop Environment Management Systems (EMS) and contingency plans and processes that help them in preventing, mitigating and controlling environmental damages and disasters, which may be caused due to their operations or that of a member of its value chain.
6. Businesses should report their environmental performance, including the assessment of potential environmental risks associated with their operations, to the stakeholders in a fair and transparent manner.
7. Businesses should proactively persuade and support its value chain to adopt this principle.
Principle 7: Businesses, when engaged in influencing public and regulatory policy, should do so in a responsible manner
1. Businesses, while pursuing policy advocacy, must ensure that their advocacy positions are consistent with the Principles and Core Elements contained in these Guidelines.
2. To the extent possible, businesses should utilize the trade and industry chambers and associations and other such collective platforms to undertake such policy advocacy.
Principle 8: Businesses should support inclusive growth and equitable development
1. Businesses should understand their impact on social and economic development, and respond through appropriate action to minimise the negative impacts.
2. Businesses should innovate and invest in products, technologies and processes that promote the wellbeing of society.
3. Businesses should make efforts to complement and support the development priorities at local and national levels, and assure appropriate resettlement and rehabilitation of communities who have been displaced owing to their business operations.
4. Businesses operating in regions that are underdeveloped should be especially sensitive to local concerns.
Principle 9: Businesses should engage with and provide value to their customers and consumers in a responsible manner
1. Businesses, while serving the needs of their customers, should take into account the overall well-being of the customers and that of society.
2. Businesses should ensure that they do not restrict the freedom of choice and free competition in any manner while designing, promoting and selling their products.
3. Businesses should disclose all information truthfully and factually, through labelling and other means, including the risks to the individual, to society and to the planet from the use of the products, so that the customers can exercise their freedom to consume in a responsible manner. Where required, businesses should also educate their customers on the safe and responsible usage of their products and services.
4. Businesses should promote and advertise their products in ways that do not mislead or confuse the consumers or violate any of the principles in these Guidelines.
5. Businesses should exercise due care and caution while providing goods and services that result in over exploitation of natural resources or lead to excessive conspicuous consumption.
6. Businesses should provide adequate grievance handling mechanisms to address customer concerns and feedback.
Honestly, one is unsure why the longish circular issued by the SEBI makes sense in the presently obtaining muddled scenario ; unless and until there is an authoritative clarity , in a conclusive manner, on the ongoing controversy whether or not the CSR requirement under the corporate law is to be taken as a mandate .
For more info., one may refer the latest ICL Blog)@ Business Responsibility Reporting, comment on which is reproduced below:
According to one’s understanding, the basic proposition whether or not CSR deserves to be made mandatory itself is being hotly debated, and remains to be authoritatively concluded. Moreover, the Guidelines said to have been issued by the MCA, pending giving it a reading, but going by its nomenclature, appears to suggest that the concerned Ministry, exclusively clothed with executive powers in such matters, is inclined more against the idea of making CSR ‘mandatory’. In the light of the attendant uncertainties, therefore, one is miserably confused on the propriety or otherwise of SEBI in issuing a circular that “the requirement to include business responsibility reports as part of the annual report is mandatory for the top 100 listed entities..” To be precise, the gravest doubt is, – has not SEBI acted, may not be without precedents, patently in excess of its powers, ‘jumped the qAccording to one’s understanding, the basic proposition whether or not CSR deserves to be made mandatory itself is being hotly debated, and remains to be authoritatively concluded. Moreover, the Guidelines said to have been issued by the MCA, pending giving it a reading, but going by its nomenclature, appears to suggest that the concerned Ministry, exclusively clothed with executive powers in such matters, is inclined more against the idea of making CSR ‘mandatory’. In the light of the attendant uncertainties, therefore, one is miserably confused on the propriety or otherwise of SEBI in issuing a circular that “the requirement to include business responsibility reports as part of the annual report is mandatory for the top 100 listed entities..” To be precise, the gravest doubt is, – has not SEBI acted, may not be without precedents, patently in excess of its powers, ‘jumped the queue’ (or ‘the gun’!), so to say? Should the expert answer, after an insightful consideration, be “YES”, then the binding nature of the SEBI’s circular becomes highly disputable , nay questionable- is that not so? ueue’ (or ‘the gun’!), so to say? Should the expert answer, after an insightful consideration, be “YES”, then the binding nature of the SEBI’s circular becomes highly disputable , nay questionable- is that not so?