$30 trln in additional investments required to achieve net zero in 8 hard-to-abate sectors
The Net Zero Industry Tracker 2024 estimates that $30 trillion in additional capital will be required across ...
Hanadi Khalife: BRSR important step towards raising sustainability reporting
Hanadi Khalife, Senior Director of MEA & India Operations, said Responsibility and Sustainability Report (BRSR) is an important departure from the earlier Business Responsibility Report and is being seen as an important step towards raising sustainability reporting to global financial reporting standards.
In 2021, SEBI, the Securities and Exchange Board of India, mandated that India’s top 1,000 listed companies (by market capitalization) would now need to introduce new sustainability reporting, highlighting their disclosures in the format of a BRSRl, she said.
Shareholders, customers, employees, policy makers, and communities are looking to businesses not only to produce profits but also to deliver progress on global economic, social, and governance issues such as climate change, corruption, deforestation, gender and ethnic diversity, and the right to work for all, she added.
Companies are shifting priorities to meet these demands in a way that drives value, she said.
The new BRSR format is based on the nine principles of the Indian government’s “National Guidelines on Responsible Business Conduct” (the “RBC Guidelines“), which are intended to define responsible business conduct for Indian companies, she expounded.
The RBC Guidelines are driven by leading international standards and practices including the UN Guiding Principles on Business and Human Rights, UN Sustainable Development Goals, the Paris Agreement, and the ILO Core Conventions. The principles address a range of sustainability matters including business ethics and transparency, human rights, environmental safety, and fair labor practices, she added.
No longer will chief financial officers (CFOs) and finance function professionals be able to perceive sustainable business initiatives and reporting as outside the scope of their external reporting responsibilities or something to be handed over to other functions. This is now well within the ambit of the CFO’s function. The best part is that members of the finance function, have unique and critical skills that may very well render the work of the sustainable business team more complete, accurate, and business-relevant, she added.
Though many professionals view the term sustainability through the lens of external demands for information on how a company affects society and the planet on issues such as climate change and deforestation, organizations the world over have begun to set broad sustainable business goals based on their purpose, values, and strategy, she said.
Numerous organizations have also become members of the United Nations (UN) Global Compact, which expresses voluntary consent in aligning a company’s efforts toward improving our increasingly global society, as articulated in the strategic development goals (SDGs).
The truth is that establishing the business case for sustainable business initiatives must be connected to and inter-linked with clear and sustained financial outcomes. While measuring such practices was considered challenging in the past, significant research by leading financial institutions, consulting firms, and academics in recent years have established a clear and complimentary connection between sustainable business practices (also referred to as ESG for environmental, social, and governance) and better performance; reduced bankruptcies and the cost of debt; improved top-line growth, lower costs, and fewer regulatory inquiries; market value; liquidity; and expected future cash flows.
As a result of increased attention to ESG issues, more companies are issuing external reports to meet the demands of investors and other stakeholders. For example, in 2019, the Governance & Accountability Institute reported that between 2011 and 2018, the percentage of S&P 500 companies preparing sustainability reports increased from 20% to a whopping 86%.
It must be noted that the finance function is overburdened by reporting, governance, and compliance matters, all of which continue to increase in both volume and complexity. For many companies, this has limited the ability of the finance team to take on new corporate disclosure demands. But the mandate to integrate sustainability into the finance and accounting mix is fairly novel.
In the very recent past, those leading the organization’s sustainable business activities and external reporting typically sat outside the CFO unit with some companies even looking to outside agencies and consultants to address their sustainable business issues, she said. However, both SEBI’s new reporting mandate and the objective of enhanced performance and value creation by integrating sustainable business practices are creating a call to action for CFOs and their finance teams.
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