ESG Reporting: Not Why But How

A lot has been said about ESG (Environment, Social, Governance) reporting and why it is important. The question now arises how do we go about reporting the company findings? A lot of companies are on the right track with respect to ESG goals, but adopt individual ways of presenting them instead of following or finding a uniform reporting mechanism. They take cues from industry peers, auditors, and partners. In India, The Companies Act 2013 (Act) requires companies to furnish non-financial information mandatorily. India also has SEBI-BRR (Securities and Exchange Board of India - Business Responsibility Index) reporting requirement, which for the first time introduced mandatory sustainability reporting among companies in India in 2012. 

What's being done globally?

Organisations like Global Initiative for Sustainability Ratings (GISR) and The SustAinability Institute by ERM have sought to promote transparency and uniform reporting ESG mechanisms. A lot of companies globally utilise GRI (Global Reporting Initiative), SASB (Sustainability Accounting Standards Board), and IIRC (International Integrated Reporting Council) standards among other local mechanisms.  The most common among these is the GRI standard. They use key elements and broad strokes to report companies’ sustainability parameters, with a focus on material aspects like environment, economy, and people. To better understand how the GRI reporting takes place, we can refer to the graph below:

In chart: How GRI reports

Image source: GRI

SASB was merged with IFRS foundation which then merged it with Value Reporting Foundation which maintained these standards previously. SASB Standards are applicable to 77 industries. They identify the subset of environmental, social, and governance issues most relevant to the financial performance of each of these industries. They are designed to help companies disclose financial-material sustainability information to investors. They use materiality founder as a base for industries like consumer goods, financials, food and beverage, mineral processing, healthcare, infrastructure, transportation, technology and communications, and resource transformations. 

The last is IIRC, which is a blend of the global economic model and 21st-century challenges, like interconnecting social, economic, governance, and financial performance. As per the Ministry of Corporate Affairs, it is established in the UK in 2010, has developed a framework that is a principle-based guidance for preparing an Integrated Report (IR). An IR provides insight into the resources and relationships used and affected by an organisation, which are referred to as ‘the capitals’.

Over and above, individual countries have their own standards. In Denmark, all companies of a certain size, in terms of number of employees, assets, and revenue, are required to voluntarily include their work and company atmosphere in terms of human rights, societal, and environmental conditions. Over and above they have to include steps taken to combat corruption as a part of their corporate activities. South Africa introduced The Johannesburg Stock Exchange (JSE) for increasing accountability. The disclosure of sustainability information starting in 2010 to ‘apply and explain’ why they did not report their ESG findings. 

In China, The Shanghai Stock Exchange (SHSE) and the Shenzhen Stock Exchange (SZSE) mandated certain listed firms to disclose ESG information starting from the financial year ending December 2008. Malaysia has The Stock Exchange Bursa Malaysia which made sustainability disclosure a listing requirement for all listed firms starting from the financial year ending December 2007. In Philippines, the Sthe ecurities and Exchange Commission (SEC) issued the ‘Sustainability Reporting Guidelines for Publicly Listed Companies’ outlining information that the eligible companies will have to disclose in relation to their non-financial performance across the economic, environmental and social aspects of their organisations on a “comply or explain” basis, starting 2020. 

When Indian constitution makers were drafting the constitution, they had taken reference from constitutions across the world. Similarly, India has its task cut out to streamline ESG reporting, but the good news is, we have multiple case studies we can take reference from.