Chapter 14 Reporting – CS Professional Governance, Risk Management, Compliances and Ethics Notes is designed strictly as per the latest syllabus and exam pattern.
Reporting – Governance, Risk Management, Compliances and Ethics Study Material
Question 1.
Write a note on ‘stakeholder inclusiveness’. (June 2014, 7 marks)
Answer:
Stakeholders Inclusiveness
Stakeholder engagement is an alliance building tool. Corporations practice stakeholder engagement in an effort to understand the needs of their stakeholders, create partnerships and to promote dialogue. Stakeholder engagement identifies stakeholders, assesses stakeholder needs, develops stakeholder relations plans and forms alliances with stakeholders. Stakeholder engagement leads to increased transparency, responsiveness, compliance, organizational learning, quality management, accountability and sustainability. Stakeholder engagement is a central feature of sustainability performance.
Stakeholder engagement is undertaken for numerous reasons which include:
- Improved corporate responsibility and financial performance across the globe.
- To avoid conflict through negotiation, mediation and collaborative learning.
- Development of a shared vision to direct future business decisions and operations.
- To innovate through collaboration.
Question 2.
Write a short note on reporting principles and standard disclosures under Global Reporting Initiative. (Dec 2021, 5 marks)
Answer:
Part 1 of Global Reporting Initiative (GRI) – Reporting Principles and Standard Disclosures – contains reporting principles, standard disclosures, and the criteria to be applied by an organization to prepare its sustainability report ‘in accordance with the guidelines.
The Reporting Principles are fundamental to achieving transparency in sustainability reporting and therefore should be applied by all organizations when preparing a sustainability report. The Principles are divided into two groups:
(a) Principles for defining report content: The Principles for Defining Report Content describe the process to be applied to identify what content the report should cover by considering the organization’s activities, impacts, and the substantive expectations and interests of its stakeholders.
(b) Principles for defining Report Quality : The Principles for Defining Report Quality guide on ensuring the quality of information in the sustainability report, including its proper presentation. The quality of the information is important to enable stakeholders to make sound and reasonable assessments of performance, and take appropriate actions.
There are two different types of Standard Disclosures:
1. General Standard Disclosures:
- Organizational Profile
- Strategy and Analysis
- Stakeholder Engagement
- Identified Material Aspects and Boundaries
- Governance
- Report Profile
- Ethics and Integrity
2. Specific Standard Disclosures:
- Disclosures on Management Approach
- Indicators.
Question 3.
Attempt the following:
“The reporting organisation should identify its stakeholders and explain in its sustainability reporting how it has responded to their reasonable expectations and interests.” Elucidate this statement by considering stakeholders’ inclusiveness. (June 2012, 5 marks)
Answer:
Companies generally consider the interest of the shareholders as the foremost. However they should take into account other stakeholders’ interest also.
Stakeholders are entities or individuals that can reasonably be expected to be significantly affected by the organization’s activities, product and /or service. Stakeholder’s actions are also reasonably expected to affect the ability of the organizations to successfully implement its strategies and meet its objective. This included entities or individuals whose right under law or international conventions provide them with legitimate claims vis-a-vis the organization.
Stakeholders engagement activities are an important tool in this direction. These may include for example, stakeholder engagement for the purpose of compliance with internationally agreed standards or informing on going organization/ business processes. Organization can also use other means such as the media, the scientific community or collaborative activities with peers and stakeholders.
The reporting organization should identify its stakeholders and explain in its report how it has responded to their reasonable expectations and interests.
1. The GRI guidance requires organization to document the stakeholder engagement processes. This will make the sustainability report assurable.
2. Conservation and management of resources, atmosphere, land, forests, deserts, mountains, agriculture, biodiversity, ocean, fresh water, toxic chemicals .hazardous radioactive and solid waste and sewage.
3. Strengthening the role of major groups: Women, children and youth, indigenous, people, non government organizations, local authorities, workers business and industry farmers, scientists and technologist.
4. Means of implementation: Finance, technology transfer, science, education, capacity building, international institutional legal measures, information.
Question 4.
Attempt the following:
(i) Discuss the standard disclosures under the G3 Guidelines of the global reporting initiative (GRI) sustainability reporting framework.
(Dec 2012, 5 marks)
Answer:
Standard Disclosures
In G3 Reporting Guidelines there are three different types of disclosures contained, which are as under:
- Strategy and profile.
- Management approach.
- Performance indicators.
Question 5.
Attempt the following:
What is Dow-Jones sustainability index? (June 2013, 5 marks)
Answer:
The Dow Jones Sustainability Indices are the first global indices tracking the financial performance of the leading sustainability-driven companies worldwide, it was launched in 1999.
The Dow Jones Sustainability World Index comprises more than 300 companies that represent the top 10% of the leading sustainability companies out of the biggest 2,500 companies in the Dow Jones world Index.
Corporate Sustainability Assessment Criteria under the Dow Jones indices is as under:
| Dimension | Criteria | Weighting (%) |
| Economic | Codes of Conduct/ Compliance/ | |
| Corruption and Bribery | 5.5 | |
| Corporate Governance | 6 | |
| Risk and Crisis management | 6 | |
| Industry Specific Criteria | Depends on Industry | |
| Environment | Environmental Performance | |
| (Eco-Efficiency) | 7 | |
| Environmental Reporting | 3 | |
| Industry specific Criteria | Depends on Industry | |
| Social | Corporate Citizenship/Philanthropy | 3.5 |
| Labour Practice Indicators | 5 | |
| Human Capital Development | 5.5 | |
| Social Reporting | 3 | |
| Talent Attraction and Retention | 5.5 | |
| Industry Specific Criteria | Depends on Industry |
Question 6.
What is ESG index? How does it work? (June 2014, 5 marks)
Answer:
ESG describes the environmental, social and corporate governance issues that investors are considering in the context of corporate behaviour. Integration of ESG refers to the active investment management processes that include an analysis of environmental, social, and corporate governance risks and opportunities and sustainability aspects of company performance evaluation.
The ESG index employs a unique and innovative methodology that quantifies a company’s ESG practices and translates them into a scoring system which is then used to rank each company against its peers in the market. Its quantitative scoring system offers investors complete transparency on Environmental, Social & governance issues of a company. Key Performance Indicators:
- Environment: Energy use and efficiency, Greenhouse gas emissions, Water use, Use of ecosystem services impact & dependence and Innovation in environment friendly products and services.
- Social: Employees, Poverty and community impact and Supply chain management
- Governance: Codes of conduct and business principles, accountability, transparency and disclosure and Implementation quality and consistency.
Question 7.
