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Integrated financial and sustainability reporting flying in India

Integrated Financial and Sustainability Reporting Anthony Harrington

One of the largely unreported and unsung triumphs of the British heir to the throne, Prince Charles, has undoubtedly been the success of his "Accounting for Sustainability" (A4S) project started back in 2004. The initial focus of A4S was issues such as the over consumption of the Earth's finite natural resources, climate change and rising global populations. However, it worked from the outset with businesses, investors, the public sector, accounting bodies, NGOs and academics to make the case for integrated thinking and reporting. Its ambition was to develop practical guidance and tools for embedding sustainability into decision-making.

By 2008 A4S had managed to get the International Integrated Reporting Council (IIRC) launched, with the backing of the Global Reporting Initiative (GRI). The latter has become the accepted framework world wide for sustainability reporting, while the IIRC's mission is to reshape corporate reporting so that sustainability and financial issues are integrated. The aim is to ensure that the reporting organization demonstrates its ability to create and sustain value across both the financial and the sustainability dimensions, with the interrelationship between the two dimensions being clearly worked through in the reporting. The Johannesburg Stock Exchange already mandates integrated reporting as a condition of listing and a number of other countries, including Singapore have either already gone down this route or are planning to.

At bottom, this is simply good business, since if a company generates a profit in the short term that has a major adverse environmental impact, or carries a risk of such an impact, then the long term costs to the company could eclipse the short term profit. Integrated reporting helps management decision making by widening the range of factors that management needs to consider when assessing a project's feasibility. This works to the ultimate long term benefit of the company and all its stakeholders, including the wider community.

In July 2011, the Indian Ministry of Corporate Affairs produced the National Voluntary Guidelines on the Social, Environmental and Economic Responsibilities of Business, which highlighted the need to integrate sustainability and inclusiveness into core business practices. A recent paper by the Deutsche Gesellschaft fur Internationale Zusammernarbeit (GIZ) and the Global Reporting Initiative's GRI Focal Point India, plus the Thought Arbitrage Research Institute, looked at the extent to which Indian companies are moving to sustainable reporting. The paper is titled: "Sustainability Reporting Practices and Trends in India 2012". GIZ has been providing advice to Indian companies since the 1970s, so has a developed expertise in this area. According to them, there are now some 80 companies in India that prepare CSR/sustainability reports, and 60 of these are public domain reports.

To have just 80 companies reporting seriously on sustainability is not a lot, so the paper in its own words, "attempts a root cause analysis to establish factors that impede reporting in India".

The authors point out that the backdrop to the move to sustainability reporting, such as it is in India is that the whole climate change debate has led to ordinary citizens everywhere wanting to know much more about how companies impact the environment. This in turn leads to pressure on funders and on stock exchanges to press for disclosure. Further pressure comes from the fact that companies start to fear both reputational damage and the fact that they may lose market share to rivals who start leveraging a strong sustainability record to increase their market share. All of this starts as a gradual process and India is just beginning to get going. In November 2011 the Securities and Exchange Board of India made it compulsory for the 100 largest businesses in the country to include a Business Responsibility Report. This flowed directly out of the National Guidelines initiative in July and represents real progress on the sustainability debate in India.

However, reading between the lines of the paper, as it were, it is clear that sustainability reporting in India is still very much in its infancy. Indian companies could cut out a lot of the pain involved in learning how to generate effective, integrated sustainability reporting if they drew on best practice from global business leaders. A lot more constructive dialogue with stakeholders would help too. A strong focus on stakeholder expectations is also a great way for companies to facilitate the inclusion of sustainability concepts with core business practices. Increasingly consumers, for example, do not just want the right products at the right price, they also want them made in the right way - with "right" here defined as ways that minimise or eliminate any negative impact on the environment.

Further reading on sustainability:


  • The CFO and the Sustainable Corporation, by Ravi Nedungadi, http://www.qfinance.com/mergers-and-acquisitions-viewpoints/the-cfo-and-the-sustainable-corporation?full
  • The Morals of Money—How to Build a Sustainable Economy and Financial Sector, by Roger Steare http://www.qfinance.com/business-ethics-viewpoints/the-morals-of-moneyhow-to-build-a-sustainable-economy-and-financial-sector?full
  • No More Room for “Business as Usual”, by Ernst Ligteringen http://www.qfinance.com/regulation-viewpoints/no-more-room-for-business-as-usual?full


Tags: Accounting for Sustainability , Global Reporting Initiative , GRI , India , International Integrated Reporting Council , Johannesburg Stock Exchange , Prince Charles
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