This article has been written by Piyush Mahanta and edited by Shashwat Kaushik.
Table of Contents
The world is more interconnected today than ever. This has been achieved in very recent decades. Though trading has been one of the most ancient forms of connectivity on a global scale, it still serves the most basic purpose of being connected with other parts of the world. While it may seem at first that businesses have only one goal, i.e., to earn profit, which is true but not entirely. In the ever growing interconnected world, not only the government but also businesses are somewhat answerable to the public. With the world moving into a digital age, the actions that a business takes are becoming more and more visible to the general public. This, in turn, puts some responsibilities on these businesses throughout the world. The responsibility of the business is to show what value the business or company brings to society and its stakeholders at large. For companies to show their value, they need to report certain things to the government, which are then made available for public scrutiny. These reports are what we know as corporate reporting.
Not only are the companies obligated to undertake this corporate reporting morally but also legally. This is because in many countries, including India, there are certain legislation and regulatory bodies that mandate companies above a certain level to file their corporate report in a timely manner. Furthermore, a company’s reputation can also be linked to such reports, which further increases the importance of the reports.
Relationship of corporate reporting with the environment
Companies or corporations are required to responsibly report their financial and non-financial information to their stakeholders on a quarterly or annual basis. The corporation may include any information that it deems fit for achieving its goals, but mostly corporate reporting includes audit reports, financial statements, long-term and short-term objectives, upcoming projects, corporate governance and most importantly, corporate responsibilities.
CSR as a part of corporate reporting
While there are several other important parts of the corporate report that a company needs to file, CSR is one of the most prominent parts of any such report. This is because CSR stands for Corporate Social Responsibility, which fundamentally is focused on the aspects that are heavily intertwined with the ‘society’ at large. CSR is a window through which the public can look inside the actions of any company that have some impact on the elements of society. These elements can be the environment, communal issues, education, Health and many more. Corporate reporting is a great source for the public to see what activities a company or corporation has taken or is planning to take to create value for its stakeholders.
CSR’s role in sustainability
It is no secret that society is more important than running a business because it is society from which business comes and not the other way around. This makes it quite obvious that the future of any such society needs to be secured. The idea of sustainability says exactly the same thing. By judiciously using resources and taking action, the future of society can be ensured to be at the same level as it is in the present, at the very least. This is where companies are playing a pivotal role in making our planet more habitable. CSR or corporate social responsibility, makes companies responsible for making wise choices and implementing policies that can be beneficial for society. These can range anywhere from conducting tree planting activities and reducing pollution output to make the environment more habitable to running programmes to support the education and health infrastructure of poor countries. Such activities are one step towards making our environment more sustainable.
While these things sound really positive, the unfortunate fact is that most corporations only do them to comply with the laws and rules that are implemented by the government and not for the sake of the betterment of society. Something that is more unfortunate is that many companies find ways to avoid undertaking CSR just to spend less from their pockets.
When it comes to bringing sustainability, it needs to be understood that businesses play a very important role in shaping the lives of people and an even more important role in shaping the future of society. They may shape it according to their own will and whims, but it needs to be ensured that such change only has a positive impact and, therefore, brings the concept of CSR into the picture.
What is sustainability
According to the United Nations Brundtland Commission, sustainability means “meeting the needs of the present without compromising the ability of future generations to meet their own needs.”
Also, according to the National Environmental Protection Policy Act of 1969, the US is committed to sustainability, which defines its national policy as “to create and maintain conditions under which humans and nature can exist in productive harmony that permit fulfilling the social, economic and other requirements of present and future generations.”
Meaning of sustainability
According to the United States Environmental Protection Agency (EPA), the concept of sustainability is simple: We rely on the natural environment for everything we need to live and thrive, either directly or indirectly. Sustainability means creating and maintaining the conditions that allow humans and nature to coexist in a way that supports both current and future generations.
From a business point of view, sustainability for a company can mean doing business activities without creating any negative effect or impact on the environment or society in general. In specific scenarios, this can have different implications with regard to the subject and the goal of the company, but the nature is similar. Business decisions that consider society and the environment as important factors can be considered sustainable business decisions. This is because such business decisions create a positive impact on people’s lives and are therefore sustainable for a longer period of time, whereas when a business decision causes negative effects on people’s lives, they tend to face backlash from society and the government, making them unsustainable.