Explain briefly the following:
(a) Global reporting initiative (GRI)
(b) UN Principle for Responsible Investment. (Dec 2014, 3 marks each)
Answer:
(a) Global Reporting Initiative (GRI):
The Global Reporting Initiative (GRI) is a large multi-stakeholder network of thousands of experts, in dozens of countries worldwide, who participate in GRI’s working groups and governance bodies, use the GRI Guidelines to report, access information in GRI-based reports, or contribute to develop the Reporting Framework in other ways both formally and informally.
(b) UN-Principles for Responsible Investment (PRI):
The Principles for Responsible Investment were developed by an international group of institutional investors reflecting the increasing relevance of environmental, social and corporate governance issues to investment practices. The Principles were launched by the UN Secretary-General Kofi Annan at the New York Stock Exchange in April 2006. The Principles were designed to be applied by all investors, with a special focus on fiduciary institutions with long-term perspectives.
The PRI Initiative aims to help investors integrate the consideration of environmental, social and governance (ESG) issues into investment decision-making and ownership practices across all asset classes and regions and in so doing, help contribute to the creation of a sustainable financial system.
Question 8.
Discuss the UN Global Compact, a strategic policy initiative in the areas of human rights, labour, environment and anticorruption. How can companies align with these principles? (June 2015, 5 marks)
Answer:
The UN Global Compact is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anticorruption. By doing so, business, as a primary driver of globalization, can help ensure that markets, commerce, technology and finance advance in ways that benefit economies and societies everywhere.
UN Global Compact incorporates a transparency and accountability policy known as the Communication on Progress (COP). Communications on Progress (COP) is a report to inform the company’s stakeholders about the company’s progress in implementing the Global Compact’s ten principles. The purpose of the COP is both to ensure and deepen the commitment of Global Compact participants and to safeguard the integrity of the initiative. Joining the Global Compact is a widely visible commitment to the ten principles. A company that signs-on to the Global Compact specifically commits itself to:
1. set in motion changes to business operations so that the Global Compact and its principles become part of management, strategy, culture, and day-to-day operations;
2. publish in its annual report or similar public corporate report (e.g. sustainability report) a description of the ways in which it is supporting the Global Compact and its principles (Communication on Progress),
3. publicly advocate the Global Compact and its principles via communications vehicles such as press releases, speeches, etc.
Question 9.
What are the key drivers of sustainability reporting? (June 2015, 5 marks)
Answer:
Following are the key drivers of sustainability reporting:
1. Regulations: Governments at most levels have stepped up the pressure on corporations to ensure the impact of their operations on the environment. Legislation is becoming more innovative and is covering an ever wider range of activities. The most notable shift has been from voluntary to mandatory sustainability monitoring and reporting.
2. Customers: Public opinion and consumer preferences are a more abstract but powerful factor that exerts considerable influence on companies, particularly those that are consumer oriented. Customers significantly influence a company’s reputation through their purchasing choices and brand.
3. Loyalty: This factor has led firms to provide much more information about the products they produce, the suppliers who produce them, and the product’s environmental impact from creation to disposal.
4. NGO’s and the media: Public reaction comes not just from customers but from advocates and the media, who shape public opinion. Advocacy organisations, if ignored or slighted, can damage brand value.
5. Employees: Those who work for a company bring particular pressure to bear on how employers behave, they, too, are concerned citizens beyond their corporate roles.
6. Peer pressure from other companies: Each company is part of an industry, with the peer pressures and alliances that go along with it. Matching industry standards for sustainability reporting can be a factor; particularly for those who operate in the same supply chain and have environmental or social standards they expect of their partners. There is a growing trend for large companies to request sustainability information from their suppliers as part of their evaluation criteria.
7. Company themselves: Corporations, as public citizens, feel their own pressure to create a credible sustainability policy, with performance measures to back it up, but with an eye on the bottom line as well. Increasingly, stakeholders are demanding explicit sustainability reporting strategies and a proof of the results. So, too, are CEOs, who consider sound social and environmental policies a critical element of corporate success. Companies report that integrated reporting drives them to re-examine processes with an eye towards resource allocation, waste elimination and efficiency improvements.
8. Investors: Increasingly, investors want to know that companies they have targeted have responsible, sustainable, long-term business approaches. Institutional investors and stock exchange CEOs, for example, have moved to request increased sustainability reporting from listed companies, and environmental, social and corporate governance indices have been established such as the Dow Jones Sustainability Index.
9. The Carbon Disclosure Project was developed in response to investor demand for a system for firms to measure and report greenhouse gas emissions and climate change strategies as a tool to set reduction targets and set individual goals.
Question 10.
Explain the concept of stakeholder inclusiveness. (June 2015, 5 marks)
Answer:
The reporting organization should identify its stakeholders and explain in its report how it has responded to their reasonable expectations and interests. Stakeholders are defined as entities or individuals that can reasonably be expected to be significantly affected by the organization’s activities, products, and/or services; and whose actions can reasonably be expected to affect the ability of the organization to successfully implement its strategies and achieve its objectives. This included entities or individuals whose rights under law or international conventions provide them with legitimate claims vis-a-vis the organization. Stakeholders can include those who are invested in the organization (e.g., employees, shareholders, suppliers) as well as those who are external to the organization (e.g., communities).
Question 11.
Describe corporate sustainability assessment criteria under the Dow – Jones Sustainability Index. (Dec 2015, 5 marks)
Answer:
Corporate Sustainability Assessment Criteria under the Dow-Jones Indices is as under:
| Dimension | Criteria | Weighting (%) |
| Economic | Codes of Conduct/Compliance/ | |
| Corruption & Bribery | 5.5 | |
| Corporate Governance | 6.0 | |
| Risk & Crisis Management | 6.0 | |
| Industry Specific Criteria | Depends on Industry | |
| Environment | Environmental Performance | |
| (Eco- Efficiency) | 7.0 | |
| Environmental Reporting | 3.0 | |
| Industry Specific Criteria | Depends on Industry | |
| Social | Corporate Citizenship/ Philanthropy | 3.5 |
| Labour Practice Indicators | 5.0 | |
| Human Capital Development | 5.5 | |
| Social Reporting | 3.0 | |
| Talent Attraction & Retention | 5.5 | |
| Industry Specific Criteria | Depends on Industry |
Question 12.
Explain the role of the government in improving sustainability reporting. (June 216, 5 marks)
Answer:
Governments are interceding with unprecedented levels of new regulations, like SEBI mandated Business Responsibility Reporting in India for top listed companies besides the voluntary reporting for others, Integrated Reporting in South Africa and many other jurisdictions are placing similar requirement on companies to report about the sustainability aspects in addition to financial information.
