BUSINESS RESPONSIBILITY REPORT

[Mr. M. GOVINDARAJAN]

‘Business Responsibility Report’ is a disclosure of adoption of responsible business practices by a listed company to all its stakeholders.   SEBI vide its circular No. CIR/CFD/DIL/8/2012, dated 13.08.2012 made it mandatory for the top 100 listed companies based on market capitalization.   Other listed companies can voluntarily disclose Business Responsibility reports as part of their annual reports. This report is in line with the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (NVGs) notified by Ministry of Corporate Affairs, Government of India, in July 2011.

For this purpose a new Clause 55 has been inserted in the listing agreement which reads as – “Listed entities shall submit, as part of their Annual Reports, Business Responsibility Reports, describing the initiatives taken by them from an environmental, social and governance perspective, in the format suggested”. The said report contains a standardized format to provide basic information about the company, information related to its performance and processes and information on principles and core elements of the Business Responsibility Reporting. The following are the contents of the Report:

• Section A – General Information about the company;
• Section B – Financial details of the company;
• Section C – Other details;
• Section D – BR Information;
• Section E – Principle-wise performance, the details of which are furnished as below:
  • Principle 1 – Business should conduct and govern themselves with Ethics, transparency and accountability;
  • Principle 2 - Business should provide goods and services that are safe and contribute to sustainability throughout their life cycle;
  • Principle 3 – Business should promote the well being of the employees;
  • Principle 4 – Business should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized;
  • Principle 5 – Business should respect and promote human rights;
  • Principle 6 – Business should respect, protect and make efforts to restore the environment;
  • Principle 7 – Business, when engaged in influencing public and regulatory policy, should do so in a responsible manner;
  • Principle 8 – Business should support inclusive growth and equitable development;
  • Principle 9 – Business should engage with and provide value to their customers and consumers in a responsible manner.

The above said format provides a set of generic reasons which the company can use for explaining their inability to adopt the business responsibility policy.   It has been designed as a tool to help companies understand the principles and core elements of responsible business practices and start implementing improvements which reflect their adoption in the manner the company undertakes its business.

The top 100 listed companies are mandatorily required to furnish this report to the stock exchange where they are listed in electronic format and publish the report on their web sites.   Other listed companies may follow the guidelines and include the report in their Annual Report and publishing the same on the company’s website. It is applicable to all types of companies including manufacturing, services etc.,

Any company holding or subsidiary which falls among the top 100 listed companies has to mandatorily furnish a Business Responsibility Report. In case of an MNC which has its subsidiary in India and which produces a single Global Reporting Initiatives (GRI) report, the subsidiary is required to prepare its separate Business Responsibility Report highlighting the responsible business practices it has put in place in India. In case of an Indian listed company that already publishes a GRI report for its operations, clause 5 of the circular says that those listed entities which have been submitting sustainability reports to overseas regulatory agencies/stakeholders based on internationally accepted reporting frameworks need not prepare a separate report for the purpose of the guidelines but only furnish the same to their stakeholders along with the details of the framework under which their Report has been prepared and a mapping of the principles contained in these guidelines to the disclosures made in their sustainability reports.

Companies may furnish additional information which may not be covered under Specific Business Responsibility Report but relevant for Business Responsibility Report. The companies may provide full Report as a part of their Annual Report or as a green initiative, host the Business Responsibility Report on their website and provide appropriate reference to the same in the Annual Report. Companies may also provide guidance on how a shareholder may request physical copy of the Business Responsibility Report from the company, if so desired.

If the company provides the annual report mentioning that company publishes the sustainability report under GRI framework along with a mapping as per the SEBI circular and clause 55 of the Listing Agreement and indicates that the sustainability report would be available on its website providing website link for the same, it would be treated as sufficient compliance of the clause 5(a) of the Circular, dated 13.08.2012.

SEBI views Business Responsibility Report as an enabling instrument for the listed companies to integrate Environmental, Social and Governance parameters into their core business practices.   Failure to provide Business Responsibility Report will be construed as non compliance with Clause 55 of the Equity Listing Agreement. taxmanagementindia.com

The following are to be furnished in the report:

• The list of entities to which the company policy is applicable along with the Business Responsibility Report;
• The report asks for up to 3 of products or services.   This is the upper limit. In case a company has more than three such products/services, it may report on the products/services it is having on the date of reporting;
• The report should indicate what proportion of its inputs (by quantity or value) are sourced from suppliers who are either covered by the company’s sustainable sourcing programs and/or are certified to be compliant with social and environmental standards;
• Apart from providers of goods, procurement of services such as landscaping, janitorial, security, taxis etc., may also be reported;
• The company has to describe what mechanism it has in place to recycle its products (including packaging) after consumption as well as for all wastes emerging out of its manufacturing process – solid, liquid and gas;
• It has to report what percentage of its product and packaging are recyclable and what percentage of waste produced is recycled;

The provisions of this circular shall be applicable with effect from financial year ending on or after December 31, 2012. However, listed entities that are yet to submit their Annual Reports for financial year ended on March 31, 2012 may also include BR Reports as part of their Annual Reports on a voluntary basis.