The last few decades have seen a significant increase in the maturity of corporate reporting frameworks that have evolved over time and been embraced internationally by leading businesses to promote, measure, and monitor sustainability performance, especially in their supply/value chain. These go beyond the financials of a company, and are also referred to as sustainability reports. While they may vary in terms of detail and depth, they all have a few common features. One, they cover a range of sustainable development issues, including environmental, social, and human rights issues. Two, many are investor-led, which indicates their interest to better assess risks and opportunities along these parameters. And three, the process of developing these frameworks is consultative, thereby reflecting the range of stakeholder expectations.
Governments of several countries have introduced disclosures on sustainability reporting. Given below, are some examples:
Denmark
Introduced in 2008, all companies that meet certain size criteria (assets, revenue, number of employees) are required to supplement their annual management’s review with a report on social responsibility, i.e. “voluntarily include considerations for human rights, societal, environmental and climate conditions as well as combatting corruption in their business strategy and corporate activities.” (Extract from “The Consequences of Mandatory Corporate Sustainability Reporting” by Ioannis Ioannou and George Serafeim published as Working Paper 11-100 by Harvard Business School, accessed on July 11, 2019)
South Africa
The Johannesburg Stock Exchange (JSE) introduced the disclosure of sustainability information starting in 2010. The JSE has introduced integrated reporting for all listed companies on an “apply or explain” basis, thus allowing those companies that did not issue an integrated report to explain why this was the case. (The JSE Listing Requirements, Bulletin 1 of 2017 accessed on March 24, 2020)
China: The Shanghai Stock Exchange (SHSE) and the Shenzhen Stock Exchange (SZSE) mandated certain listed firms to disclose ESG information starting from financial year ending December 2008. Specifically, SHSE mandated sustainability reporting for firms included in the SHSE Corporate Governance Index, firms with overseas listed shares, and firms in the financial industry. (Extract from “The Consequences of Mandatory Corporate Sustainability Reporting” by Ioannis Ioannou and George Serafeim published as Working Paper 11-100 by Harvard Business School, accessed on July 11, 2019)
Malaysia
The Stock Exchange Bursa Malaysia made sustainability disclosure a listing requirement for all listed firms starting from financial year ending December 2007. (As defined in paragraph (29), Part A of Appendix 9C of the Main Market Listing Requirements and paragraph (30) of Appendix 9C of the ACE Market Listing Requirements issued by Bursa Malaysia Securities Berhad)
Philippines
In 2019, the Securities 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. (SEC Memorandum Circular No. 4, series of 2019 issued by the Securities and Exchanges Commission, The Philippines)
The EU Non-Financial Reporting Directive (which requires large companies in the EU to disclose social, environmental, and diversity information) is the most significant EU-wide legislative initiative to promote sustainability reporting; the process of transposing this into the national laws of EU countries is underway. Additionally, several countries have reporting requirements on specific issues. For instance, climate change related reporting is prevalent in Australia, Mexico, USA, and in France. The Modern Slavery Act, first enacted by the UK in 2015 and more recently by Australia, asks each company to report on modern slavery not just in its operations but also in its global supply chains, thereby including many SMEs in emerging
markets. (Directive 2014/95/EU of the European Parliament)
Business Responsibility Reporting (BRR) in India
Ministry of Corporate Affairs (MCA), Govt. of India released the ‘Report of the Committee on Business Responsibility Reporting (BRR)’ on August 11, 2020. Increasing trends of Environmental, Social and Governance (ESG) investing, the demand for non-financial reporting is growing in India and in this regard the BRSR framework aims to set the stage for sustainable investing. In its Report, the Committee recommended a new reporting framework called as the ‘Business Responsibility and Sustainability Report (BRSR)’ to better reflect the intent and scope of reporting on non-financial parameters. The Committee recommended two formats for disclosures: one ‘comprehensive format’ and the second a ‘Lite version’. (Read more)
(Source: Report of the Committee on Business Responsibility Reporting)
