Sustainability Reporting in India

“Dive into the evolving landscape of Sustainability Reporting in India. Explore its phases of development, regulatory interventions, and global standards adoption. Uncover the significance of transparency, risk mitigation, and competitive advantage it brings to businesses. Delve into the challenges and opportunities, addressing data quality, awareness, and integration into business strategy. Gain insights into the structured format followed by Indian companies, encompassing materiality assessment, environmental, social, and economic performance, and future goals. Stay informed about the key components shaping Sustainability Reports and the transformative impact they hold for a greener, more responsible future.”

Sustainability reporting is gaining increasing importance in today’s world, as businesses and governments around the globe recognize the urgent need to address environmental, social, and governance (ESG) issues. In India, sustainability reporting has evolved over the years, reflecting a growing commitment to sustainability practices. This article delves into the landscape of sustainability reporting in India, examining its development, significance, and the challenges and opportunities it presents.

The Evolution of Sustainability Reporting in India

Sustainability reporting in India has come a long way since its inception. It can be divided into several phases:

1. Early Beginnings: The concept of sustainability reporting in India started to take shape in the early 2000s, with a few pioneering companies publishing their sustainability reports voluntarily. These reports primarily focused on environmental aspects and were not standardized.

2. Regulatory Intervention: In 2012, the Securities and Exchange Board of India (SEBI) introduced Clause 55 of the Listing Agreement, which made it mandatory for the top 100 listed companies in India to publish an annual business responsibility report (BRR). This report required companies to disclose information related to their ESG performance. Further, the Business Responsibility and Sustainability Reporting (“BRSR”), originating from the MCA report on Business Responsibility Reporting, has found its way into the regulatory provisions by way of an amendment to the Regulation 34(2)(f) of the Listing Regulations[1], notified on 5th May, 2021.SEBI vide circular dated 10th May, 2021 introduced the format of BRSR and the guidance note to enable the companies to interpret the scope of disclosures. The BRSR will replace the existing BRR format w.e.f. FY 2022-23. For the FY 2021-22, the top 1000 listed entities may voluntarily submit the BRSR and from FY 2022-23 onwards, the same has to be submitted mandatorily.

3. Global Reporting Initiative (GRI) Standards: Many Indian companies have adopted the GRI Standards for sustainability reporting, which provide a globally recognized framework for reporting on ESG issues. These standards have played a pivotal role in standardizing reporting practices in India.

4. National Voluntary Guidelines on Social, Environmental, and Economic Responsibilities of Business (NVGs): In 2011, the Ministry of Corporate Affairs released the NVGs, providing guidance on responsible business conduct. Companies are encouraged to align their sustainability reporting with these guidelines.

Significance of Sustainability Reporting in India

1. Transparency and Accountability: Sustainability reports enable companies to transparently communicate their ESG performance to stakeholders, fostering trust and accountability.

2. Risk Mitigation: By identifying and addressing ESG risks, companies can reduce vulnerabilities and enhance long-term resilience.

3. Competitive Advantage: Companies that excel in sustainability reporting often enjoy a competitive advantage by attracting responsible investors and customers.

4. Regulatory Compliance: Compliance with SEBI regulations and global reporting standards is essential for listed companies in India.

Challenges and Opportunities

1. Data Quality and Availability: Gathering accurate and relevant data for sustainability reporting can be challenging, especially for smaller companies. Investment in data management systems is essential.

2. Awareness and Training: Many Indian businesses lack awareness of sustainability reporting and the skills needed to prepare comprehensive reports. Training and capacity building are required.

3. Integration into Business Strategy: Sustainability reporting should not be a standalone activity. It should be integrated into a company’s overall business strategy to drive meaningful change.

4. Small and Medium-sized Enterprises (SMEs): Encouraging SMEs to embrace sustainability reporting is a significant opportunity. They can benefit from sustainability practices and attract responsible investors.

Format of Sustainability Reporting

Sustainability reporting in Indian companies typically follows a structured format to ensure consistency, transparency, and compliance with regulatory requirements. The format can vary slightly depending on the industry, size of the company, and specific reporting standards adopted. However, the following is a general outline of the key components commonly included in sustainability reports of Indian companies: 

1. Introduction and Company Overview:

• Introduction to the company, its mission, and its core values.
• Overview of the reporting period (usually the fiscal year).
• Sustainability Governance Structure
• Sustainability Policy

2. Chairman’s Statement or CEO’s Message: A high-level message from the company’s leadership regarding its commitment to sustainability and its achievements during the reporting period.

3. Report Scope and Boundary: Explanation of the scope and boundaries of the report, including the entities, operations, and geographical locations covered.

4. ESG Overview: Explanation of ESG Score card and performance snapshot 

5. Sustainability Strategy & Framework

• Sustainability Strategy
• Sustainability Framework

6. Materiality Assessment:

• Identification of material ESG issues that are significant to the company and its stakeholders.
• Explanation of the process used for materiality assessment.

7. Governance and Management Approach:

• Description of the company’s governance structure related to sustainability.
• Explanation of how sustainability is integrated into the company’s overall management approach.

8. Stakeholder Engagement:

• Overview of the company’s engagement with various stakeholders, such as investors, employees, customers, and communities.
• How feedback and input from stakeholders are incorporated into decision-making.

9. Environmental Performance:

• Reporting on environmental performance indicators, such as energy consumption, water usage, greenhouse gas emissions, and waste generation.
• Initiatives and strategies for reducing environmental impacts.

10. Social Performance:

• Reporting on social aspects, including labor practices, employee well-being, diversity and inclusion, and community engagement.
• Highlights of social initiatives and programs.

11. Economic Performance:

• Financial performance related to sustainability, including investments in sustainable practices and their financial outcomes.
• Contributions to the local economy and communities.

12. Supply Chain Management: Overview of supply chain sustainability efforts, including responsible sourcing and supplier engagement.

13. Achievements and Milestones: Notable accomplishments and milestones related to sustainability during the reporting period.

14. Future Goals and Targets: Clear articulation of sustainability goals, targets, and initiatives for the future.

15. Assurance and Verification: If applicable, information about external verification or assurance of the report’s content.

16. Appendices and Additional Information: Supplementary data, charts, graphs, case studies, and any other relevant information.

17. GRI or Other Framework Disclosures: If the Global Reporting Initiative (GRI) or another specific reporting framework is used, a section providing disclosures as required by that framework.

18. Contact Information: Contact details for individuals or departments responsible for handling inquiries about the sustainability report.

It’s important to note that sustainability reporting in India is influenced by regulatory requirements, and companies often align their reports with the SEBI Business Responsibility Report (BRR) framework and global standards such as the GRI Standards. The format may evolve over time as reporting guidelines and regulations are updated.

Conclusion

Sustainability reporting in India has made remarkable strides in recent years, driven by regulatory changes, global standards, and an increasing recognition of the importance of ESG issues. While there are challenges to overcome, the opportunities for businesses to make a positive impact on society and the environment are substantial. As India continues its journey towards sustainability, reporting will remain a key tool for businesses to showcase their commitment to a greener, more inclusive future.