Scope of achieving sustainability
Sustainability can be achieved in a number of areas. Corporations can contribute to and impact many lives by undertaking activities in various fields and aspects of society.
A field like healthcare is one such aspect where a number of communities throughout the world and in India as well need dire support to meet their basic medical needs. People don’t have enough resources to purchase medicines or are not able to get proper treatments and facilities. These people can greatly benefit from the support of corporations. Undertaking activities such as medical aid camps, funding trusts to create new hospitals and medical facilities, and providing medicines to the needy communities can help ensure a sustainable future for such communities.
Supporting environmental causes through the means of adopting new and green technology, promoting the use of green energy and opting to voluntarily create a more habitable environment can also increase the sustainability of our environment.
Impact on the environment and society
The amount of impact that sustainable practises can have on society and the environment is truly worth every single effort. It is common knowledge today that we are destroying our world at a rapid pace, and the population on Earth won’t be able to survive for long if the current situation keeps on growing. It is to be understood that companies and the rise of industries were the most prominent reasons behind this scenario being present here. While most of the impact that these businesses had on the environment until the late 1970s was negative, it started to change when global leaders realised that such practises are not sustainable forever and that, at some point in time, there will come a day when neither the environment nor society will survive.
Thus, it is more than ever important to actually understand the impact of these corporate actions and tailor them in such a way that they reduce the negative effects that have accumulated over time and bring about positive results to make the environment better and make society able to sustain itself for a longer period of time. This conclusively makes it evident that sustainable practises do have a major impact on the very existence and well-being of human civilization, no matter to which part of the world it may belong.
Present situation of sustainability
In an effort to address the most pressing global challenges, the United Nations adopted a set of 17 Sustainable Development Goals in 2015. These goals serve as a comprehensive blueprint for achieving a better and more sustainable future for all. They aim to eradicate poverty, protect our planet, and promote peace and prosperity by 2030.
As of 2022, there has been a considerable improvement in monitoring progress towards the Sustainable Development Goals (SDGs) through the use of ESG software or sustainability tools, as per international comparison data. The global SDG database now includes 217 indicators, a significant increase from 115 indicators in 2016. However, there are still significant gaps in data with regard to geographical coverage, timeliness, and granularity, which pose a challenge for accurately assessing progress towards achieving the 2030 Agenda.
The convergence of the climate crisis, the ongoing war in Ukraine, a bleak global economic outlook, and the persistent impacts of the COVID-19 pandemic have revealed major systemic vulnerabilities, severely impeding progress towards the Goals. With only seven years remaining to achieve the goals, the stakes are enormous.
Increasing demand of CSR
In recent decades, there has been a significant shift in the public’s expectations of corporations. Gone are the days when profits were the sole objective of businesses. Today, people across the globe demand that companies prioritise more than just financial gain. In fact, a staggering 91% of the world’s population expects businesses to contribute to society in meaningful ways beyond their bottom line. Moreover, consumers are increasingly drawn to brands that demonstrate a commitment to corporate social responsibility (CSR), with 88% indicating a preference for such companies. The impact of this shift is visible in the business world, with companies that have embraced these expectations enjoying success and growth, while those that have failed to adapt have lost market share or even gone out of business.
Government’s mandate on CSR
On April 1, 2014, India became the first country to legally mandate that corporations must contribute towards social responsibility. The new law requires companies to allocate funds towards activities that are beneficial to society, such as education, healthcare, and environmental conservation. If any amount remains unspent in their corporate social responsibility accounts, the government now requires companies to set up a CSR committee. The Ministry of Corporate Affairs has amended the rules governing corporate social responsibility (CSR), according to an official notification. This move aims to ensure that companies contribute to social development while also promoting transparency and accountability in corporate operations.
In India, the concept of CSR is governed by Section 135 of the Companies Act, 2013. Thus, it is mandatory for the companies covered under Section 135 to comply with the CSR provisions in India. Section 135 (1) of the Act states, “Every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director” and Section 135 (5) states, “the Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.”
