corporate sustainability reporting
DESCRIPTION
Corporate Sustainability Reporting : Business Case of an Indian and an MNC bankTRANSCRIPT
2009
Submitted to:
Prof. K.M. Kavadia
Group 2
205 - Ankur Agrawal
206 – Swapnil Agrawal
225 – Gourav Garg
234 – Karan Madan
239 – Anuj Pachauri
264 – Tanya Goel
Corporate Sustainability Reporting
Corporate Sustainability Reporting
P a g e | 2
Acknowledgement
Corporate Social Responsibility has come a long way from being just a philanthropic activity a
decade ago to one that is essential for sustainable development of the firm. Corporate
Sustainability Reporting is an important check and balance tool, both, for the company and its
stakeholders as it depicts company‟s performance on environmental, social and economic
parameters.
We would like to thank Prof. K. M. Kavadia for providing us with this opportunity to do a
project on Corporate Sustainability Reporting. The project was helpful in learning about the
frameworks and trends in reporting. Also business case presentation of an Indian bank and an
MNC bank taught us about the competitive advantages that an organization can derive from
reporting. This assignment was really helpful in understanding that reporting is no more an
exception but has become a norm now. The learning from the assignment would act as useful
guidelines in determining the environmental, social and economic impacts of decisions that we
would make in our corporate careers.
Corporate Sustainability Reporting
P a g e | 3
Table of Contents
Corporate Sustainability Reporting ..................................................................................................... 1
Introduction .............................................................................................................................................. 4
Need for Reporting ................................................................................................................................... 6
Dilemmas related to Reporting ................................................................................................................. 7
Reporting Standards ................................................................................................................................. 7
Global Trends in Reporting ....................................................................................................................... 8
Business Case of MNC Bank: Standard Chartered .............................................................................. 11
About the bank ....................................................................................................................................... 11
Sustainability Initiatives .......................................................................................................................... 11
Sustainability Reporting .......................................................................................................................... 13
Benefits of Sustainability Reporting ........................................................................................................ 14
Business Case of Indian Bank: HSBC India ......................................................................................... 15
Sustainability Reporting .......................................................................................................................... 15
Benefits of Sustainability Reporting ........................................................................................................ 15
Conclusion ....................................................................................................................................... 19
References ....................................................................................................................................... 20
Corporate Sustainability Reporting
P a g e | 4
Corporate Sustainability Reporting
Introduction
Sustainability reporting is a broad term used to describe company‟s reporting on its economic,
environmental and social performance.
Sustainability reporting has gained significance as a tool to monitor and ensure that companies
are looking towards long term sustainable development rather than short term growths.
Sustainable development is defined as “meeting the needs of the present generation without
compromising the ability of future generations to meet their own needs”.
Sustainability reporting can be synonymous with: triple bottom line reporting, corporate
sustainability reporting, ESG (Environmental, Social and Governance) reporting and sustainable
development reporting but increasingly these terms are becoming more specific in meaning and
therefore subsets of sustainable reporting.
An important distinction is made between sustainability reporting and corporate philanthropy,
the latter being defined as the act of donating money, goods time or effort to support a charitable
cause.
There is no single universally accepted definition of Sustainable Reporting. Some useful
definitions are as below:
Sustainability reporting is … the practice of measuring, disclosing, and being accountable to
internal and external stakeholders for organizational performance towards the goal of sustainable
development.”
GRI Sustainability Reporting Guidelines
“Corporate Sustainability is a business approach that creates long term shareholder value by
embracing opportunities and managing risks deriving from economic, environmental and social
developments.
Corporate sustainability leaders achieve long term shareholder value by gearing their strategies
and management to harness the market‟s potential for sustainability products and services while
at the same time successfully reducing and avoiding sustainability costs and risks.
Dow Jones Sustainability Index
Two principal factors driving the sustainability reporting trend are:
Corporate Sustainability Reporting
P a g e | 5
1) An increasing recognition of the potential for sustainability related issues to materially
affect a company‟s long term economic performance.
