1. Introduction
Good corporate governance is essential not only for businesses, but also for society. In fact, good corporate governance raises the confidence of various stakeholders in the companies. The renewed emphasis of Indian Companies Act, 2013 on corporate social responsibility (CSR) enhances transparency and increases responsibility of business to their stakeholders. In turn, companies that focus their efforts on sustainability are rewarded by investors and fund houses and it also increases a company’s potential to succeed and survive. In particular, the Indian Companies Act, 2013 has placed responsibility on Indian companies pertaining to CSR practices and their disclosures. So, before heading further on the corporate governance aspect of CSR the Author will discuss the key terms of sustainability, CSR and the reasons why companies care about the same and key guidelines issued by various agencies in this regard.
Sustainability is described as an environmental and social responsibility that enables the company to meet stakeholder expectations. The objective of sustainability reporting is to convey the company’s commitments and results to all stakeholders through its Business Responsibility Report (BRR)/Sustainability Report (SR) / Corporate Social Responsibility (CSR) Report. As a good corporate citizen, the corporation works closely with all of its partners to accelerate success for all and aims to generate value by improving livability across the socioeconomic continuum.
According to the Brundtland Commission report, 1987[1], “Sustainable Development means one that meets the needs of the present without endangering future generations’ resources to perform their own needs.” To accomplish this long-term corporate sustainability target, the Sustainable Development framework is based on “three essential pillars” that businesses must fulfill:
a) Economic development;
b) Social equity; and
c) Environmental protection.
While businesses have been working to grow the economy “pillar” of manufacturing, revenue, and benefit, this has not always been the norm with the environmental conservation and social responsibility pillars that are also on the agendas of businesses. The environmental pillar is concerned with challenges such as emissions, waste, and energy use, as well as re-optimizing supply chains. The social pillar has an outward component, which includes corporations compensating societies where their actions have caused disruption or annoyance. Inside the business, it also means providing equal pay and benefits to workers, ensuring inclusivity, and upholding basic human needs and ethics.
Despite the current discussion on the definition and implementation of sustainable development in a corporate setting, it is common to believe that an organization is a Socially Conscious Enterprise if it can meet these three pillars. It is normal for these companies to willingly exchange details about their triple bottom line (another word for the three foundations listed above), not only to show that they walk the walk, but also to achieve a comparative edge. These details, in turn, is widely referred to as Sustainability Reporting, and it can be achieved by the use of traditional mechanisms such as the Global Reporting Initiative (GRI) or simply by adopting methodology and impact metrics selected by an organization.
In particular, the Indian Companies Act, 2013 has placed responsibility on Indian companies pertaining to CSR practices and their disclosures.
2. The Association between Corporate Governance and Sustainable Development
The company boards are incorporating the aforesaid three dimensions of sustainable growth into their practices, and most businesses now have corporate social responsibility initiatives (CSR) and engagement systems in place to communicate their priorities with the stakeholders. Because of climate change, several businesses have been working hard on the environmental pillar, promising to show customers that they are environmentally friendly which enhances their credibility and benefits them in the long run. This is one of the primary reasons why boards of directors are interested in the environmental success of the businesses they run and why they are disclosing reports on these matters. This knowledge is highly helpful in gaining “socially conscious investors” who closely track the actions of these firms. Of late, sustainability is rising in the agendas of corporations who recognize that long-term profits necessitate CSR policies for businesses to survive and prosper. In this way, environmental sustainability must be incorporated into organizational corporate governance.[2].
3. DIFFERENT STANDARDS OF SUSTAINABILITY PRACTICES
Global Reporting Initiative (GRI):
The Global Reporting Initiative (GRI) is a non-profit organization that supports economic, environmental, and social sustainability on a global scale. The GRI was established in 1997 in collaboration with the United Nations Environment Programme (UNEP). The organization has established Sustainability Reporting Standards to improve the openness and accountability of economic, environmental, and social results, and it provides all businesses and organizations with a robust sustainability reporting system that is commonly used around the world. Since 2016, the GRI recommendations also included references to the United Nations Sustainable Development Goals (SDGs).