In 2011, Ministry of Corporate Affairs (MCA), Govt, of India issued the first voluntary reporting framework for reporting on Business Responsibility in the form of ‘National Voluntary Guidelines (NVG) on Social, Environmental and Economic Responsibilities of Business’. SEBI considering the framework given under the NVG guidelines, inserted clause 55 to the listing agreement to give mandate to top 100 listed companies to adopt the Business Responsibility Framework. The other listed companies are encouraged to adopt the Business Responsibility Reporting voluntarily. The similar regulators initiatives are required in Other jurisdiction also to encourage the companies to adopt the Reporting on Sustainability aspects. Over the past 10 years, environmental issues have steadily encroached on businesses capacity to create value for customers.
Question 13.
“The UN Global Compact incorporates a transparency and accountability policy known as the communications on progress (COP).” Elaborate. (June 2016, 5 marks)
Answer:
UN Global Compact incorporates a transparency and accountability policy known as the Communication on Progress (COP). The Communication on Progress (COP) is an annual disclosure to stakeholders on progress made in implementing the ten principles of the UN Global Compact in the areas of human rights, labour, environment and anti-corruption, and in supporting broader UN development goals. The COP is posted on the Global Compact website by business participants. Failure to issue a COP will change a participant’s status to non-communicating and can eventually lead to the expulsion of the participant.
Purpose:
- The COP helps drive continuous sustainability performance improvement within the company. The library of COPs at the UN Global Compact website represents the largest repository of corporate practices in sustainability.
- The COP provides investors with sustainability performance information of companies, thus allowing for a more effective integration of Environmental, Social and Governance (ESG) considerations in their investments and resulting in a more effective allocation of capital.
- The COP is an important demonstration of a company’s commitment to transparency and accountability and it serves as an effective tool for multi-stakeholder dialogue.
Question 14.
What is stakeholder inclusiveness? (Dec 2016, 5 marks)
Question 15.
Answer the following:
What are the key drivers of sustainability reporting? (Dec 2016, 5 marks)
Question 16.
(i) “Report content should be balanced and reasonable presentation of the organisation’s performance.” In the light of above statement, discuss the steps to use the GRI Reporting Framework. (Dec 2016, 5 marks)
(ii) Since the sustainability reporting is relatively a new concept, many organisations find it difficult to prepare. What are the challenges in mainstream sustainability reporting? (5 marks)
Answer:
(i) The Global Reporting Initiative (GRI) had launched the fourth generation of its sustainability reporting guidelines: the GRI G4 Sustainability Guidelines (the Guidelines) in 2013. The aim of G4, is to help reporters prepare sustainability reports that contain valuable information about the organization’s most critical sustainability-related issues, and make such sustainability reporting standard practice.
G4 is applicable to all organizations, large and small, across the world. The Guidelines are now presented in two parts to facilitate the identification of reporting requirements and related guidance. It consist of following two parts:
Part 1 – Reporting Principles and Standard Disclosures: It contains the reporting principles and standard disclosures and also sets out the criteria to be applied by an organization to prepare its sustainability report in accordance with the Guidelines.
Part 2 – implementation Manual: It contains reporting and interpretative guidance that an organization should consult when preparing its sustainability report.
There are two different types of Standard Disclosures. The General Standard Disclosures are applicable to all organizations preparing sustainability reports.
The General Standard Disclosures are divided into seven parts:
- Strategy and Analysis
- Organizational Profile
- Identified Material Aspects and Boundaries
- Stakeholder Engagement
- Report Profile
- Governance
- Ethics and Integrity
(ii) Challenges in Mainstreaming Sustainability Reporting:
Since the Sustainability Reporting is relatively a new concept, many organization find it difficult to prepare sustainability. Following may be considered as the challenges in main streaming sustainability reporting:
- Government Encouragement
- Awareness
- Expertise Knowledge
- Investor Behavior
Question 17.
What are the different reporting principles for defining quality in GRI? (June 2017, 5 Marks)
Answer:
The Principles for Defining Report Quality guide on ensuring the quality of information in the sustainability report, including its proper presentation. The quality of the information is important to enable stakeholders to make sound and reasonable assessments of performance, and take appropriate actions. Decisions related to the process of preparing information in a report should be consistent with these Principles. All of these Principles are fundamental to achieving transparency.
| Heading | Principle | Description |
| Balance | The report should reflect positive and negative aspects of the organization’s performance to enable a reasoned assessment of overall performance. | The overall presentation of the report’s content should provide an unbiased picture of the organization’s performance. The report should avoid selections, omissions, or presentation formats that are reasonably likely to unduly or inappropriately influence a decision or judgement by the report reader. |
| Comparability | The organization snould select, compile and report information consistently. | The reported information should be presented in a manner that enables stakeholders to analyze changes in the organization’s performance over time, and that could support analysis relative to other organizations. Comparability is necessary for evaluating performance. Stakeholders using the report should be able to compare information reported on economic, environmental and social performance against the organization’s past performance, its objectives, and, to the degree possible, against the performance of other organizations |
| Accuracy | The reported information should be sufficiently accurate and detailed for stakeholders to assess the organization’s performance. | Responses to economic, environmental and social DMA and Indicators can be expressed in many different ways, ranging from qualitative responses to detailed quantitative measurements. The characteristics that determine accuracy vary according to the nature of the information and the user of the information. |
| Timeliness | The organization should report on a regular schedule so that information is available in time for stakeholders to make informed decisions. | The usefulness of information is closely tied to whether the timing of its disclosure to stakeholders enables them to effectively integrate it into their decision making. The timing of release refers both to the regularity of reporting as well as its proximity to the actual events described in the report. |
| Clarity | The organization should make information available in a manner that is understandable and accessible to stakeholders using the report. | Information should be presented in a manner that is comprehensible to stake-holders who have a reasonable understanding of the organization and its activities. |
| Reliability | The organization should gather,record, compile analyze and disclose information and processes used in the preparation of a report in a way that they can be subject to examination and that establishes the quality and materiality of the information. | Stakeholders should have confidence that a report can be checked to establish the veracity of its contents and the extent to which it has appropriate |
Question 18.
(i) What are the different sections of Business Responsibility Reporting framework as per LODR regulations? (June 2017, 3 marks)
(ii) What do you understand by integrated reporting? (June 2017, 3 marks)
Answer:
(i) Business Responsibility Report under SEBI (Listing Obligation and Disclosure Requirements) Regulation, 2015
With reference to Regulation 34(2)(f) read with Regulation 101(2) of SEBI (LODR) Regulations, 2015, for the top one thousand listed entities based on market capitalization, a business responsibility report describing the initiatives taken by the listed entity from an environmental, social and governance perspective, in the format as specified by the Board from time to time. However, the requirement of submitting a business responsibility report shall be discontinued after the financial year 2021 -22 and thereafter, with effect from the financial year 2022-23, the top one thousand listed entities based on market capitalization shall submit a business responsibility and sustainability report in the format as specified by the Board from time to Jime. Further, during the financial year 2021 -22, the top one thousand listed entities may voluntarily submit a business responsibility and sustainability report in place of the mandatory business responsibility report. Further, the remaining listed entities including the entities which have listed their specified securities on the SME Exchange, may voluntarily submit such reports.