2) The need for business community (and individual companies) to appropriately respond to
issues of sustainable development.
Other drivers for reporting as identified in KPMG‟s 2008 survey of Global Fortune 250
companies are shown below in Figure 1.
Figure 1 – Drivers for Corporate Responsibility Reporting (G250)
Corporate community has realized that for their businesses to excel in the long term, they need
support of all their stakeholders. Sustainability reporting is the means of communication and
engagement between a company and its stakeholders.
Financial
Stakeholders
Supply chain
stakeholders
Regulatory
stakeholders
Political
stakeholders
Social stakeholders
Shareholders Customers SEBI Central
Government
Local communities
Bondholders Alliance Partners Revenue
Department
State
Government
General public
Banking
Institutions
Direct Suppliers International
Governments
Academia
Employees Upstream
Suppliers
United Nations Charitable organizations
Contractors Environmental & Social
organizations
Table 1 - Typical Stakeholders for a publicly owned Indian company
Corporate Sustainability Reporting
P a g e | 6
Need for reporting
A company‟s value is influenced by the quality of relationship it maintains with its internal and
external shareholders such as the ones shown in Table 1. The ability of a company to
communicate its activities and performance effectively with its key stakeholders can be critical
to its long term success, viability and growth.
The World Business Council for Sustainable Development (WBSCD) and the United Nations‟
Environment Program (UNEP) have produced publications specifically focused on the „business
case‟ for sustainability reporting. The potential internal and external benefits associated with
sustainability reporting are as follows:
Demonstrating
Transparency
Reporting exhibits company’s commitment at looking beyond just
financial benefits and establishes a sound base for stakeholder
dialogue by demonstrating transparency in its operations.
Creating financial value Sustainability reporting often involves assessment of processes and
collection, collation and analysis of data on resources and materials usage.
This process can help a company in further improving its processes by
making them more efficient.
Enhancing reputation Sustainability reporting can help a company in protecting and enhancing
its reputation among its diverse stakeholders.
Achieving continuous
improvement
Internal and external reporting of sustainability information focuses
management attention on sustainability approach, thereby helping in
identification of key improvement areas of reported performance.
Improving regulatory
compliance
Sustainability reporting may assist the company prepare itself to manage
emerging areas of compliance (e.g. greenhouse gas emission data) through
the establishment of appropriate reporting systems and processes,
Reporting may help a company to influence future regulatory responses.
Strengthening risk
awareness and
management
Sustainability reporting assists a company to demonstrate its commitment
to effectively managing risk associated with its sustainability performance
factors and to communicate its risk performance.
Encouraging innovation Reporting may stimulate leading edge thinking and performance, thereby
enabling a company to enhance its competitiveness.
Enhancing management
systems and decision
making
A company would be pushed to put in place a more rigorous and robust
management systems and decision-making processes to better manage
environmental, economic and social risks, opportunities and impacts.
Raising awareness,
motivating and aligning
staff, and attracting
talent
Publication of sustainability information can play a role in positioning a
company as an „employer of choice‟. This status can enhance employee
loyalty, reduce staff turnover and increase a company‟s ability to attract
and retain high quality employees.
Attracting long term
capital and favorable
There are important potential flows on implications for how the company
is assessed and rated by investment analysts and other members of the
Corporate Sustainability Reporting
P a g e | 7
financing conditions investment community. Sustainability reporting would keep the growing
group of investors that include ESG considerations within their decision
making process, happy.
Maintaining licence to
operate
Communities and stakeholders are likely to be more supportive of
companies that communicate openly and honestly about their management
and performance in relation to environmental, social and economic
factors. Reporting would ensure smooth business for the companies.
Establishing competitive
positioning and market
differentiation
A company may use sustainability related performance attributes to
differentiate its brand, products and/or services.
Table 2 – Benefits associated with Sustainability Reporting
Dilemmas related to Reporting
1) Disclosure of sensitive information – Disclosing information could give away the
company‟s competitive advantage or trade secrets that are key drivers to the success of
the company
2) Additional corporate infrastructure is required to properly monitor sustainability – A
company would have to put in place extra processes to monitor and manage the
sustainability reporting.
