Organisations adopting sustainability reporting get competitive edge
New Delhi, May 29, 2023
Organizations that adopt sustainability reporting get a competitive edge in a market where consumer awareness is rising, in addition to helping the world’s efforts to address urgent environmental and social concerns. Investors are give due importance to ESG aspects into their decision-making processes, and consumers are expecting more goods and services from businesses that exhibit ethical and sustainable business practices. Governments and regulatory organizations are also stressing on the need of achieving sustainable development and enforcing higher reporting standards.
As a statutory body, the Institute of Chartered Accountants of India (ICAI) regulates the profession of Chartered Accountants in India. A strong tradition of public service and economic development has distinguished the ICAI as the world’s leading body of knowledge for accountancy. With the mission to formulate comprehensive and globally comparable standards for measuring and disclosing non-financial information about an entity’s progress towards the UN Sustainable Development Goals (SDGs) 2030, theICAI constituted the Sustainability Reporting Standards Board (SRSB) in February 2020.Several initiatives have been launched by the Board over the years to revolutionize the ideology behind sustainable reporting such as introduction of Sustainability Assurance Engagement Standards, certificate courseon BRSR reporting, social audit standards,etc.
In May 2021, SEBI made a notable shift towards the adoption of Business Responsibility and Sustainability Reporting (BRSR) framework in recognition of the need for a more comprehensive and integrated approach towards sustainability reporting.The BRSR framework acknowledges that sustainability issues should not be ignored or considered as a side issue, instead, they ought to be thoroughly incorporated into a company’s overall operations and strategies by acknowledging the connection between sustainability and commercial performance. BRSR framework focuses on transparency and comparability. Organizations can give stakeholders reliable information about their sustainability practices by adopting a standardized approach to reportingand can also better streamline decision-making, increase transparency, and align sustainability with their core business strategy. This makes it possible for stakeholders like consumers, employees, and investors to assess the sustainability performance of various businesses and make educated decisions. The sustainability board of ICAI has come out with an innovative approach towards measuring an organs ISAR ion maturity towards BRSR. On 18th March 2021, SRSB launched itsSustainability Reporting Maturity Model (SRMM Version 1.0”) as a grading/scoring methodology for BRSR released by the Ministry of Corporate Affairs (MCA) as part of its initiatives to build the sustainability ecosystem in the nation. This maturity model records an organization’s progress towards sustainability reporting through four distinct degrees of sustainability maturity. Based on the changes brought in by the SEBI BRSR circular, SRMM Version 1.0, was further updated to Version 2.0 by the board. To assist organizations in implementing the SRMM, the SRSB has also set up a network of training and support facilities and tools and resources.
The SRMM is a self-assessment tool which gives organizations a clear structure and path so they can evaluate where they are now and where they need to improve. Second, the model also encourages organizations to go up through the levels, promoting the maturity of sustainability reporting. The approach helps organizations gradually improve their reporting procedures and incorporate sustainability into their primary business strategy by outlining a clear path. The model has four unique stages, each of which corresponds to a different level of sustainability reporting maturity. All 4 levels are defined based on the overall range of scores that a corporate entity has scored within a fiscal year using the BRSR scoring system. The SRMM has a total score of 300 points divided across all the sections of BRSR. By assigning a score of 75 out of 300 to leadership indicators, firms are encouraged to set goals for achieving them.
A company scoring up to 25% falls in the first stage or the Formative stage of SRMM. This stage implies that the company is in the nascent stage of reporting and is still outlining the fundamental facts and identifying the need and responsibility of BRSR. These companies are actively trying to collect data and establish policies related to sustainability. A company scoring more than 25% and up to 50% falls under the Emerging stage which is the 2nd stage in the SRMM. Level 2 organizations tend to be more aware of the importance of BRSR and have a strong mechanism for reporting the same, butthese businesses are constantly working towards enhancing and establishing the current internal control system and collecting data for disclosures.
Level 3 or the Established Stage is achieved whena company has a BRSR score of more than 50% and up to 75%. These organizations haveestablished business strategy and functional systems for reporting BRSR parameters efficiently. Such organizations are actively involved in compliance functions and are more focused on improving and accelerating the qualitative aspects of their business.
A company with a score or more than 75% qualifies for the highest level of sustainability reporting maturity - Level 4 and is in the stage of leading by examples. At this level, sustainability is deeply ingrained in the culture and ethos of the company. Organizations actively work to have a beneficial social, environmental, and economic impact. They demonstrate creativity and adopt cutting-edge sustainability trends and best practices. Companies who are a part of Level 4 are constantly involved in innovative methods so as to enhance their disclosures and work towards becoming a market leader.
Organizations go through a transformative process as they advance from Level 1 to Level 4, which includes incorporating sustainability into their fundamental business strategies, setting up reliable reporting systems, and interacting with stakeholders. As they advance through the levels, organizations become industry leaders in sustainability reporting, link sustainability with their core business strategy, enhance transparency and accountability, and create value. The SRMM is a useful tool in the effort to create a company environment that is more ethical and sustainable.
[The Daily Pioneer]