Note: For the purpose of this clause, market capitalization shall be calculated as on the 31st day of March of every financial year.
The format of the BRSR and the guidance note are detailed in Annexure I and Annexure II respectively.
The Business Responsibility & Sustainability Report framework is divided into three sections in Annexure I:
(a) Section A: General Disclosures.
(b) Section B: Management and Process Disclosures.
(c) Section C: Principle wise Performance Disclosure
(ii) Integrated reporting is a new approach to corporate reporting which is rapidly gaining international recognition, integrated reporting is founded on integrated thinking, which helps demonstrate interconnectivity of strategy, strategic objectives, performance, risk and incentives and helps to identify sources of value creation. Integrated Reporting is one step ahead of sustainability reporting and its set to become the way companies report their annual financial and sustainability information together in one report. The aim of an integrated report is to clearly and concisely tell the organization’s stakeholders about the company and its strategy and risks, linking its financial and sustainability performance in a way that gives stakeholders a holistic view of the organization and its future prospects.
Question 19.
Discuss the following:
(a) Global Compact Self Assessment Tools,
(b) Standard and Poor’s ESG India Index. (Dec 2017, 3 marks each)
Answer:
(a) Global Compact Self-Assessment Tool:
The Global Compact Self Assessment Tool is an easy-to-use guide designed for use by companies of all sizes and across sectors committed to upholding the social and environmental standards within their respective operations. The tool consists of 45 questions with a set of three to nine indicators for each question. It consists of a ‘management section’ and four other sections, including human rights, labour, environment and anti-corruption that relate to the principles of the UN Global Compact. The tool is in line with the UN Guiding Principles on Business and Human Rights. For asmair company, this tool acts as a measure of the company’s performance in all areas of the UN Global Compact and how well these issues are managed. For a large organisation, this tool helps to continuously improve existing policies and systems, engage subsidiaries, suppliers or other stakeholders, and improves internal and external reporting.
(b) Standard & Poor’s ESG India index provides investors with exposure to a liquid and tradable index of 50 of the best performing stocks in the Indian market as measured by environmental, social, and governance parameters. The index employs a unique and innovative methodology that quantifies a company’s ESG practices and translates them into a scoring system which is then used to rank each company against their peers in the Indian market. Its quantitative scoring system offers investors complete transparency.
The creation of the index involves a two step process, the first of which uses a multi-layered approach to determine an ‘ESG’ score for each company. The second step determines the weighting of the index by score. Index constituents are derived from the top 500 Indian companies by total market capitalizations that are listed on National Stock Exchange of India Ltd. (NSE). These stocks are then subjected to a screening process which yields a score based on a company’s ESG disclosure practices in the public domain.
Question 20.
“Corporate Citizenship is a commitment to improve community well being through voluntary practices.” Comment (Dec 2017, 3 marks)
Answer:
Corporate citizenship is a commitment to improve community well-being through voluntary business practices and contribution of corporate resources leading to sustainable growth. Corporate responsibility is achieved when a business adapts CSR well aligned to its business goals and meets or exceeds, the ethical, legal, commercial and public expectations that society has of business.
The term corporate citizenship implies the behaviour, which would maximize a company’s positive impact and minimize the negative impact on its social and physical environment. It means moving from supply driven to more demand led strategies; keeping in mind the welfare of all stakeholders; more participatory approaches to working with communities; balancing the economic cost and benefits with the social; and finally dealing with processes rather than structures. The ultimate goal is to establish dynamic relationship between the community, business and philanthropic activities so as to complement and supplement each other.
Corporate citizenship is being adopted by more companies who have come to understand the importance of the ethical treatment of stakeholders.
Question 21.
Discuss in brief the following;
Environment, Social and Governance (ESG) Index. (June 2018, 3 marks)
Answer:
ENVIRONMENT, SOCIAL, GOVERNANCE (ESG) INDEX
ESG describes the environmental, social and corporate governance issues that investors are considering in the context of corporate behaviour. Integration of ESG refers to the active investment management processes that include an analysis of environmental, social, and corporate governance risks and opportunities and sustainability aspects of company performance evaluation.
Key Performance Indicators:
- Environment – Energy use and efficiency, Greenhouse gas emissions, Water use, Use of ecosystem services – impact and dependence and Innovation in environment friendly products and services.
- Social – Employees, Poverty and community impact and supply chain management
- Governance – Codes of conduct and business principles, accountability, transparency and disclosure and Implementation – quality and consistency.
Question 22.
What are the Financial Information which are required to be disclosed on website of the Company as per Regulation 46 of SEBI (LODR) Regulations, 2015? (June 2019, 5 marks)
Answer:
The financial information which are required to be disclosed on website of the company as per the Regulation (46) of SEBI (LODR) Regulations, 2015 are:
(i) financial information including:
- notice of meeting of the board of directors where financial results shall be discussed
- financial results, on conclusion of the meeting of the board of directors where the financial results were approved
- complete copy of the annual report including balance sheet, profit and loss account, directors report, corporate governance report etc.
(ii) shareholding pattern
(iii) details of agreements entered into with the media companies and/or their associates, etc.
(iv) schedule of analyst or institutional investor meet and presentations made by the listed entity to analysts or institutional investors simultaneously with submission to stock exchange
(v) new name and the old name of the listed entity for a continuous period of one year, from the date of the last name change
(vi) With effect from October 1, 2018, all credit ratings obtained by the entity for all its outstanding instruments, updated immediately as and when there is any revision in any of the ratings
(vii) Separate audited financial statements of each subsidiary of the listed entity in respect of a relevant financial year, uploaded at least 21 days prior to the date of the annual general meeting which has been called to inter alia consider accounts of that financial year.
Question 23.
In addition to the Financial Capital, the Integrated Reporting examines five additional capitals that should guide an organisation’s decision-making and long-term success. Which are these five additional capitals ? (June 2019, 5 marks)
Answer:
Integrated reporting is a concept that has been created to better articulate che broader range of measures that contribute to long-term value and the role, organisations play in society. Central to this is the proposition that value is increasingly shaped by factors additional to financial performance, such as reliance on the environment, social reputation, human capital skills and others. This value creation concept is the backbone of integrated reporting.
In addition to financial capital, integrated reporting examines five additional capitals that should guide an organisation’s decision-making and long-term success its value creation in the broadest sense. They are:
- Manufactured capital: Manufactured capital is seen as human-created, production-oriented equipment and tools.