3) It is not a legal requirement to do business – Outside most EU countries, there are not
many laws enforcing companies to report.
4) There is a massive learning curve to reporting – Reporting is a process and takes time to
understand, while the industry is still in its infancy.
Reporting Standards
Figure 2 - Reporting Standards and guidelines used by companies
Corporate Sustainability Reporting
P a g e | 8
More than three quarters (77%) of the G250 and 69 percent of the N100 reporting companies
follow the Global Reporting Initiative‟s (GRI) Sustainability Reporting Guidelines. About 20
percent of both cohorts use internally-developed company frameworks as the basis for reporting
(see figure 2). Even fewer use national standards, though the figure is slightly higher among
G250.
GRI hence is a generally accepted framework developed through a multi-stakeholder, consensus-
seeking approach. First generation of the guidelines was presented in 1999 and the Third
Generation (G3) came in October 2006. It is designed to be used by organizations of any size,
sector, or location. Sector supplements and National Annexes respond to the needs of specific
sectors or national reporting requirements.
In India, though there is no specific sustainability/CSR reporting legislation or guidelines,
sustainability reporting is increasingly becoming a necessity because of globalization. It would
become mandatory for companies to report on social, environmental and economic initiatives
once the ICAI CSR ruling comes into force. Also there is a committee being formed for
standardizing the disclosures related to sustainability reporting. Sustainability reporting has
become mandatory for Indian companies going to be listed abroad.
Global Trends in Reporting
Population
Strategy with objectives identified
Management and measurement system
Corporate responsibility report
G250 (250 total) 73% 64% 79% N100 (2170 total) 43% 41% 45%
Source: KPMG Global Sustainability Services, October 2008
Table 3 – Elements of Corporate Responsibility Management Systems (G250 and N100)
The best strategies are ineffective unless robust and accountable management systems are in
place to ensure they are implemented cohesively and consistently.
Table 3 reveals an interesting gap in the G250 group: 64 percent disclosed that they have
established systems for managing, and reporting on corporate responsibility, but 79% percent
actually issue sustainability reports. This leaves about 35 companies reporting without a publicly
discloses system for managing, measuring, and reporting. Without a systematic approach to
Corporate Sustainability Reporting
P a g e | 9
manage and monitor corporate responsibility initiatives, these companies are in danger of issuing
reports that do not reflect their true performance. The gap is narrower in N100 group, where 45
percent issue a sustainability report and 41 percent disclose that they have a management,
measurement and reporting system in place.
Figure 3 – Global report output by year (Source: corporateregister.com)
Figure 3 shows a per year count of reports issued across all sectors and countries. It is clear from
the figure that sustainability reporting has now become the norm rather than exception as more
and more companies are adopting it. Occasionally a company may produce two reports in one
year so these figures are not directly related to the number of reporting companies.
Figure 4 – Top 20 Countries by Report Output (Source: corporateregister.com)
Figure 4 shows per country count of reports issued across all industry sectors, for the top 20
countries worldwide. The data is broken in to two series, the first being a grand total of reports
Corporate Sustainability Reporting
P a g e | 10
for 1992-2007 and the second showing the total for just 2008 to indicate which countries are
becoming more active in the reporting field.
- Australia & New Zealand are driving voluntary reporting
- Globalization as well as SRI funds and research groups have increased demands for
reports from listed companies
- SRI funds in Europe and NA have created a ripple effect for Japanese companies to
report
Figure 5 – Report Content: Percentage wise (Source: corporateregister.com)
Figure 5 shows that there had been a shift towards Sustainable Reporting on Sustainable
Practices over the years from the erstwhile environmental reporting.