Therefore, under the Act, certain classes of profitable companies (companies with an annual turnover of 1,000 crores and more, a net worth of Rs. 500 crores and more, or a net profit of Rs. 5 crores and more) are required to establish a CSR Committee and spend at least 2 percent of their average net profit of the preceding three financial years on CSR activities in a particular financial year. This also includes the Section 8 companies within the scope of Section 135 if they fall under the mentioned classes of profitable companies.
Societal pressure on corporations
The way a business conducts its operations ethically has a significant impact on how customers choose to buy from it. A recent survey conducted by Environics International has shown that more than 20% of respondents have either rewarded or punished companies based on their social performance. This highlights the growing importance of social responsibility in investing, which has been around for generations but has gained much popularity among millennials.
According to SoFi Learn, a whopping 92% of millennials plan to invest their entire holdings in socially responsible investments. Investors today rely on reporting standards such as the ESG (Environmental, Social and Governance) and GRI (Global Reporting Initiative) to evaluate business investments and their potential long-term returns. This indicates a shift towards ethical and socially responsible investing practises that prioritise sustainable growth and development.
The middle-aged generation, commonly referred to as Generation Y or Millennials (referring to people born from 1981-1996 according to the Pew Research Centre), is increasingly conscious of the corporate world’s operations and its impact on society. They are naturally suspicious of businesses’ motives, and their desire to make a positive impact on the world has led to the rise of an overwhelming demand for corporate social responsibility (CSR). Instead of blindly supporting corporations with unclear intentions and shady operations, millennials strongly prefer businesses that are transparent and committed to giving back to society. According to a 2015 Cone Communications Millennial CSR Study, more than 90% of millennials would switch to a brand associated with a cause. They are willing to make personal sacrifices, like paying more for a product, sharing products rather than buying, or taking a pay cut to work for a responsible company, to make a positive impact on issues that matter to them. This trend highlights the importance of businesses’ social responsibility and the need for them to be transparent in their operations.
Customer perception influencing the market
Over the past few years, many thriving multinational corporations have been strengthening their corporate social responsibility (CSR) strategies. With the motto, “doing well by doing good,” these companies devise marketing campaigns to foster ethical consumption and develop a positive image as a socially responsible entity in the eyes of consumers (Baskentli et al., 2019). In today’s world of social and environmental crises, consumers expect companies to act transparently, avoid exploiting workers, and promote positive development.
Emerging markets have shown remarkable growth in their share of world trade over the last few decades. This notable expansion in their participation in the global economy has prompted a growing interest in sustainability. As per the World Bank’s report (2022), in 2021, USD 182 billion was invested by these markets in green, social, and sustainability-linked bonds, which is three times the amount invested in 2020.
The majority of consumers and investors are influenced by a company’s dedication to making positive changes in the world. Specifically, 77 percent of consumers are more likely to purchase from companies committed to making a difference, while 73 percent of investors prioritise environmental and social efforts when making investment decisions. Twenty-five percent of consumers and 22 percent of investors cite a “zero tolerance” policy towards companies that embrace questionable practises on the ethical front.
How sustainable corporate reporting can be helpful
Sustainable corporate reporting seems to be the need of the hour for many companies. This is because, as has been mentioned previously, the perception of the customers is greatly influenced by the CSR activities that a company is undertaking. This makes it even more clear that to portray the image of a company on the positive side of the spectrum, undertaking CSR work is going to be a key determinant.
Furthermore, as the world tends to increase its social media engagement, it becomes more than necessary for companies to have a strong social media presence. If this presence can be paired with showcasing the CSR activities and the amount of positive impact as a result of undertaking such CSR activities, corporations can build a perception of reliability, trust and faith. This will cater to corporations as a means of paving the way for building strong customer relations, which is essential for profit making.
Therefore, CSR is not only a government mandate or burden that needs to be done in order to maintain the books of audit and compliance; rather, it is a tool for businesses to tap into the areas of positive outreach and developing strong brand perception. If done correctly and strategically, CSR can be a rewarding means of business marketing.