- intellectual capital: It is a key element in an organization’s future earning potential, investment in R&D, innovation, human resources and external relationships, which can determine the organization’s competitive advantage.
- Human capital: It is generally understood to consist of individual’s capabilities and the knowledge, skills and experience of the company’s employees and managers as they are relevant to the task at hand as well as the capacity to add to the reservoir of knowledge, skills and experience.
- Social and relationship capital: Social and relationship capital may include relationships within an organization, as well as those between an organization and its external stakeholders, depending on where social boundaries are drawn.
- Natural capital: It may be defined as any stock of natural resources or environmental assets such as soil, water, and atmosphere, ecosystems which provide a flow of useful goods or services now and in the future.
Question 24.
“Integrated reporting would build on the existing financial reporting model to present additional information about a company’s strategy, governance, and performance” In light of above sentence, prepare a note on purpose of Integrated reporting and guiding principles for preparation of such report. (Dec 2019, 5 marks)
Answer.
Integrated reporting is founded on integrated thinking, which helps demonstrate interconnectivity of strategy, strategic objectives, performance, risk and incentives and helps to identify sources of value creation. It is a concept that has been created to better articulate the broader range of measures that contribute to long-term value and the role, organisations play in society.
Purpose of Integrated Reporting
The primary purpose of an integrated report is to explain to providers of financial capital how an organisation creates value over time. An integrated report benefits all stakeholders interested in an organisation’s ability to create value overtime, including employees, customers, suppliers, business partners, local communities, legislators, regulators and policy-makers.
An integrated report aims to provide insight about the resources and relationships used and affected by an organisation these are collectively referred to as “the capitals” in this Framework.
It also seeks to explain how the organisation interacts with the external environment and the capitals to create value over the short, medium and long term. The capitals are stocks of value that are increased, decreased or transformed through the activities and outputs of the organisation. They are categorized in this Framework as financial, manufactured, intellectual, human, social and relationship, and natural capital, although organisations preparing an integrated report are not required to adopt this categorization pr to structure their report along the lines of the capitals.
Guiding Principles : The following Guiding Principles underpin the preparation and presentation of an integrated report, informing the content 6f the report and how information is presented. These Guiding Principles are applied individually and collectively for the purpose of preparing and presenting an integrated report; accordingly, judgement is needed in applying them, particularly when there is an apparent tension between them (e.g., between conciseness and completeness).
A. Strategic focus and future orientation : An integrated report should provide insight into the organisation’s strategy, and how it relates to the organisation’s ability to create value in the short, medium and long term and to its use of and effects on the capitals.
B. Connectivity of information : An integrated report should show a holistic picture of the combination, interrelatedness and dependencies between the factors that affect the organisation’s ability to create value over time.
C. Stakeholder relationships: An integrated report should provide insight into the nature and quality of the organisation’s relationships with its key stakeholders, including how and to what extent the organisation understands, takes into account and responds to their legitimate needs and interests.
D. Materiality: An integrated report should disclose information about matters that substantively affect the organisation’s ability to create value over the short, medium and long term.
E. An integrated report should be concise: An integrated report includes sufficient context to understand the organisation’s strategic governance, performance and prospects without being burdened with less relevant information.
F. Reliability and completeness : An integrated report should include all material matters, both positive and negative, in a balanced way and without material error.
G. Consistency and comparability : The information in an integrated report should be presented:
- On a basis that is consistent over time.
- In a way that enables comparison with other organisations to the extent it is material to the organisation’s own ability to create value over time.
Question 25.
What are the major sections of Business Responsibility Report (BRR)? (Dec 2019, 5 marks)
Answer:
Business Responsibility Report under SEBI (Listing Obligation and Disclosure Requirements) Regulation, 2015
With reference to Regulation 34(2)(f) read with Regulation 101(2) of SEBI (LODR) Regulations, 2015, for the top one thousand listed entities based on market capitalization, a business responsibility report describing the initiatives taken by the listed entity from an environmental, social and governance perspective, in the format as specified by the Board from time to time. However, the requirement of submitting a business responsibility report shall be discontinued after the financial year 2021-22 and thereafter, with effect from the financial year 2022-23, the top one thousand listed entities based on market capitalization shall submit a business responsibility and sustainability report in the format as specified by the Board from time to time. Further, during the financial year 2021-22, the top one thousand listed entities may voluntarily submit a business responsibility and sustainability report in place of the mandatory business responsibility report. Further, the remaining listed entities including the entities which have listed their specified securities on the SME Exchange, may voluntarily submit such reports.
Note: For the purpose of this clause, market capitalization shall be calculated as on the 31 st day of March of every financial year.
The format of the BRSR and the guidance note are detailed in Annexure I and Annexure II respectively.
The Business Responsibility & Sustainability Report framework is divided into three sections in Annexure I:
(a) Section A: General Disclosures.
(b) Section B: Management and Process Disclosures.
(c) Section C: Principle wise Performance Disclosure
Question 26.
Prepare a brief note on National Guidelines on Responsible Business Conduct (NGRBC). (Dec 2019, 5 marks)
Answer:
The Ministry of Corporate Affairs has revised the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, 2011 (NVGs) and has released the National Guidelines on Responsible Business Conduct (NGRBC) in March 2019. These guidelines urge businesses to actualise the principles in letter and spirit. The annexure 3 of the Guidelines details the reporting framework associated with the National Guidelines for Responsible Business Conduct. It consists of three sections:
(a) Section A – General Disclosures, covering operational, financial and ownership related information.
(b) Section B – Management and Process Disclosures covering the structures, policies and processes to integrate the Guidelines and
(c) Section C – Principle-wise Performance Indicators covering how well businesses are performing in pursuit of these Guidelines.
Businesses may use this reporting framework to voluntarily disclose their commitment to and performance against their economic, social and environmental impacts. A growing number of businesses are already doing this and are reporting several benefits, internal and external, as a result of their commitment to disclosure and reporting.
Question 26.
What do you mean by Corporate Sustainability Reporting? Discuss the benefits and key drivers of sustainability reporting. (Dec 2020, 5 marks)
Answer:
Corporate sustainability is an approach that creates long-term stakeholder value by implementing a business strategy that considers every dimension of how a business operates in the ethical, social, environmental, cultural, and economic spheres.
Sustainability reporting is a process for publicly disclosing an organization’s economic, environmental, and social performance. Many companies find that financial reporting alone no longer satisfies the needs of shareholders, customers, communities and other stakeholders for information about overall organizational performance.
A sustainability report is an organizational report that gives information about economic, environmental, social and governance performance. Sustainability reporting aims to communicate an organization’s sustainability priorities, policies, programs and performance to its investors.