Corporate Sustainability Reporting
P a g e | 11
Business Case of MNC Bank: Standard Chartered
About the bank
Standard Chartered was formed in 1969 through a merger of two banks: The Standard Bank of
British South Africa, founded in 1863, and the Chartered Bank of India, Australia and China,
founded in 1853.Both companies were keen to capitalize on the huge expansion of trade and to
earn the handsome profits to be made from financing the movement of goods between Europe,
Asia and Africa.
Standard Chartered PLC, Listed on both the London Stock Exchange and the Hong Kong Stock
Exchange, ranks among the top 25 companies in the FTSE-100 by market capitalization. The
London-headquartered Group has operated for over 150 years in some of the world's most
dynamic markets, leading the way in Asia, Africa and the Middle East. Its income and profits
have more than doubled over the last few years primarily as a result of organic growth,
supplemented by acquisitions.
Standard Chartered is active in consumer, wholesale, SME, Islamic and private banking. It has a
network of over 1,600 branches and outlets and 5,500 ATMs in more than 70 countries and
territories across the globe, making it one of the world's most international banks.
On June 4, 2009 Standard Chartered was acknowledged by The Financial Times and the
International Finance Corporation as Runner Up in the 2008 FT ‘Sustainable Bank of the Year’
Award. This prestigious award is open to financial institutions involved in the provision of
banking services, including commercial and investment banks, private banks, cooperatives and
development finance institutions, and recognizes excellence in creating environmental, social
and financial value across its operations.
Sustainability Initiatives
Sustainability agenda at Standard Chartered, takes into account the fundamental task of re-
establishing confidence and trust in banks whilst continuing to maintain an unwavering focus on
addressing the longer term challenges that world faces.
Approach to sustainability, adopted by Standard Chartered focuses both on continuing to manage
their core banking practices responsibly and on the seven specific areas which have been at the
Corporate Sustainability Reporting
P a g e | 12
heart of their sustainability strategy, shown in Figure 6, for some years. They have focused on
areas that integrate with their business strategy, based on three criteria:
Relevance to markets
Best use of capabilities and infrastructure to maximize contribution
Distinctive value for business and the nations
Figure 6 – Sustainability Strategy at Standard Chartered Bank
Extensive consultation with stakeholders helped them to identify seven priorities which meet
these criteria:
Protecting the environment: Reducing their environmental impact and helping others to
do the same
Sustainable finance: Addressing the environmental, social and governance risks and
opportunities involved in doing business with their customers
Access to financial services: Making finance more accessible to people excluded from
formal banking services
Tackling financial crime: Detecting and preventing activities such as fraud and money
laundering, corruption and terrorist financing
Corporate Sustainability Reporting
P a g e | 13
Responsible selling and marketing: Treating customers fairly through the highest levels
of service, transparency and responsible banking practices
Great place to work: Attracting, developing and retaining the best talent by making
employees feel valued, included and engaged
Community investment: Using their expertise and resources to help communities develop
and economies grow
Sustainability Reporting
2008 Sustainability Review, reports their activity and commitments, targets and progress under
each of the seven sustainability priorities.
Standard Chartered have sought to cover issues that are most relevant and important to the Bank
and to stakeholders, based on their sustainability strategy and engagement with stakeholders.
They have been reporting on their environmental performance since 2001 and their social
performance since 2004 when they published their first Corporate Responsibility Report. This is
their third Sustainability Review, reporting on integrated strategy.
They use the Global Reporting Initiative (GRI) to guide their reporting. They include a GRI
index and also United Nations Global Compact Index to highlight how activity relates to relevant
indicators.
Sustainability review is a different report from the annual report or any other financial statements
released by the company. The sustainability report covers the following in detail:
1) Strategy for building a sustainable business.
2) Sustainability highlights of the year like CO2 reductions/employee. These indicators
provide a quantitative measure for sustainability initiatives.
3) Financial Highlights: Operating Income, Operating Profit and Total Assets.
Corporate Sustainability Reporting
P a g e | 14
4) Non-Financial Highlights: Number of Employees, Countries and Territories and
Nationalities.
5) Report on the goals achieved under the seven priorities and goals for the next year.
6) Standard Chartered initiatives for Millennium Development Goals (MDGs).