United Nations Sustainable Development Goals (UN SDGs):
The Sustainable Development Goals (SDGs), also known as the Global Goals, were adopted in 2015 by all United Nations Member States as a universal call to action to end hunger, protect the environment, and ensure that all people live in peace and security by 2030.
All the above mentioned SDGs are interconnected, in the sense that they understand that actions in one field can have an effect on results in others and that growth must balance Economic, Social and Environmental (ESG) sustainability. Countries have agreed to prioritize change for those who are the furthest behind in the promise to ‘Leave No One Behind’. As a result, the SDGs are expected to carry the world to many life-changing ‘zeroes,’ such as zero violence, zero malnutrition, zero AIDS, and zero violence against women and girls. To meet these ambitious goals, everybody must work together. To achieve the SDGs in every sense, all of society’s innovation, know-how, technology, and financial resources are needed.”[3]
The Ten Principles of the UN Global Compact
“Corporate sustainability begins with a company’s belief system and a principles-based business strategy. This entails acting in ways that, at the very least, fulfill basic obligations in the fields of civil rights, labor, the environment, and anti-corruption. Responsible companies follow the same standards and ideals everywhere they work, and they recognize that positive practices in one field do not substitute for damage in another. Companies who integrate these Ten Values of the UN Global Compact into their plans, practices, and processes, as well as those companies who create a culture of ethics, are not only performing their fundamental obligations to people and the world but also laying the foundations for long-term sustainability.
These Principles are based on the Universal Declaration on Human Rights, the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention against Corruption.[4]
The principles outlined can be expanded into 10 categories, of which the 7th, 8th, and 9th are particularly relevant to environmental concerns. These principles state that businesses should adopt a precautionary approach to environmental challenges, undertake initiatives to promote greater environmental responsibility, and encourage the development and diffusion of environmentally friendly technologies. These principles, when implemented, can contribute to a more sustainable and environmentally conscious business environment.
Principle-wise National Voluntary Guidelines (NVGs):
“The Ministry of Corporate Affairs (MCA) of the Government of India published the National Voluntary Guidance on Environmental, Social and Economic Responsibilities of Industry (NVGs) in 2011. The NVGs are a systematic and idealistic framework to inspire ethical market behavior in India. The NVGs, a compilation of nine values, discuss a wide variety of social, economic, environmental, and governance concerns, as well as developmental goals. The Nine Principles of National Voluntary Guidelines outline the ethical and responsible business practices that businesses should adopt. These principles include operating with ethics, transparency, and accountability; providing safe and sustainable goods and services; prioritizing employee well-being; respecting and responding to the interests of all stakeholders, especially disadvantaged, vulnerable, and marginalized groups; respecting and promoting human rights; respecting, protecting, and restoring the environment; influencing public and regulatory policy responsibly; supporting inclusive growth and equitable development; and engaging with and providing value to customers and consumers responsibly. By adhering to these principles, businesses can contribute to a more sustainable and equitable society.
To match the NVGs with the UN Global Goals, new standards known as the National Guidelines on Responsible Business Conduct (NGRBC) were established in March 2019.[5]
Sustainability Accounting Standards Board (SASB) is an autonomous, private-sector standards-setting agency whose goal is to assist companies worldwide in identifying, managing, and reporting on the sustainability issues that SASB feels are most important to investors. SASB Principles define the subset of Environmental, Social, and Governance (ESG) problems that are most important to the financial results of everyindustry. They are intended to assist businesses in disclosing financially significant sustainability knowledge to customers. Its robust and open standard-setting process involves evidence-based analysis, extensive and unbiased input from businesses, customers, and subject matter specialists, as well as impartial review and approval.”[6]
4. ANALYSIS OF CORPORATE GOVERNANCE AND SUSTAINABLE REPORTING ON THE 2021 NSE-NIFTY LISTED TOP 10 INDIAN COMPANIES
The analysis of corporate governance and sustainable reporting on the NSE listed companies has been carried forward by adopting the methodology of Guo and Yang. Analysis reports are as follows:
Company Name- Tata Consultancy Service (TCS)
Sector – Information Technology
Company Details- It is a global IT Consultancy firm and a subsidiary of the TATA Group. It operates in 46 countries and offers a variety of services like application creation, business process outsourcing, capacity planning, consultancy, corporate computing, hardware scaling, payment processing, software administration, and technology education.
