Rising standards of sustainability reporting in India

Abstract

Purpose The increasing awareness among the stakeholders demands the companies to be more transparent in their annual reporting. In the absence of standardized reporting norms, companies are free to structure sustainability report as per their understanding, willingness and intent. Although some voluntary guidelines have been issued by the regulatory authorities in India, the norms are still not clear as to what to report and how to report. This paper aims to look in to sustainability reporting practices by top companies listed in Bombay stock exchange and its impact on financial performance. Design/methodology/approach Using this sample of 68 companies from top 100 in the list of ET500 for 2016, self-constructed sustainability reporting score has been computed for each company for the financial year 2012-2013 and 2015-2016. The two periods represent pre- and post-disclosure reform periods in India. A sustainability reporting scale has been constructed using 16 parameters of sustainable performance based on social, environment and governance aspects as reported in the annual report, sustainability report and business responsibility report. Findings It has been found that there is a significant improvement in sustainability reporting by Indian companies after the introduction of disclosure reforms. Different sectors show significant difference in the sustainability reporting during pre-reform period but as the sustainability reporting improves after the reforms, sector difference reduces. Sustainability reporting is a significant predictor of financial parameters of return on sales, return on equity and Tobin’s Q in pre-reform period, but in the post-reform period, no significant impact was found on financial performance. Practical implications Disclosure reforms have made a significant impact on sustainability reporting by Indian companies. Companies need to identify the core areas of social responsibility, to implement Indian model of mandatory 2 per cent spending on corporate social responsibility. Disclosure of carbon foot prints should be mandatory and more number of independent directors should be appointed for successful implementation of these reforms. Market regulators should be made more powerful and given a free hand to prosecute the companies involved in frauds and high penalties should be imposed for non-compliance. Originality/value Sustainability reporting has drawn increased strategic attention in India to make reporting more transparent and responsible toward society and environment. The structural changes and introduction of disclosure reforms make an interesting case to investigate their implications on Indian companies. Accordingly, this research studies the sustainability reporting by Indian companies before and after the introduction of disclosure reforms. No previous research has investigated the impact of these reforms considering two different periods.

The impact of audit committee attributes on the quality and quantity of environmental, social and governance (ESG) disclosures

“…In particular, the firms belonging to environmentally sensitive industries (sensitive industries hereafter) such as coal, oil and gas exploration and distribution make efforts to report improved ESG information to maintain their legitimacy and neutralise the inherent stigma associated with these industries of being polluters (Gamerschlag et al , 2011; Garcia et al , 2017). Nevertheless, ESG disclosures have been mostly voluntary and incongruent due to the absence of standardised reporting frameworks (Dhaliwal et al , 2011; Goel, 2018; Martínez‐Ferrero et al , 2016; Olson, 2010). Consequently, there have been concerns about the quality and objectivity of ESG reporting.…”

Corporate Environmental Disclosure in India: An Analysis of Multinational and Domestic Agrochemical Corporations

“…Although CSR in India has been favourably compared to that in other emerging economies [189,190], many have noted a continuing lack of priority of CSR issues in India despite the moves to mandatory disclosure [96,191]. Indian CSR reports have often contained little related to environmental issues [37,177,192].…”

“…Table 1 documents studies that have investigated CED reporting among Indian companies. Although the research on CED overlaps with that of CSR disclosure more generally, which includes consideration of environmental concerns (e.g., [94][95][96]), these studies are not included here. The CED studies differ substantially in the focus of the research and in their approaches and methods.…”

“…There have been relatively few other jurisdictions that have instituted mandatory CSR requirements, Indonesia [131] and South Africa [132] being two of them. Some research has contributed to a critique of mandatory enforcement of CED [91,[133][134][135]; in contrast, others have reported positively in terms of CED practice and overall company performance associated with reforms leading to requirements for mandatory CED [93,96].…”

“…Goel [96] observed that, generally, little attention has been paid by researchers to the manifest effects of the Companies Act reforms on reporting. In reference to the Companies Act 2013, Prasad et al [111] did speculate that "mandatory reporting may increase the extent of information disclosed (the items on which information is disclosed), yet the quality of these disclosures may remain largely descriptive and lack quantitative details, as the criteria for the disclosures have not been clearly specified in the regulations" (p. 2018).…”