Integrated Reporting - Opportunities and challenges for CEO’s / CFO’s of Indian Companies

Image http://creativity103.com/ Integrated Reporting - Opportunities and challenges for CEO’s / CFO’s of Indian Companies 2010

Sustainability Reporting • Many professional accountants today, are taken aback to hear that accounting as they know it is about to change forever. The Sustainability community today is talking about Integrated Reporting - a way of accounting for economic, social and environmental (ESG) impacts. • For most accountants / ﬁnance departments all over the world sustainability has been either about risk mitigation or compliance. It hasn’t really made a signiﬁcant dent in how they worked. However, integrated reporting is about to change all that. The Global Reporting Initiative (www.globalreporting.org) and The Prince’s Accounting for Sustainability Initiative (www.accountingforsustainability.org) are driving the change towards integrated reporting practices at organizations all over the world. • The Prince’s Accounting for Sustainability Initiative talks about 10 main elements to embed sustainability http://www.accountingforsustainability.org/output/page152.asp . Here are my comments on (4 points) their implications for Indian Companies and CFO’s

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Board and senior management commitment “ Senior management needs to be committed to the process of embedding sustainability. In particular the Chief Executive needs to show urgency in both Image http://creativity103.com/ action and message. Only when the enthusiasm and motivation comes from the top will sustainability become an essential and unquestioned part of an Source organization's procedures. ” • http://www.accountingforsustainability.org/output/page152.asp

Board and senior management commitment The Indian perspective • Most Indian companies understand • Social Contribution - Most large the fundamental principles of Indian corporate houses make sustainability, however there is much significant contributions to skepticism voiced in direct meetings communities where their plants/ with CFO’s. C Level executives are factories are located. They often approached by NGO’s to understand the need to take care of support their causes. While most C the families of their large workforce level executives understand the and stay compliant to pollution laws. need to do good, they are However, integrated reporting poses flummoxed when it comes to a significant challenge for most. It drawing the right balance between means that the balance sheet will doing good for the business and the now talk publicly about charity / planet / society. community contributions and that they will be mandated to contribute to society - voluntary action will now become mandated. What will the impact of these disclosures be, is a mystery for most.

Board and senior management commitment The Indian perspective • Environment - The benefit of carbon • At the GRI conference in Amsterdam credits and the ability to reduce Barbara Kux, Siemens AG made an costs by reducing consumption of impressive presentation on their water and electricity is not lost on commitment to ‘green most Indian companies. However, technologies’, but someone in the there are significant technological Indian delegation remarked ‘ Will challenges for many companies in these be available to us?’. Many greening the supply chain. In many Indian companies believe that the cases it needs significant environmental laws / disclosure investments in technologies. norms will involve significant challenges, and steps to address skepticism and resistance need to be taken.

Understanding and analyzing the key sustainability drivers for the organization “ Few organizations have unlimited resources to dedicate to addressing sustainability issues. It is therefore important for each organization to determine which Image http://creativity103.com/ sustainability areas are the most important for it, and to understand how sustainability in these areas affects reputation, brand and relationships with key Source stakeholders. ” • http://www.accountingforsustainability.org/output/page152.asp

Understanding and analyzing the key sustainability drivers for the organization The Indian perspective • Indian C level executives ﬁnd that • While many frameworks and they understand that a key map of standards exist, there are many gaps. possible initiatives needs to be For example most don’t really take addressed. The challenge is not in into consideration India’s biggest making this list, but in evaluating it. challenge of developing sustainable When companies approach NGO’s livelihoods. At the GRI conference in they are often handed over a list of Amsterdam only 1 person raised this the NGO’s top causes for which they topic Mr. Y.C. Deveshwar, who is the may need funding. When they CEO of ITC, one of India’s largest approach consultancies they ﬁnd that companies. there are very few trained people who understand the business perspective and can actually translate • I am still not clear how the GRI sustainability opportunities into a sustainability guidelines cover this business case for reputation building, really important issue for developing brand value enhancement or economies. enhancing relationships with key stakeholders.

Extensive and effective sustainability training “ Creating a culture of sustainability begins with staff, throughout the organization, understanding not only what sustainability means generally, but what it means and Image http://creativity103.com/ why it is important in their speciﬁc context. Training is key to this and is particularly important and relevant in this developing area. ” Source • http://www.accountingforsustainability.org/output/page152.asp

Extensive and effective sustainability training The Indian perspective • The biggest challenge that Indian • The BSE or the Bombay Stock companies are likely to face is the Exchange is one of the largest Stock absence of trained Chartered Exchange’s in the world with over Accountants and MBA’s who really 4900 listed companies. All these ‘get sustainability as well as the companies have a team of highly business context’. The curriculum in qualiﬁed ﬁnance teams that head most of India’s business schools is them. The Institute of Chartered woefully out of date with what the Accountants of India (ICAI) India has world is talking about. Sustainability over 1,60,000 members spread impact on Finance, Marketing, throughout the country and in Operations, Supply Chains and different parts of the world. Not only Business Strategy is seldom do most of these people need discussed. Instead separate training, they need constant inputs ‘Sustainability’ courses are taken, on the fast moving pace of GRi which are too simplistic. guidelines as they are being developed and institutionalized. • The training challenge is immense

Monitoring and reporting sustainability performance “ Accountantsisn't inclined toreporting ifsustainability measured it are done and say that it isn't performance in internal and external accounts is essential. Sustainability measures need to be reported in a way that is part of and connected to the other key measures, ﬁnancial and general, which inform performance evaluation. Measuring sustainability factors and establishing them at the Image http://creativity103.com/ heart of decision-making ensures that sustainability is embedded in the day-to-day life of the organization. In order to maintain support for sustainability improvements it is necessary to demonstrate how the organization has beneﬁted from the changes made. This requires monitoring and reporting back Source on progress in achieving sustainability priorities. ” • http://www.accountingforsustainability.org/output/page152.asp

Monitoring and reporting sustainability performance The Indian perspective • After reading this most consultants would have a happy smile on their “ Accountantsisn't inclined toreporting ifsustainability measured it are done and say that it isn't faces while C level executives would performance in internal and external accounts is essential. Sustainability measures need to be have mixed views. Change reported in a way that is part of and connected to the management of the 80‘s and 90‘s other key measures, financial and general, which inform performance evaluation. Measuring has now seen a resurgence and is sustainability factors and establishing them at the now being termed as Sustainable heart of decision-making ensures that sustainability is embedded in the day-to-day life of the Change Management. organization. In order to maintain support for sustainability improvements it is necessary to demonstrate how the organization has benefited from the changes • The task is not an easy one as it will made. This requires monitoring and reporting back have significant long term business ” on progress in achieving sustainability priorities. impact, isn’t that why many C level executives shudder at the thought?

Integrated Reporting - Opportunities and challenges for CEO’s / CFO’s of Indian Companies Futurescape Level 4, Rectangle 1 Commercial Complex D4, Saket New Delhi - 110017, INDIA Tel: +91 (11) 4051 4196 www.futurescape.in

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Integrated Reporting - Opportunities and challenges for CEO’s / CFO’s of Indian Companies

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Integrated Reporting - Opportunities and challenges for CEO’s / CFO’s of Indian Companies — Presentation Transcript