Sebi Asks Top 500 Firms to Adopt Integrated Reporting

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arly Feb 2017, the Securities and Exchange Board of India (SEBI) asked India’s top 500 listed companies to voluntarily commit to publishing Integrated Reports rather than only Sustainability Reports from the 2017-2018 financial year. Integrated reports include producing both financial and sustainability reports as one report.

At present, it is compulsory for top 500 listed firms to submit their business responsibility report (BRR), which basically requires the company to disclose how its dealings affect areas such as environment, governance, and stakeholders’ relationships and so on. Sebi said in a circular that investors seek both financial as well as non-financial information to take a well-informed investment decision. “An integrated report aims to provide a concise communication about how an organization’s strategy, governance, performance and prospects create value over time,” Sebi said.

The integrated report by a company should include insight into the organization’s strategy and how it relates to the organization’s ability to create value. Such information should also explain the possible impact on the company’s capital due to its strategies, said Sebi. Also, an integrated report should provide insight into the nature and quality of the organization’s relationships with its key stakeholders, including how and to what extent the organization understands, takes into account and responds to their legitimate needs and interests.

Globally, Global Reporting Initiative (GRI) is spearheading the integrating reporting agenda dialogue. It states, “GRI believes that integrated reporting which incorporates appropriate material sustainability information equally alongside financial information provides reporting organizations with a broad perspective on risk.”

Integrated reporting (IR) has been developed and promoted by the International Integrated Reporting Council (IIRC), a global coalition of regulators, investors, companies, standard setters, the accounting profession and non-governmental organizations. IR has been introduced to the syllabuses of many of the professional level papers. IIRC states that, “An integrated report should answer the question: What challenges and uncertainties is the organization likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance? (IIRC).”

A PwC note states, “Companies that have embarked on the integrated reporting journey view it as a change process that has enabled them to think differently about their businesses. Among the benefits they’ve realized are strengthened financial reporting across business activities, enhanced internal collaboration, and increased internal and external communications. Some have also used the process to develop key performance indicators to provide clarity regarding their business models.”

It adds, “Integrated reporting is more than creating a comprehensive annual report. It can be used as an effective governance tool for performance-oriented management.”

The big question is – if it is so important, why make it voluntary, and only for top 500 companies? At a time when climate change risk on organizations, consumers and other stakeholders is so clearly evident, the faster it is made mandatory, the better it would be.

 

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