All Rights Reserved Finance News 2020.
Soon, get deeper insights into what a company is all about, and its social compass
ET Intelligence Group: A committee set up by the Ministry of Corporate Affairs has proposed to incorporate a host of reporting requirements that companies have to reveal in their business responsibility and sustainability reports. Here are five disclosure areas that are slated to become most critical non-financial information for investors.
“Business, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent,” reads a new principle. This involves disclosing the names of trade and industry associations affiliated with and the name of public policies on which advocacy positions have been taken by the company. While corporate lobbying has been an age-old practice, disclosing it transparently is going to be a different ball game.
ASSESSMENT OF SOCIAL & ENVIRONMENTAL IMPACT
Companies have to disclose the material environmental risks for the business, list the products or services that beget environmental risks and measures taken to mitigate the risks. The proportion of R&D budget spent on environmental and social impact is also to be disclosed. Companies are also required to mention if their top three plants are situated in and around vulnerable areas like national parks, wildlife sanctuaries, biodiversity hotspots, water-stressed zones or coastal regulation zones. They also need to disclose the percent of recycled or reused input material to total raw material used in production.
The proposed business responsibility guidelines take a firm step towards inclusiveness in recruitment, pay and training. They require disclosure on representation of women and disabled at the level of board of directors and other key managerial positions. Companies also have to reveal data on average remuneration drawn by employees based on gender as well as on being differently abled, providing an insight into the pay gap from the workers to the level of board of directors. The guidelines also seek the details on the recruitment and remuneration of disabled and if there is a policy on preferential procurement from marginal or vulnerable groups. The companies also need to reveal the steps taken to address human rights grievances.
Companies have to describe the mechanism in place to receive and respond to consumer feedback. They need to inform about the number of consumer complaints related to data privacy, advertising, unfair trade practice, etc., and reveal the proportion of their goods and services carrying information relevant to consumers.
The proposed guidelines seek the details of adverse judicial or regulatory orders for anti-competitive conduct by a company along with details of corrective action taken by the company. While the reporting requirements are likely to be implemented in a gradual and phased manner, the recommendations, if approved, will make the revised business responsibility report a single source of information about a company’s conduct and character.