Business Responsibility Reporting

The
debate continues over the nature of the corporate social responsibility (CSR) requirements
that should be imposed on Indian companies through the Companies Bill, 2011,
i.e. whether voluntary or mandatory. Although the Government had proposed a
hybrid approach, the Parliamentary Standing Committee on Finance appears to be
keen on retaining the mandatory approach, as we had previously
discussed
.
While
this debate continues at the legislative level, SEBI has introduced some amendments
to the listing agreement that will require large listed companies to include
business responsibility reporting as part of their annual reports. SEBI
formalised this by way of a circular
dated August 13, 2012 issued to the stock exchanges. This comes on the heels of
the “National Voluntary Guidelines on Social, Environmental and Economic Responsibilities
of Business” issued by the Ministry of Corporate Affairs last year.
According
to SEBI’s circular, the requirement to include business responsibility reports
as part of the annual report is mandatory for the top 100 listed entities based
on market capitalisation at BSE and NSE as on March 31, 2012. The circular
contains an elaborate set of details to be disclosed, including principle-wise
performance.
The
business responsibility reporting is applicable with effect from the financial
year ending on or after December 31, 2012 (although entities that are yet to
submit their annual reports for the financial year ending March 31, 2012 may
include this on a voluntary basis).
Although
there are arguments in favour of disclosure and transparency as methods of altering
corporate behaviour in its impact on society, it remains to be seen whether efforts
such as this are likely to make a significant difference. The downside, which
has been experienced in other forms of reporting, is that over a period of time
certain standardized disclosures and templates will evolve that will make
differentiation between companies somewhat difficult and thereby erode the
significance of such disclosures.

(On a related note, here
is another one in the series of critiques against CSR, particularly of the
mandatory variety)

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

2 comments

  • According to one’s understanding, the basic proposition whether or not CSR deserves to be made mandatory itself is being hotly debated, and remains to be authoritatively concluded. Moreover, the Guidelines said to have been issued by the MCA, pending giving it a reading, but going by its nomenclature, appears to suggest that the concerned Ministry, exclusively clothed with executive powers in such matters, is inclined more against the idea of making CSR ‘mandatory’. In the light of the attendant uncertainties, therefore, one is miserably confused on the propriety or otherwise of SEBI in issuing a circular that “the requirement to include business responsibility reports as part of the annual report is mandatory for the top 100 listed entities..” To be precise, the gravest doubt is, – has not SEBI acted, may not be without precedents, patently in excess of its powers, ‘jumped the queue’ (or ‘the gun’!), so to say? Should the expert answer, after an insightful consideration, be “YES”, then the binding nature of the SEBI’s circular becomes highly disputable , nay questionable- is that not so?

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