Type of Report- Corporate Sustainability Report
SR/CSR/CCR/BRR availability- YES [7]
Reporting Start Date- 2006
Guideline- Global Compact Advance Level, UN Goals and Issues, and SDGs.
Reporting Assurance- Internally assessed by the Board of Directors.
Company Name- Reliance Industries Ltd.
Sector- Energy
Company Details- It is the largest portfolio of power projects in the private sector based on thermal and renewal energy. Business areas are power projects, coal based projects, Gas based projects, Solar based projects, wind based projects, Hydroelectricity projects, Initiatives in renewal energy and Carbon credits.
Type of Report- Business Responsibility Report
SR/CSR/CCR/BRR availability- YES[8]
Reporting Start Date- 2004
Guideline- GRI Standards
Reporting Assurance- External assurance
Company Name- HDFC Bank Ltd.
Sector- Banking
Company Details- IT is a bank and financial services, provider. It provides wholesale banking, retail banking, and several treasury services, and consumer loans. It has developed a presence in Bahrain, Hong Kong and Dubai.
Type of Report- Sustainability Report
SR/CSR/CCR/BRR availability- YES[9]
Reporting Start Date- 2014
Guideline- GRI Standards
Reporting Assurance- Externally assured based on ISAE 3000 (Revised) and AA1000, AS (2008) standards.
Company Name- Hindustan Unilever Ltd (HUL)
Sector- Consumer Goods
Company Details- It is a consumer products business that is a division of the British Dutch conglomerate Unilever. One of the biggest firms listed on the London Stock Exchange. HUL was established in 1933, now offers products in more than 20 categories, including food, personal care and grooming, home cleaning, and water purification.
Type of Report-Unilever Sustainable Living Plan
SR/CSR/CCR/BRR availability- YES[10]
Reporting Start Date- 2008
Guideline- UN SDGs
Reporting Assurance- External Assurance. Det Norske Veritas AS (DNV), as per AA 1000 AS (2008) standard.
Company Name- Housing Development Finance Corporation (HDFC)
Sector- Financial Services
Company Details- – It is a business Conglomerate. HDFC is mainly engaged in housing finance in India, but it is also involved in Banking through its holding of HDFC Bank, life and general insurance, asset management, venture capital, real estate, education, saving, and education loans.
Type of Report- Business Responsibility Report
SR/CSR/CCR/BRR availability- YES [11]
Reporting Start Date-2011
Guideline- National Voluntary Guideline
Reporting Assurance- External Assurance
Company Name- Infosys Ltd.
Sector- Information Technology
Company Details- It is a multinational firm that focuses on management consultancy, IT, and outsourcing. It has operations in India, the USA, China, Australia, Japan, the Middle East, and Europe, specialized in software development, servicing, and autonomous validation services for businesses in banking, insurance, engineering, and other industries.
Type of Report- Sustainability Report
SR/CSR/CCR/BRR availability- YES[12]
Reporting Start Date- 2006
Guideline- GRI Standards
Reporting Assurance- External Assurance
Company Name- ITC
Sector- Conglomerate
Company Details- Founded 1910 as Imperial Tobacco Company of India Limited, ITC has since diversified into five diversified businesses: fast-moving consumer goods (cigarettes, food, personal care, etc), hotels, paper-related products and packaging, agribusiness, and IT.
Type of Report- Sustainability Report
SR/CSR/CCR/BRR availability- YES[13]
Reporting Start Date- 2004
Guideline- UN SDGs
Reporting Assurance- External Assurance. Det Norske VERITAS AS (DNV), as per AA 1000 AS (2008) standard.
Company Name- Kotak Mahindra Bank
Sector-Financial Services
Company Details- It is a bank in the private sector. Personal Finace, investment banking, general insurance, life insurance, and asset management are also areas in which it operates. It is one of India’s largest private banks, with over 1300 branches distributed across world.
Type of Report- Business Responsibility Report
SR/CSR/CCR/BRR availability- YES[14]
Reporting Start Date- 2012
Guideline- National Voluntary Guideline
Reporting Assurance-External Assurance
Company Name- ICICI Bank
Sector- Financial Services
Company Details- It is a global financial market and banking corporation. Via its branches, it provides a wide variety of banking products and financial services to corporate and institutional clients, as well as private banking, insurance, venture capital, and asset management.