Benefits of Sustainability Reporting
The sustainability reporting has helped Standard Chartered Bank in achieving the following:
1) Become proactive than reactive
To appease dissatisfied stakeholders: Human Rights violation, Environment impacts,
Developing Nations by reporting its initiatives on a regular basis.
2) Shaping the future of Standard Chartered
Understanding the importance of social and environment factors in the more conscious
world and for future positioning in the industry as an environment friendly Bank.
3) Open and maintain dialogs with stakeholders
Two way communication to seek focused response and feedback on the ongoing activities
through Corporate Sustainability reporting.
4) Prioritize initiatives with performance indicators targets and goals
Increase efficiency of Standard Chartered bank by prioritizing and by adding new
dimensions to evaluate the business performance.
5) Communicate Internally and Externally
Making employees aware of the company‟s activities with respect to sustainability and
environment and increasing the employee motivation. Standard Chartered has been ranked
as one of the best companies to work with.
6) Innovate and Collaborate to meet the toughest challenges
Align with partners for developing strategic solutions, adoption of the best standards by the
industry and becoming the torch bearer for the other banks.
7) New annual report
Removing the burden of economic performance on Standard Chartered Bank by changing
the standards of evaluating a bank or a company.
Corporate Sustainability Reporting
P a g e | 15
Business Case of Indian Bank: HSBC India
Sustainability Reporting
The Indian bank which we have taken for studying Corporate Sustainability Reporting
is the Indian subsidiary of HSBC Bank. At HSBC, sustainability reporting is an integral part of
the way they do business. Across India, their initiatives span around 26 cities collaborating with
businesses, employees, not-for-profit organizations & customers. HSBC's corporate
sustainability practice, as shown in Figure 7, consists of education, financial inclusion,
environment sustainability and employee engagement, the ultimate goal being to achieve
sustainability for business and build prosperous communities.
Figure 7 - HSBC’s Approach
Benefits of Sustainability Reporting
Financial inclusion initiatives at HSBC are targeted at economically and socially
marginalized and excluded sections of society in different life stages – HSBC supports
underprivileged children to access education, youth to acquire skills for social integration and
employment and women to become economically independent. The ultimate aim of all HSBC
programmes is to enable these communities to participate in the economy, lead productive lives
and become drivers of social change as shown in Figure 8. HSBC tries to achieve this financial
inclusion through 3 major initiatives as shown in Figure 9.
Corporate Sustainability Reporting
P a g e | 16
Figure 8 – Objective of HSBC programmes
Figure 9 – Initiatives for Financial Inclusion
Thus, through this financial inclusion, they are trying to build their own market by contributing
to the lives of people at the basic level & making them more & more self-sufficient in economic
terms & as once, they become self-sufficient, they will definitely be loyal to HSBC as this bank
only helped them in reaching to this level. They are also providing microfinance to various
organizations like Rural Urban Development Institute (RUDI) Manager's School which is
running in 9 districts in the Western India state of Gujarat & is run by SEWA (Self Employed
Women's Association). Thus, by attaching themselves with a national level organization like
SEWA actually helps them in increasing their reach to the rural markets which would otherwise
have remained untapped. They have also tied up with SHARE (Society to Heal, Aid, Restore and
Corporate Sustainability Reporting
P a g e | 17
Educate) India in a Water-Based Livelihood Model in drought prone villages in Raigad district,
Maharashtra. This initiative ensures village based economic livelihood revival through rain water
harvesting systems, formation of self-help groups of women and men, and creation of
entrepreneurship and agricultural livelihood opportunities at the bottom of the pyramid. There
also microfinance initiatives like Students In Free Enterprise (SIFE) & „JA More Than Money‟
which aims to roll out financial literacy and entrepreneurship projects across the country. Thus,
through initiatives like these, HSBC is trying to make people involved in this project accountable
for the kind of business they bring in which helps the people in developing their entrepreneurial
talent & helps the company in making these people more motivated so that they can bring in
more business for them. Thus, it is a win-win situation for both of them.