How to ensure corporate reporting is in sync with environmental sustainability
Ensuring corporate reporting to comply with practises that are environmentally sustainable might seem like burdensome work. Surprisingly, it is not at all burdensome when it can be paired with some profit of its own. The strategy that a company may opt for just has to be profitable enough to fund the process itself and, in the best case, have some surplus profit money as well.
Investing in greener energy can be a starting point for this. If your company heavily depends on the energy that is generated or processed by the means of old school machinery, it might be highly possible that it is not based on renewable energy, and therefore it might be the right time to replace them with machinery that is based on renewable energy. This might seem like a big investment, but it is only a one-time investment, which certainly means that the running cost of such machinery will be way less than what it was previously and the added bonus will be less pollution generated by it.
Investing in R&D work, which is based on the study and development of cutting-edge technology that can solve environmental issues, can also be a great alternative. Investing in this kind of research means investing in the future. Not only will it be helpful for the planet, but it will become a replacement for other existing products on the market once it is fully developed. This can mean getting a competitive edge over others and that too in a positive way.
Apart from these, there can be numerous ideas for undertaking activities that can make a company’s corporate reporting in sync with environmental sustainability. All it takes to bring out those ideas is to give sustainability its deserved importance and thoughts. As it has already been mandated by the Government of India through the Companies Act, 2013, that every specified company needs to establish a CSR committee, it is more than enough to understand that it is going to be more and more essential for companies to understand the importance of CSR. Thus, it is better to take action early and prioritise activities that are mutually beneficial for the companies and our planet.
Way forward with corporate reporting in consonance with sustainable environment
Once it is understood that creating a sustainable environment is everyone’s duty, whether it’s an individual or corporation, the steps that need to be taken in order to create that environment come into play.
Future prospects of the growing demand
The United Nations Global Compact (UNGC) has established a set of comprehensive guidelines for corporate sustainability with the aim of promoting responsible corporate behaviour and advancing sustainable development. These guidelines require companies to adhere to responsible principles, support the well-being of society, and drive sustainability in the corporate framework. In order to ensure transparency and accountability, corporations are required to submit annual reports detailing their efforts towards achieving these goals.
The International Labour Organisation (ILO) has been actively promoting the social and economic progress of societies by emphasising the importance of corporate social responsibility (CSR) for corporations. As part of its efforts to support international labour standards, the ILO recognises the value of CSR activities adopted by corporations. ILO has set its sights on implementing the InFocus Initiative, which follows the guidelines of the MNE declaration that lays down good CSR practises and policies. ILO’s implementation of this initiative will establish its leadership position in the area of CSR. The Organisation for Economic Co-operation and Development (OECD) has issued guidelines for multinational enterprises that focus on responsible business practises to be carried out according to their standards and principles. These guidelines are designed to promote environmentally and socially responsible corporate behaviour. By adhering to these guidelines, corporations can play a vital role in bringing about positive changes in society.
Specifically for India, the Companies Act 2013’s Schedule VII outlines the activities a company can include in its Corporate Social Responsibility Policy. Activities relating to:
- Eradicating extreme hunger and poverty;
- Promotion of education;
- Promoting gender equality and empowering women;
- Reducing child mortality and improving maternal health;
- Combating human immunodeficiency virus, acquired immune deficiency syndrome, malaria, and other diseases;
- Ensuring environmental sustainability;
- Employment enhancing vocational skills;
- Social business projects;
- Contribution to the Prime Minister’s National Relief Fund or any other fund set up by the Central Government or the State Governments for socio-economic development and relief and funds for the welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women; and
- Such other matters as may be prescribed.
By keeping these in mind, we get to see that it’s becoming increasingly important for CSR programmes to be effective and impactful. To achieve this, leaders, managers, and field staff need to think creatively and come up with innovative ideas that go beyond traditional approaches. It’s crucial for everyone at all levels to be involved in ideation, as only then can we keep up with the challenges we face.
Moreover, technology infusion and application play a key role in the success of CSR strategies. In the current era of a technology-driven society, it’s imperative to leverage technology as a major enabler. This involves the integration of appropriate technologies developed by academics, technological institutions, and industry to enhance the impact of CSR initiatives. By embracing creativity, innovation, and technology, we can develop effective CSR strategies that have a positive impact on society and the environment.