Sustainability reporting can be considered as synonymous with other terms for non-financial reporting; triple bottom line reporting, corporate social responsibility (CSR) reporting, and more. It is also an intrinsic element of integrated reporting; a more recent development that combines the analysis of financial and non-financial performance.
Benefits of sustainability reporting
- Internal benefits of sustainability reporting for companies and organizations can include: Increased understanding of risks and opportunities
- Emphasizing the link between financial and non-financial performance
- Influencing long term management strategy and policy, and business plans
- Streamlining processes, reducing costs and improving efficiency
- Benchmarking and assessing sustainability performance with respect to laws, norms, codes, performance standards, and voluntary initiatives
- Avoiding being implicated in publicized environmental, social and governance failures
- Comparing performance internally, and between organizations and sectors External benefits of sustainability reporting can include:
- Mitigating – or reversing – negative environmental, Social and governance impacts
- Improving reputation and brand loyalty
- Enabling external stakeholders to understand the organization’s true value, and tangible and intangible assets
- Demonstrating how the organization influences, and is influenced by, expectations about sustainable development
Some of the key drivers of sustainability reporting are:
- Regulations
- Customers
- Loyalty
- NGO’s and the media
- Employees
- Peer pressure from other companies
- Companies themselves
- Investors
Question 27.
The Board of Directors of Fresco Pvt. Ltd. is in the process of reviewing the list of laws applicable to the company. As the Company Secretary of Fresco Pvt. Ltd., advise the Board on the components of a robust internal compliance reporting program. (Dec 2020, 5 marks)
Answer:
An internal reporting mechanism need not be extensive however it must go far beyond a written policy. It must be designed to reflect the practices, laws and culture of the countries in which the company is operating. Any broken link in the reporting chain can interrupt the flow of information from the reporter to those who need to hear and act on it. A sound program should include the following elements:
- Communications
- Accessibility
- Culture Appropriateness
- Universality
- Confidentiality and Anonymity
- Screening
- Collect Data
- Remedial action and feedback
- Management visibility
- Employee Protection
Question 28.
“Corporate reporting is an essential means by which companies communicate with investors as a part of their accountability and stewardship obligation.” Comment and list out the expected information required by investors, (Dec 2020, 5 marks)
Answer:
Corporate reporting is an essential means by which companies communicate with investors as part of their accountability and stewardship obligations. The current financial reporting model was developed in the 1930’s for an industrial world. In general, the model provides a backwards-looking review of performance and does not provide enough relevant information for decision- making today.
The financial reporting model is like “looking in the. rear-view mirror,” when in fact the road ahead is very turbulent and there are huge impacts on the company, both societal and environmental.
It is not necessarily the volume of information, but the lack of a comprehensive story, which is where improvements in corporate reporting are needed. Investors expect information about:
- Business model and strategy,
- Intangible factors and sustainability (i.e. economic, environmental, social) commitments,
- Impacts and performance that affect a company’s value today and its ability to create value in the future,
- Key aspects of corporate governance, ‘
- Internal controls,
- Human rights / diversity practices and policies,
- Key financial ratios.
Question 29.
Why Non-Financial Reporting is important for companies? (Aug 2021, 5 marks)
Answer:
Non-Financial reporting is a structured way of presenting information about one’s performance. It is the practice of measuring, disclosing and being accountable to internal and external stakeholders for organisational performance towards the goal of sustainable and inclusive development. It epitomises that a company’s financial health is dependent on much more than the assets on its balance sheet and the movements on its profit and loss account.
Non:financial reporting is an opportunity to communicate in an open and transparent way with stakeholders. In their non-financial reports, companies report an overview of their environmental and social impact during the previous year. The information in nonfinancial reports contributes to building up a company’s risk-return profile. Non-financial reporting includes –
- Board’s Report
- Corporate Social Responsibility Report
- Corporate Sustainability Report
During the initial phases, corporate performance was mainly judged by market capitalization, share price and certain financial ratios such as Earnings Per Share (EPS), Return on Equity (ROE), etc. Now in the 21st century, corporate performance is being judged by corporate social responsibility reporting and Sustainability reporting whose disclosure will fall under non-financial reporting.
One of the critical parameters to be evaluated in this context would be the value created by the firm for society and whether such value creation is going to be enduring in nature. As a result, non-financial reporting will be extremely important for companies and its relevance is only going to increase in times to come. Just as financial reporting is not only concerned with returns but the risk return trade-off, similarly, non-financial reporting is also about the risks that one creates in the society and measures adopted to mitigate the same.
Question 30.
Sustainability Reporting being relatively a new concept, what challenges do you foresee in mainstreaming sustainability reporting? (Aug 2021, 5 marks)
Answer:
Since the Sustainability Reporting is relatively a new concept, many organizations find it difficult to prepare sustainability reports. Following may be considered as the challenges in mainstreaming sustainability reporting:
1. Awareness: lack of awareness about the emerging concept of sustainability reporting is also a major challenge which the government and corporate governance bodies need to address by arranging the sustainability awareness programme for the Professionals, Board of Directors and Management in the corporate sector, as these are the persons who will drive sustainability reporting initiative for an organisation. The government/regulators should organize such awareness programme jointly with the experts in the field of Sustainability Reporting.
2. Expertise Knowledge: Sustainability Reporting is relatively a new concept in many jurisdictions and organization found it very difficult to prepare a sustainability report in the absence of expert guidance on the subject. The Sustainability Reporting concept is emerging as a good tool to showcase the corporate governance practices of an orgainsation and this area demand professionals having expert knowledge of sustainability reporting. The professional bodies in various jurisdictions should impart the expert knowledge of sustainability reporting to their members to develop a good cadre of experts in this emerging area of sustainability reporting.
3. Investor Behaviour: It is a recognized principle that investors should consider the Environmental, Social and Governance (ESG) issues while making investment decisions. There are specific regulators guidelines for the institutional investor to be vigilant on voting aspects and be concerned about the governance practices of the companies in which they invest. However, the investor behaviour may vary from company to company and sometimes they invest in companies without considering the ESG issues either due to lack of awareness on ESG issues or some other business reasons. It should be made a practice that the investor fund flow to those organization following the good governance including reporting on sustainability aspects.
4. Cost Factor: Many elements of the reporting process can contribute to its cost, including:
- Time for senior management and other staff to discuss report contents.
- Developing and implementing data gathering systems
- Time for gathering and inputting data
- Implementing new processes, including staff training on data collection
- Time for checking information
- Preparing the report itself, involving internal resources (time, capacity building, etc.), and potentially external resources (consultancy, writing/editing, layout, printing, etc.)
- External verification or auditing, if applicable.
Question 31.
