There exists wide differences in terms of sustainability reporting practices among different sectors that constitute NIFTY 500 companies, according to an analysis by Sculpt Partners, a sustainability-oriented advisory firm that works with public-listed corporations, early-stage ventures, and impact investors.
Companies in the cement, metals and mining industry report better quality data on environmental topics. This finding is part of a first of its kind comprehensive study by Sculpt Partners of the state of sustainability reporting by the top 500 listed companies in India as of Financial Year 2021-22. Sculpt Partners had analysed multiple publicly available resources such as annual reports, websites, investor releases, and other filings on sustainability topics.
The Sculpt report also provides better visibility on sustainability topics that are better reported vis-a-vis others. Companies disclose richer information and metrics for sustainability topics such as Waste Management, GHG Emissions, Water Consumption and Energy Efficient Operations. Some of the industries which are lagging behind on these parameters include Healthcare Services, IT, Financial Services and Media Entertainment and Publication.
Beginning financial year 2022-23, the Business Responsibility & Sustainability Reporting (BRSR) guidelines introduced by SEBI makes it mandatory for the top 1000 listed companies in India (by market capitalisation) to publish sustainability reports and disclose vital ESG information as per BRSR standards.
“In order to align with the SEBI guidelines, we believe that most companies from the lagging sectors need to significantly improve their environment impact reporting practices. Board of Directors, Chief Financial Officers (CFOs) and Chief Sustainability Officers (CSOs) of these companies need to step up and establish measurement mechanisms and narratives to report firm sustainability performance in a fair, transparent, accurate and intuitive manner,” said Kumar Subramanian, Founding Partner and Managing Director, Sculpt Partners.
Sound environmental reporting practices are part of a robust governance structure to effectively oversee, manage and execute an organisation’s sustainability agenda. In this context some of the key findings of the report are:
Less than 15 per cent of the Nifty 500 companies have a dedicated committee of the board to oversee enterprise sustainability agenda.
About 37 per cent report key sustainability risks based on the enterprise risk management framework.
Only 4 per cent report that their board evaluation framework captures sustainability topics.
Only six companies have appointed a Chief Sustainability Officer (CSO) (or an equivalent key management role) to lead enterprise sustainability initiatives at the management level
Only 2 per cent report that key sustainability indicators are linked to management remuneration
Only three companies disclose exact percentage of remuneration linked with sustainability performance
Kumar Subramanian, Founding Partner and Managing Director, Sculpt Partners said: “The enterprise sustainability mandate has to be steered by the Board. They need to integrate the sustainability agenda with their firm strategy, goal-setting, risk management and management incentives. Boards also need to invest themselves in regular training on contemporary sustainability topics. Where appropriate, they should co-opt an advisory board to seek counsel on sustainability risks and opportunities material to the firm. The management of these companies has to sponsor, articulate and execute key sustainability initiatives within the firm and across their value chain. Robust collection, reporting and third-party verification of sustainability data provides the right foundation for a data-led sustainability strategy and practices, and provides transparency to investors on current performance and future commitments. “
The study also examined disclosure of sustainability information regarding key value chain constituents such as customers, suppliers and the government.
As per the study, most Nifty 500 companies fail to report material information on vital customer-related topics such as product safety and quality, product recalls, and practices regarding product labelling and consumer data protection.
Less than 10 per cent of companies (48 of 500) report indicators on data protection breaches and about 1 per cent (7 of 500) report product recall metrics.
On the supply-side, disclosure is largely limited to policies and initiatives on sustainable sourcing.