HSBC believes in sharing responsibility with governments and citizens for
minimizing the damaging effects of human activity - pollution of land, water and air and the
depletion of resources. The depletion of the planet's natural resources on which life depends can
only lead to human conflict. HSBC‟s environment initiatives are targeted towards nature, habitat
and biodiversity conservation, water harvesting and climate change initiatives as shown in Figure
10.
Figure 10 – Environmental initiatives
By investing in the climate conservation initiatives like Earth Sciences Forum, HSBC Climate
Partnership, HSBC Young Rangers – for a Cooler World, HSBC Living Business in some of
which they have tied up with TERI (The Energy and Resources Institute), they are directly trying
to benefit their own balance sheets by increasing their carbon credits which they can sell in the
global markets.
By investing in the Ecosystem Conservation initiatives which are targeted towards protection of
biodiversity (especially endangered species), afforestation and water conservation through
Corporate Sustainability Reporting
P a g e | 18
watershed and rain water harvesting projects, they are trying to build a responsible brand name
for themselves which is likely to positively affect their business.
HSBC India tries to develop good practices in terms of energy saving habits like using low
energy light bulbs, air conditioning controls, smart controls for all the electrical installations etc.
among their employees which helps them in saving their costs.
The initiatives like Annual Helping Hands Mela, Junior Achievement Mentoring
Programme, Kuch Dil Se Payroll Giving Programme, Mumbai Marathon, HSBC Climate
Champions, World Environment Day, Breaking Barriers - Celebrating with a difference,
Volunteering Action Fortnight in which the employees are directly involved which help the
company in team building among the employees & motivating them by making them a part of
these social initiatives which give them a sense of satisfaction as they are able to do their bit for
the society. Also, these initiatives help the employees in taking much needed rest from their
stress filled life & also, give them a feel of importance in the company as the company organizes
these initiatives for these employees.
Corporate Sustainability Reporting
P a g e | 19
Conclusion
The question is no longer “Who is reporting?” but “Who is not?”. Corporate responsibility
reporting is now a mainstream expectation of companies. Since more than 80 percent of the
world‟s 250 largest companies now report on corporate responsibility and as motivations for
reporting have shifted away from reactive and risk management factors and towards aspirational
and innovative ones, we can expect this trend to roll out rapidly at the country and sector levels
in the coming years.
We are seeing a distinctive maturing of corporate responsibility management systems overall.
Reporting is now more likely to occur within the context of an overarching strategy and
management system. The use of GRI guidelines by the majority of Global Fortune 250
companies shows that this has become a leading standard for reporting. Now that some of the
world‟s largest companies have been able to quantify the business case for corporate
responsibility and reporting, it is likely that the practice will spread through countries and sectors
to the smaller players.
Corporate Sustainability Reporting
P a g e | 20
References
1. KPMG International Survey of Corporate Responsibility Reporting 2008
2. Sustainability Reporting: Element and Experiences, GCS Monthly Meeting, 29
December 2008
3. The future of Corporate Sustainability Reporting – A rapidly growing assurance
opportunity by Brian Ballou, Dan L. Heitger and Charles E. Landes, Journal of
Accountancy, December 2006
4. International trends in corporate „sustainability‟ reporting by Markus Milne and Rob
Gray, Chartered Accountants Journal, December 2008
5. Undisclosed Risk: Corporate Environmental and Social Reporting in Emerging Asia by
Dana Krechowicz and Hiranya Fernando, International Finance Corporation, April 2009
6. Corporate Sustainability at HSBC in India
7. http://www.corporateregister.com/
8. http://www.enviroreporting.com/
9. http://www.sustainabledevelopment.in/services/corporate_substainability_management/a
ctivities/sustainability_reporting.htm
10. http://www.globalreporting.org/ReportingFramework/NationalAnnexes/
11. http://www.sustreport.org/business/report/trends.html
12. www.standardchartered.com
13. www.ftconferences.com/sustainablebanking
14. www.sustainabledevelopment.in