Elucidate the purposes and limitations of Financial Reporting. (Aug 2021, 5 marks)
Answer:
Financial reporting is the process of producing statements that disclose an organisation’s financial status to management, investors and the government. Financial Reporting involves the disclosure of financial information to the various stakeholders about the financial performance and financial position of the organisation over a specified period of time. These stakeholders include – investors, creditors, public, debt providers, governments & government agencies. In case of listed companies the frequency of financial reporting is quarterly & annual.
Financial reporting serves two primary purposes. First, it helps management to engage in effective decision- making concerning the company’s objectives and overall strategies. The data disclosed in the reports can help management discern the strengths and weaknesses of the company, as well as its overall financial health. Second, financial reporting provides vital information about the financial health and activities of the company to its stakeholders including its shareholders, potential investors* consumers, and government regulators. It’s a means of ensuring that the company is being run appropriately.
The importance of financial reporting cannot be over emphasised. But still financial reporting has some limitations. The current financial reporting model was developed in the 1930’s for an industrial world. In general, the model provides a backwards-looking review of performance and does not provide enough relevant information for decision-making today. The financial reporting model is like “looking in the rear-view mirror,” when in fact the road ahead is very turbulent and there are huge impacts on the company, both societal and environmental.
It is not necessarily the volume of information, but the lack of a comprehensive story, which is where improvements in financial reporting are needed. Investors expect information about:
- Business model and strategy,
- Intangible factors and sustainability (i.e. economic, environmental, social) commitments,
- Impacts and performance that affect a company’s value today and its ability to create value in the future,
- Key aspects of corporate governance,
- Internal controls,
- Human rights/diversity practices and policies,
- Key financial ratios.
Question 32.
What are the Guiding Principles for preparation of an integrated report? (Aug 2021, 5 marks)
Answer:
The following Guiding Principles underpin the preparation of an integrated report, informing the content of the report and how information is presented:
1. Strategic focus and future orientation: An integrated report should provide insight into the organization’s strategy, and how it relates to the organization’s ability to create value in the short, medium and long term, end to its use of and effects on the capitals.
2. Connectivity of information: An integrated report should show a holistic picture of the combination, interrelatedness and dependencies between the factors that affect the organization’s ability to create value over time.
3. Stakeholder relationships: An integrated report should provide insight into the nature and quality of the organization’s relationships v ith its key stakeholders, including how and to what extent the organization understands, takes into account and responds to their legitimate needs and interests.
4. Materiality: An integrated report should disclose information about matters that substantively affect the organization’s ability to create value over the short, medium and long term.
5. Conciseness: An integrated report should be concise.
6. Reliability and completeness: An integrated report should include all material matters, both positive and negative, in a balanced way and without material error
7. Consistency and comparability: The information in an integrated report should be presented: (a) on a basis that is consistent over time; and (b) in a way that enables comparison with other organizations to the extent it is material to the organization’s own ability to create value over time.
Question 33.
Discuss the relation between integrated reporting and sustainability reporting. (Aug 2021, 5 marks)
Answer:
Sustainability reporting is a process that assists organizations in setting goals, measuring performance and managing change towards a sustainable global economy – one that combines long term profitability with social responsibility and environmental care. Sustainability reporting – mainly through but not limited to a sustainability report – is the key platform for communicating the organization’s economic, environmental, social and governance performance, reflecting positive and negative impacts. The aspects that the organization deems to be material, in response to its stakeholders’ expectations and interests, drive sustainability reporting. Stakeholders can include those who are invested in the organization as well as those who have other relationships with the organization.
Integrated reporting is an emerging and evolving trend in corporate reporting, which in general aims primarily to offer an organization’s providers of financial capital with an integrated representation of the key factors that are material to its present and future value creation. Integrated reporters build on sustainability reporting foundations and disclosures in preparinQ their integrated report. Through the integrated report, an organization provides a concise communication about how its strategy, governance, performance and prospects lead to the creation of value over time. Therefore, the integrated report is not intended to be an extract of the traditional annual report nor a combination of the annual financial statements and the sustainability report’. However, the integrated report interacts with other reports and communications by making reference to additional detailed information that is provided separately.
Although the objectives of sustainability reporting and integrated reporting may be different, sustainability reporting is an intrinsic element of integrated reporting. Sustainability reporting considers the relevance of sustainability to an organization and also addresses sustainability priorities i and key topics, focusing on the impact of sustainability trends, risks and opportunities on the long term prospects and financial performance of the organization. Sustainability reporting is fundamental to an organization’s i integrated thinking and reporting process in providing input into the organization’s identification of its material issues, its strategic objectives, and the assessment of its ability to achieve those objectives and create value overtime.
Question 34.
Discuss the guiding principles for Preparation and presentation of an integrated report. (Dec 2021, 5 marks)
Answer:
Guiding Principles underpin the preparation of an integrated report, informing the content of the report and how information is presented. The following guidelines are applied individually arid collectively for the purpose of preparing and presenting an integrated report:
- Strategic focus and future orientation
- Connectivity of information
- Stakeholder relationships
- Materiality
- Conciseness
- Reliability and completeness
- Consistency and comparability
Question 35.
Define financial reporting. What are its main components? (Dec 2021, 5 marks)
Answer:
Financial Reporting involves the disclosure of financial information to the various stakeholders about the financial performance and financial position of the organisation over a specified period of time. These stakeholders include – investors, creditors, public, debt providers, governments and government agencies. In case of listed companies the frequency of financial reporting is quarterly & annual.
Financial reporting serves two primary purposes. First, it helps management to engage in effective decision making concerning the company’s objectives and overall strategies. The data disclosed in the reports can help management discern the strengths and weaknesses of the company, as well as its overall financial health. Second, financial reporting provides vital information about the financial health and activities of the company to its stakeholders including its shareholders, potential investors, consumers, and government regulators. It is a way of ensuring that the company is being run appropriately.
The main components of financial reporting are:
- The notes to financial statements
- The financial statements – Balance Sheet, Statement of Profit & Loss, Cash flow statement & Statement of changes in stock holder’s equity
- Prospectus (In case of companies going for IPOs)
- Quarterly & Annual reports (in case of listed companies)
- Management Discussion & Analysis (In case of public companies)
The Government and the Institute of Chartered Accounts of India (ICAI) has issued various accounting standards and guidance notes which are applied for the purpose of financial reporting. This ensures uniformity across various diversified industries when they prepare and present their financial statements.
Question 36.
Specify, in brief, the information to be disclosed in board’s report. (Dec 2021, 5 marks)
Answer:
The Companies Act, 2013 mandates certain disclosures to be made in the board’s report. In addition, a listed company has to comply with certain additional requirements under SEBI (Listing Obligations and Disclosure’ Requirements) Regulations, 2015. Where a company is listed in an overseas stock exchange, then it has to also comply with the disclosure requirements of that exchange. A company regulated by any other law has to comply with the disclosure requirements of those laws.
