SUSTAINABILITY REPORTING AND GRI BY ARSHA SASIKUMAR

Table of Contents
Introduction to Sustainability Reporting .........................................................3

Why is it needed ? ...............................................................................................4

How is it done ? ..............................................................................................5-12 Introduction on Various Reporting Processes ..................................................5 1. GRI& Evolution of its Guidelines ................................................................6 2. GRI Guidelines Reporting Framework.........................................................6 3. Sustainability Reporting Guidelines 5.1 Reporting Principles ...............................................................................9 5.2 Standard Disclosures ............................................................................10 4. GRI Applications Levels ............................................................................12 International & National Scenario .............................................................13-15 1. International Scenario .................................................................................13 2. National Scenario........................................................................................13 2.1 Indian Policies & Legislative Environment .........................................14 2.2 Scenario across key sectors in India ................................................14-15 3. Drawbacks & Remedial Measures .............................................................16

Annexures ..........................................................................................................17

What is it?
Sustainability Reporting (SR) is a framework for reporting of business initiatives, for
taking professional care of three most vital pillars of organisational growth and stability. These three pillars are planet, people and profit. There are no generally accepted mandatory standards/rules on such reporting at international and even at national level. Organisations are reporting sustainability issues using some voluntary standards.

Why is it needed?
In simple words, the main motive of such reporting is that in a world of changing expectations, companies must account for the way they impact the communities and environments where they operate. SR has certain advantages and they are as follows Corporate companies that focus on SR outperform their peers over the longer run, which in turn results into a stronger market position and increased profitability. There is a reliable co-relation between business integrity and above average financial performance. SR helps to acquire national and international listings and provide access to otherwise restricted markets. SR will provide a sound understanding of the organization's customer needs, especially foreign international customers. Other benefits include attracting finance through transparent relationships with credit providers, improving management systems and improving employee motivation and customer satisfaction.

How is it to be done?
Introduction
Indian companies have been reporting on sustainability since 2001 by using the GRI Framework, following the Carbon Disclosure Project (CDP) or the UN Global Compact's Communication of Progress (CoP). The process of evolution for most of the companies has been to initiate the reporting process under the CDP or the CoP and later progress into reporting under the GRI Framework, which is based on some principles and standard disclosures, including performance indicators. However, a small number of companies report under all the three norms. The number of the companies reporting on sustainability has been increasing but is still relatively small as compared to the total number of companies that are publicly listed in India. The Carbon Disclosure Project (CDP) is an independent not - for - profit organization registered in England and holds the largest database of primary information on corporate climate change in the world. An annual questionnaire, from CDP, is sent inviting disclosures on GHG emissions and climate change parameters to select companies based on their market capitalisation in the chosen countries and the relevant information on climate change is put for increasing transparency in areas of climate related investment and other risks. The UN Global Compact and CoP Filing (CoP) is a public communication to stakeholders on the progress that the company has made in implementing the principles laid out by United Nations Global Compact (UNGC) in their business activities. It is an annual statement shared publicly with the stakeholders. UNGC has signatories not only from the industry and corporate sector, but also from not - for - profit and educational institutions. Arising need for verified data, had eventually led to the use of the Global Reporting Initiative (GRI) framework, as it recommends the use of external assurance certifying the credibility of the report. It is complementary to GRI's application Level check, which indicates the extent to which the GRI Guidelines have been applied but does not comment on the content or the quality of reporting. GRI has become a permanent, independent organization, with a distinguished Board of Directors, and global headquarters in Amsterdam, Netherland.

GRI& its Guidelines

The GRI guidelines provide guidance on how organizations can disclose their sustainability performance. The reporting framework sets out principles and standard disclosure items, including performance indicators which are used by organizations to measure and report their economic, environmental and social performance.

Evolution of GRI Guidelines

The first version of the GRI was first issued in 2000. The second version, known as G2, was unveiled at the World Summit on Sustainable Development in Johannesburg in 2002. With the advent of G2, some Indian companies started reporting on the G2 framework. Eventually another version, called G3, was launched in 2006 at an international conference and was picked up as the latest set of guidelines by the followers. The G3 is the so-called "Third Generation" of the GRI's Sustainability Reporting Guidelines.There is a "third generation" because the GRI seeks to continually improve the Guidelines. The G3 builds on the G2, which in turn is an evolution of the initial Guidelines, which was released in 2000. The G3.1 Guidelines are the latest and most complete version of GRI's Sustainability Reporting Guidelines. The G3.1 Guidelines are an update and completion of the third generation of GRI's Sustainability Reporting Guidelines, G3. Launched in 2011, G3.1 includes expanded guidance for reporting on human rights, local community impacts, and gender. G4 is GRI's fourth generation of Sustainability Reporting Guidelines and is now in development. To be launched in May 2013, G4 is part of GRI's commitment to the continuous development of its Guidelines. GRI is committed to ensuring that G4's improved guidance will result in increased value for reporters and report users. The Guidelines' development is influenced by changes in the reporting field, such as the introduction of new concepts, trends and tools, and requests by new players. GRI believes that G4 will improve sustainability reporting guidance by making it more focused, helping reports be more relevant.

