The country’s top 100 listed companies (by market capitalization) will have to report certain critical information to its shareholders as per the Securities and Exchange Board of India (SEBI) circular. The circular has a special mention of corporate social responsibility (CSR), asking companies to declare how much percentage of their net profit is being spent towards CSR. The companies will also have to share the number of stakeholders’ complaints received and resolved, details of any pending case filed by a stakeholder against any unfair trade practice, irresponsible advertising or anti-competitive behaviour adopted by the company.
According to SEBI, the move will enable the shareholders to have a better understanding of the manner in which their companies function and make a strong case for adopting responsible business practices.
As per the SEBI circular dated August 13, 2012, companies have been directed to follow the national voluntary guidelines on social, environmental and economic responsibility formulated by the ministry of corporate affairs in July 2011. Information like number of employees hired on temporary or contractual basis, any legal notices received from pollution control boards and number of consumer complaints pending at the end of the fiscal will all come in public domain if the circular is strictly followed.
The SEBI circular will make it compulsory for all top 100 companies to report their responsibility initiatives and also bring in a certain uniformity in their reporting. Many leading companies including L&T, HUL, Dr Reddy’s Labs,Tata Motors, ITC and ICICI Bank are already publishing a separate sustainability report along with their annual reports.
As per the circular, the companies, apart from initiatives and spends reports, will also have to provide the details of the director responsible for implementation of their business responsibility policies. In case a company is not abiding by any of the principles to be reported, it has to explain the reasons for its failure to do so.
While the Companies Bill 2011, which was expected to make CSR reporting mandatory, is still awaiting the parliament’s approval, SEBI’s circular has already made ‘business responsibility’ reporting mandatory for at least the large companies.
To be applicable from December 31, 2012, the new rule is meant for all companies listed on the stock exchanges. The national voluntary guidelines are already applicable to all Indian companies including multinationals as well as small and medium enterprises.
The companies that already submit sustainability reports to their stakeholders based on internationally accepted reporting frameworks have to only map the principles contained in the national voluntary guidelines to their existing sustainability reports.