The board’s report should be based on the company’s standalone financial statement and should relate to the financial year for which such statement has been prepared. If any information is specified elsewhere ir, the financial statement, then the board’s report may give a reference thereof instead of repeating the same.
A board’s report should typically include information under following heads:
- Capital and Debt Structure
- General Information
- Company Specific Information
- Management
- Investor Education and Protection Fund (IEPF)
- Credit Rating of Securities
- Details of Deposits
- Disclosures Relating to Subsidiaries, Associates and Joint Ventures
- Particulars of Contracts or Arrangements with Related Parties
- Particulars of Loans, Guarantees And Investments
- Corporate Social Responsibility (CSR)
- Foreign Exchange Earnings and Outgo
- Conservation of Energy, Technology Absorption
- Risk Management including management perception of Risk factors
- Details of Establishment of Vigil Mechanism
- Material Orders of Judicial Bodies /Regulators
- Changes in directors and KMP .
- Explanations in Response to Auditors’Qualifications
- Auditors Reports including Secretarial Audit Report
- Compliance of applicable regulations
- Compliance With Secretarial Standards
- Corporate Insolvency Resolution Process Initiated under the Insolvency and Bankruptcy Code, 2016 (IBC)
- Annual Return link on website
- Failure to Implement any Corporate Action
- weat Equity, ESOPs etc.
- Details of Committee meetings
- Attendance of Directors at meetings of Board
- Additional Disclosures Under Listing Regulations
- Disclosures pertaining to the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 etc.
Question 37.
The Companies Act, 2013 brought revolutionary changes and mandated the Corporate Social Responsibility (CSR) provisions for the companies. As per the provisions related to CSR, eligible companies need to file a CSR Report on annual basis. What are the contents of CSR report? (June 2022, 5 marks)
(b) Integrated reporting is founded on integrated thinking, which helps to demonstrate interconnectivity of strategy, strategic objectives, performance, risk and incentives and helps to identify sources of value creation. In reference to integrated reporting, explain the International Integrated Reporting Council (IIRC). (June 2022, 5 marks)
(c) Explain the regulatory framework with respect to sustainability reporting in India. (June 2022, 5 marks)
(d) As per SEBI Circular No. CIR/CFD/CMD/10/2015 dated 4th November, 2015, a format for “Business Responsibility Report (BRR)” has been prescribed. This circular prescribes the BRR framework into five sections. Explain the contents of these five sections, in brief. (June 2022, 5 marks)
Question 36.
“Global Reporting Initiative (GRI) Sustainability Reporting Standards (GRI Standards) helps businesses, governments and other organizations understand and communicate the impact of business on critical sustainability issues.” Considering the statement, discuss any five distinctive elements of the GRI Standards. (June 2022, 5 marks)
Question 38.
Attempt the following:
“In India, the primary responsibility for administration and implementation of the policy of Government of India with respect to environmental management, conservation, ecological development and pollution control rests with the Ministry of Environment and . Forests (MoEF)’.” Discuss and list out the enactments administered by MoEF. (June 2013, 5 marks)
Answer:
The primary responsibility for administration and implementation of the Policy of the Government of India with respect to environmental management, conservation, ecological sustainable development and pollution control rests with the Ministry of Environment and Forest (MoEF). The MoEF is the agency responsible for the review and approval of Environmental Impact Assessment. Under this notification certain activities must obtain clearance from Central and State Government and also to obtain no objection certificate before commencement of the operations.
The MoEF is responsible to enforce the Regulations established pursuant to major legal enactment which include:
- The Water (Prevention and Control of Pollution) Act, 1974.
- The Air (Prevention and Control of Pollution) Act, 1981.
- The Environment (Protection) Act, 1986.
- National Environment Appellate Authority Act, 1997.
- The Prevention of Cruelty to Animals Act, 1960.
- Wild Life (Protection) Act, 1972.
- Scheduled Tribes and other Traditional Forest Dwellers (Recognition of Forest Rights) Act, 2006.
- Forest Conservative Act, 1980.
- Indian Forest Act, 1927.
- Biological Diversity Act, 2002.
Question 39.
As the Company Secretary of Sound India Ltd., you are required by the Chairman to prepare a note for the Board of directors highlighting the following:
(i) Importance of sustainability reporting .
(ii) Available framework for sustainability reporting
(iii) Challenges involved in main streaming sustainability reporting. (Dec 204, 8 marks)
Answer:
(i) Importance of sustainability reporting:
- Legitimation of corporate activities, products and services which create environmental and social impacts.
- Increase in corporate reputation and brand value.
- Gaining a competitive advantage.
- Comparison and benchmarking against competitors.
- Increasing transparency and accountability within the company.
- Establishing and supporting employee motivation as well as internal information and control processes.
(ii) Available framework for sustainability reporting:
The idea of sustainability reporting is that how an organization contributes or aims to contribute in the future, to the improvement or deterioration of economic, environmental and social conditions, developments and trends at the local, regional or global level. This involves discussing the performance of the organization in the context of the limits and demands placed on environmental or social resources at the sectoral, local, regional or global level.
(iii) Challenges involved in Main streaming Sustainability Reporting:
Since the Sustainability Reporting is relatively a new concept, many organization find it difficult to prepare sustainability report. Following may be considered as the challenges in main streaming sustainability reporting:
- Government Encouragement
- Awareness
- Expertise Knowledge
- Investor Behaviour.
Reporting Notes:
Integrated Reporting
Integrated reporting (IR) is a “process that results in communication, most visibly a periodic “integrated report”, about value creation over time.
Financial Reporting:
Financial reporting is the process of producing statements that disclose an organization’s financial status to management, investors and the government.
An integrated report should include eight Content Elements that are fundamentally linked to each other and are not mutually exclusive
- Organisational overview and external environment
- Governance
- Business model
- Risks and opportunities
- Strategy and resource allocation
- Performance
- Outlook
- Basis of presentation
Compliance Officer
The Regulation 2(c) defines the meaning of “compliance officer”. It means any senior officer, designated so and reporting to the board of directors or head of the organisation in case board is not there, who is financially literate and is capable of appreciating requirements for legal and regulatory compliance under these regulations and who shall be responsible for compliance of policies, procedures,, maintenance of records, monitoring adherence to the rules for the preservation of unpublished price sensitive information, monitoring of trades and the implementation of the codes specified in these regulations under the overall supervision of the board of directors of the listed company or the head of an organisation, as the case may be.
Encumbered Shares:
Encumbered securities are securities that are owned by one entity, but subject to a legal claim by another. When an entity borrows from another, legal claim on the securities owned by the borrower can be taken as ‘ security by the lender should the borrower default on its obligation.