Addressing the enormous problems faced by India today and in the future is beyond the scope of CSR organisations alone. The total expenditure on CSR in the country accounts for only about 5 percent of the nonprofit sector’s spending in India and approximately 1.5 percent of the government’s expenditure on social programmes. Therefore, partnership and collaboration will play a crucial role in achieving a significant impact and reaching a larger audience.
By including employee engagement in CSR initiatives alongside customer-focused activities, organisations can make a significant impact. Implementing CSR in organisational policy not only helps in building a positive image but also encourages employees to become ambassadors of the brand. This way, they are more likely to recommend the brand to others and advocate for it, leading to better brand recognition and a positive work culture.
Needs of the future
It is an undeniable fact that human activities, mainly the emission of greenhouse gases, have caused global warming. In fact, the global surface temperature has already risen by 1.1°C above the 1850-1900 average during the last decade. Greenhouse gas emissions have been on the rise and different regions, countries, and even individuals have contributed unequally to this increase. Unsustainable energy use, land use and land-use change, consumption and production patterns, and lifestyle choices are among the main culprits behind this phenomenon. As a result, we have already witnessed significant and rapid changes in the atmosphere, ocean, cryosphere, and biosphere. Climate change caused by human activities has already started impacting the weather and climate worldwide. If we do not change our ways and continue emitting greenhouse gases, we will experience even more global warming, which will magnify numerous hazards simultaneously.
This certainly means that efforts to eliminate the threat of global warming are becoming extremely crucial with each passing year. It is only through the collective effort of all, including but not limited to the people, government, private corporations, and other stakeholders, that this can be achieved.
Over the years, technology has played a crucial role in expanding access to education for learners who have encountered significant barriers to attending school or receiving guidance from trained teachers. This has been possible through a wide range of technological advancements that have helped to bring education to hard-to-reach learners.
As a result of the COVID-19 pandemic, technology played a vital role in facilitating remote learning. However, despite the widespread implementation of distance learning, a significant number of students were unable to benefit from it. It is worth noting that nearly 95% of education ministries worldwide adopted some form of distant learning during school closures, which had the potential to benefit over 1 billion students. The resources utilised during the pandemic were initially developed in response to previous emergencies or to cater for rural education. Remarkably, some countries have been practising remote learning for several decades. Nonetheless, it is disheartening to note that at least half a billion students, equivalent to 31% of students worldwide, were unable to benefit from remote learning. This was mainly due to their economic status, with the poorest students (72%) and those in rural areas (70%) being the most affected.
When we digitise educational content, we make it easier to access and distribute. Teachers and learners can now find relevant materials through digital libraries and educational content at repositories like the National Academic Digital Library of Ethiopia, the National Digital Library of India, and the Teachers Portal in Bangladesh. To help organise content, learning management platforms have become a key part of the contemporary learning environment by integrating digital resources into course structures.
The world is moving towards becoming more and more digitised, and the education sector needs to be equipped with proper digital mediums. This will not only ensure the quality of education, but it will also ensure that this education reaches all those who are in need of such education. While governments throughout the world, including the GOI, are actively pursuing this goal, it becomes an area where companies can come forward and bring innovation to bridge the gaps that are lying there.
There are many fields in which attention and action are required to meet the needs of the forthcoming future. But the most crucial ones are the climate (our natural environment) and education paired with healthcare. Once these are dealt with efficiently, one can move on to the economic aspects of life.
The world is going through a phase of immense transformation, where digitization and globalisation have caught up with the unprecedented speed of growth but on the other hand, we are heading towards a future where the resources and inclusiveness of the world remain behind a big question mark. It is up to the collective efforts of all of us to come up with an answer in favour of this question mark.
It is at this point where corporations can play a major and crucial role by engaging in activities that can potentially have a positive impact on society at large. A prominent tool for doing so is corporate social responsibility and by including sustainable practises in corporate reporting, the benefits of working for society can even have a positive impact on the businesses themselves. Corporate reporting, when paired with environmentally sustainable practises, can have a huge impact on society and on corporations engaged in such practises as well. All it needs is the vision to combine these two prospects into one strategy.
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