Corporate social responsibility and India Inc: IT leads, finance lags

Reporting on corporate social responsibility has been undertaken by almost three quarters (73 percent) of large Indian companies, led by the IT sector, shows a new survey by KPMG.

However, the survey covering top 100 (by gross revenues for FY12-13) listed companies,shows that CSR reporting in India largely assumes the form of limited discussion on community development and/orenvironmental protection initiatives as disclosed by companies in their annual reports and websites rather than corporates comprehensively covering aspects of, governance, targets and commitments, and performance.

""The need for business transparency and accountability is felt greater than ever. Regulations like Clause55 (Business Responsibility Reporting) of the listing agreement and CSR disclosure under the newCompanies Act will drive the reporting agenda in India. It is no more a choice for companies to report or

not to report," said Raajeev Batra, Head of KPMG Climate Change and Sustainability Services in India.

AFP

The survey shows that there has been a 73 percent uptake of CR disclosures but the average quality score for all CRreports is 42 out of a possible 100, indicating that there is a need to significantly improve the quality of CR reporting in India.

Here are the key highlights of the report:

1. IT companies have the best quality reports in India with an average score of 64, while the Pharmaceutical sector has the lowest average score of 20.

Companies in the IT sector comprehensively report oncorporatesocial responsibility through separate reports covering the company'sinitiatives on community developmentand / or environmental protection. Suchinformation is mostly disintegrated fromthe management discussion and analysison company's performance and futureplans.On the other hand, financialservices sector remains the key laggingsector. The sector is represented by22 companies in the top 100, but only 13percent financial sector companies report using standard frameworks andnone of the financial sector companiescomprehensively report on CR throughseparate reports.

Source: KPMG in India, India Corporate Responsibility Reporting Survey 2013, December 2013
Base: N100 CR Reports (31)

2. 71 percent of CR reports reckon Climate Change as a key sustainability megaforce that will impact businesses,

while Energy and Fuel, Water scarcity and Material resource scarcity are other key megaforces discussed.

3. Majority of the CR reports (48%) mention innovation as a key opportunity for companies to provide sustainable products and solutions. This is followed by opportunities identified for cost savings through operational efficiencies (26%), especially energy and resource efficiency.

4. 74 percent of Indian CR reports discuss some social and environmental impacts of their products and services. Onlyone in 10 reports discuss these impacts in detail. The balance have a limited discussion on social and environmental impacts of their products and services.

5. However, disclosure on the outcome of stakeholder engagement and actions taken is low. Only 23 percent clearly report on actions taken in response to feedback from all stakeholders. None of the CR reports have presented comments from a formal stakeholder panel, suggesting that companies have not formally set-up stakeholder panels with representation from different stakeholder groups.

5. CR has moved up to the board level but needs more resources at the execution level. For instance, relatively fewer CR reports (71%) identify individual / function responsible for day-to-day CR management compared to the ultimate responsibilityat an apex level (81%), indicating that the ownership of CR management at the execution level is not well defined in some companies.

"The involvement of the Board in overseeing the CR agenda will increase significantly with the new Companies Act mandatinga separate Board-level CSR Committee which should also include atleast one independent director," the report said.

Moreover, the linkage of CR performance to remuneration is poorly reported in the Indian CR reports with only 16 per cent reports partially explaining such linkage.

6. Only 1 in 5 (19%) reports discusses key challenges and dilemmas in detail while 1 in 4 (26%) reports has nodisclosure. This suggests that most of the CR reports highlight more positive achievements and miss out reporting on the key challenges and dilemmas.

7. Almost 1 in 3 (32%) Indian CR reports does not specify the timelines of achievement of targets which showsthe lack of commitment towards timely achievement

CR target shows below:

Source: KPMG in India, India Corporate Responsibility Reporting Survey 2013, December 2013
Base: N100 CR Reports (31)