Saturday, 20 July 2013

Sustainability Reporting – Overview of the Most Important Standards Worldwide and in India

I started out writing this blog to share my excitement of the Sustainability microsite of one of the most popular brands of our times.  At last, Sustainability Reports dont have to be intimidating pdf's with a data-overload!  However, midway through that piece, it seemed important to present the context and the bigger picture first.  This is the first of a two-part blog on Sustainability Reporting - trends that are hot and trends that we love.  Meanwhile, also look the Whitepaper on the subject of Sustainability Reporting on our website.

First, there were Financial Reports.  They greatly changed the way businesses dealt with each other, with investors and with their customers.

The earliest Environmental and Corporate Social Responsibility (CSR) Reports were used by companies primarily to counter negative images issues, or by small and mid-sized outliers with high environmental concerns - the tree-huggers among enterprises.

Over the last decade or so, as Sustainability is integrated into enterprise strategy to drive business growth, Sustainability Reports have emerged as important tools.  More recently, such Reports have been morphing from being standalone, weighty documents or THINGS, to the integrated, interesting PROCESS of Sustainability Reporting.   But more of the emerging trends in the next blog.  Let us first look at the most popular Sustainability Reporting standards.

The Global Reporting Initiative (GRI); .
The GRI guidelines for voluntary disclosure of sustainability parameters were introduced in 2000.  The GRI website currently lists over 5,000 organizations and over 12,000 GRI Reports.  The current generation of GRI guidelines – G3 and G3.1 – asks for disclosures under three sections with a fixed number of questions under each section – Strategy and Profile (42 questions), Management Approach (37 questions), and Performance Indicators (84 questions).  There is an additional section on sector-specific disclosures for a limited number of sectors.  Based on the number of questions responded to, the Levels A, B and C are accorded to the applications.  A ‘+’ is accorded to applications at any level if it has gone through an external audit process.

The Carbon Disclosure Project (CDP);
235 enterprises to the first CDP questionnaire sent to the biggest corporations asking them to report their greenhouse gas emissions in 2003.  The number of respondents has now grown to over 2,500 and CDP is credited with having the largest database of enterprise-level climate change information. Meanwhile CDP is now more than eponymous, having introduced CDP Water Disclosure, CDP Supply Chain, CDP Cities, and most recently, forest footprints.

While the GRI and CDP are multi-stakeholder, not-for profit/ private frameworks, the UNGC, ISO and the OECD MNE Guidelines are initiated by the international organizations - the United Nations and the OECD respectively.

The United Nations Global Compact (UNGC). The UNGC's ten principles for businesses - covering environmental responsibility, human rights and workers rights - were officially launched in 2000.  Interestingly, the principles are a central reference point for the GRI Guidelines.  With over 7,000 participating businesses, the largest database of corporate sustainability reports can be found on the UNGC website.
The Organisation for Economic Cooperation and Development(OECD) Guidelines on Multinational Enterprises (MNE's).  These are recommendations addressed by OECD governments to multinational enterprises operating in or from adhering countries.  The "Disclosure" section encourages timely and regular disclosure on social and environmental issues, in addition to financial ones. 
The International Organization for Standardization (ISO); 
ISO is a non-governmental network of national-level standards institutes and technical bodies that co-ordinates international standards for business and products.  While most of ISO's standards deal with technical subjects, The 1SO 14000 Series of standards focus on corporate environmental management systems and ISO 26000 covers social responsibility. 

India-SpecificStandards and Guidelines
Sustainability Reporting is still at a nascent stage in India.  Around 80 companies are now reporting under the GRI framework.  Last year, 53 companies out of the top 200 by market cap to whom the CDP questionnaire was sent,  responded to the questionnaire. 

As elsewhere in the world, Sustainability Reporting is mandated in India only to the extent of the 'Disclosures' required by legislations such as the Companies Act, Environment Protection Act etc.  However, in addition to some directives that are at the pilot stage, the following measures introduced by the Government in the past few years specifically targeting Sustainability issues in enterprises is expected to have a marked impact on Sustainability Reporting as well:

The Companies Bill 2011 was passed by the Lok Sabha in december 2012.  said India would become the first country to mandate corporate social responsibility (CSR) through a statutory provision. that mandates companies in India to spend 2% of their profit in the preceding 3 years on CSR activities and report a CSR Policy.

Effective 2012-2013, these guidelines mandate that CPSE’s spend at least 0.5% of their PAT (if PAT is less than Rs. 100 crores) and Rs. 50 crores + 0.1% of their PAT (if PAT is more than Rs.100 crores) on various Sustainable Development activities such as Carbon Management, Renewable Energy and Sustainability Reporting.

National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Businesses (NVG) launched on 8 July 2011 by the Ministry of Corporate Affairs, Government of India, the Guidelines recommend 8 principles for voluntary adoption by companies. These principles are intended to address the interests of various stakeholders of the companies, including employees, customers, NGOs and investors.

Next week we will look at the most recent trends in Sustainability Reporting.

1 comment:

  1. Joya! follow this link, there have been changes on the document with focus on IMPACT assessment now.