Type of Report- Business Responsibility Report
SR/CSR/CCR/BRR availability- YES[15]
Reporting Start Date- 2015
Guideline- National Voluntary Guideline
Reporting Assurance- Internally assessed by the board of directors.
Company Name- State Bank of India
Sector- Banking
Company Details- It is a global public sector banking and financial services conglomerate that is majority-owned by the Indian Government. SBI, which dates back to 1806, is now the largest Indian Bank, offering a wide variety of banking services and products in India and 36 other countries.
Type of Report- Sustainability Report
SR/CSR/CCR/BRR availability- YES[16]
Reporting Start Date- 2012
Guideline- UN SDGs and GRI standards
Reporting Assurance- Internally assessed by Corporate Centre Sustainability Committee.
All companies of the sample provide sustainability account reporting. This means 100% of firms in our sample chose to report their sustainability activities, higher than the ratio of 96% of G250 and 80% of N100 – 5,200 companies including the largest 100 companies in 52 countries issuing separate reports in 2019 (KPMG, 2020)[17]. The study data confirms the rising trend of sustainability accounting reporting in practice.
5. Conclusion
Reference can be drawn after the analysis that there is a fast growth of interests in sustainability reporting. Several initiatives taken by independent and governmental organizations have guided to assist organizations with sustainability reporting and its external assurance. So, this blog contributes to area of sustainability reporting by studying the practices associated with the same. To conclude with this part we would like to re-emphasize that “Many businesses do not include sustainability in their corporate strategy and management, nor do they include it in their success assessment and management. After analyzing the reporting practices the author shall be dealing with the comparative study of the policy landscape.
[1] Bhatia, A., & Tuli, S. (2016). Sustainability disclosure practices: a study of selected Chinese companies. Management and Labour Studies, 40(3 & 4), 1-16.
[2] https://youmatter.world/en/definition/corporate-governance-definition-purpose-and-benefits/
[3] https://www.undp.org/content/undp/en/home/sustainable-development-goals.html#:~:text= The% 20Sustainable%20Development%20Goals%20SDGs,peace%20and%20prosperity%20by%202030.
[4] https://www.unglobalcompact.org/what-is-gc/mission/principles
[5]https://www.mca.gov.in/Ministry/pdf/NationalGuildeline_15032019.pdf
[6] https://www.sasb.org/standards/download/
[7]http://www.tcs.com/content/dam/tcs/images/discover-tcs/investor-relations/corporate-sustanibility/pdf-covers/csr-2018-card.jpg.
[8]http://www.ril.com/ar2019-20/pdf/businessresponsibilityreports.pdf.
[9]https://v1.hdfcbank.com/csr/pdf/sustainability%20report%20FY-2019-20.pdf.
[10]https://www.hul.co.in/Images/unilever-sustainable-living-plan-hul-summary-of-progress-2019 tcm1255-551089 1 en.pdf.
[11]http://www.hdfc.com/sites/default/files/2020-07/business-rresponsibility-report-2019-20-pdf.
[12]https://www.infosys.com/sustainability/documents/documents/infosys-sustainability-report-2019-2-.pdf.
[13]http://www.itcportal.com/sustainability-report-2020/sustainability-report-2020.pdf.
[14] http://www.kotak.com/content/dam/Kotak/investor-relation/Financial-Result/Annual-Reports/FY-2020/kotak-mahindra- bank/kotak Mahindra Bank Limited Business Resonsibility Report FY20.pdf
[15]https://wwwicicibank.com/managed-assests/docs/investors/annual-reports/2020/Business Responsibility Report.pdf.
[16]https://bank.sbi/dpcuments/17826/24027/2007201345-SBI+Sustainability+Report+V37+20 07 2020 Spread layout.pdf/801cc)de-a47d-c860-f5c3-fc57efb58339?t=1595232977158.
[17] https://www.globalreporting.org/about-gri/news-center/2020-12-01-sustainability-reporting-is-growing-withgri-the-global-common-language/