GRI Guidelines Reporting Framework

The GRI Reporting Framework is intended to serve as a generally accepted framework for reporting on organization's economic, environmental, and social performance. It is designed for use by organizations of any size, sector, or location. It takes into account the practical considerations faced by a diverse range of organizations - from small enterprises to those with extensive and geographically dispersed operations.The GRI Reporting Framework contains general and sector - specific content that has been agreed by a wide range of stakeholders around the world to be generally applicable for reporting an organization's sustainability performance.

The Sustainability Reporting Guidelines (the Guidelines) consist of Principles for defining report content and ensuring the quality of reported information. It also includes Standard Disclosures made up of Performance Indicators and other disclosure items, as well as guidance on specific technical topics in reporting. The Reporting Principles help reporters define the report content, the quality of the report, and give guidance on how to set the report boundary. Principles include those such as materiality, stakeholder inclusiveness, comparability and timeliness. The Guidelines identify information that is relevant and material to most organizations and of interest to most stakeholders for reporting the three types of Standard Disclosures: a. Strategy and Profile: Disclosures that set the overall context for understanding organizational performance such as its strategy, profile, and governance. b. Management Approach: Disclosures that cover how an organization addresses a given set of topics in order to provide context for understanding performance in a specific area. c. Performance Indicators: Indicators that elicit comparable information on the economic,environmental, and social performance of the organization. Indicator Protocols exist for each of the Performance Indicators contained in the Guidelines. These Protocols provide definitions, compilation guidance, and other information to assist report preparers and to ensure consistency in the interpretation of the Performance Indicators. Users of the Guidelines should also use the Indicator Protocols. Sector Supplements complement the Guidelines with interpretations and guidance on how to apply the Guidelines in a given sector, and include sector - specific Performance Indicators. Applicable Sector Supplements should be used in addition to the Guidelines rather than in place of the Guidelines. Technical Protocols are created to provide guidance on issues in reporting, such as setting the report boundary. They are designed to be used in conjunction with the Guidelines and Sector Supplements and cover issues thatface most organizations during the reporting process.

Sustainability Reporting Guidelines

The Sustainability Reporting Guidelines consist of Reporting Principles, Reporting Guidance, and Standard Disclosures (including Performance Indicators). These elements are considered to be of equal in weight and importance.

1.1 Reporting Principles and Guidelines

Reporting Principles describe the outcomes, a report should achieve and guide decisions throughout the reporting process, such as selecting which topics and indicators to report on and how to report on them. The Principles themselves are organized into two groups: a. Reporting Principles for Determining the Content - Namely materiality, stakeholder inclusiveness, sustainability concept, and completeness; and, b. Reporting Principles for Ensuring the Quality - Namely balance, comparability, accuracy, timeliness, clarity and reliability.

Reporting Principles For Determining The Content

Materiality The information in a report should cover topics and Indicators that reflect the organization's significant economic, environmental, and social impacts, or that would substantively influence the assessments and decisions of stakeholders. Stakeholders Inclusiveness The reporting organization should identify its stakeholders and explain in the report how it has responded to their reasonable expectations and interests. Sustainability Context The report should present the organization's performance in the wider context of sustainability. Completeness Coverage of the material topics and Indicators and definition of the report boundary should be sufficient to reflect significant economic, environmental, and social impacts and enable stakeholders to assess the reporting organization's performance in the reporting period.
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Reporting Principles For Ensuring The Quality Balance The report should reflect positive and negative aspects of the organization's performance to enable a reasoned assessment of overall performance. Comparability Issues and information should be selected, compiled, and reported consistently. Reported information should be presented in a manner that enables stakeholders to analyse changes in the organization's performance over time, and could support analysis relative to other organizations Accuracy The reported information should be sufficiently accurate and detailed for stakeholders to assess the reporting organization's performance. Timeliness Reporting occurs on a regular schedule and information is available in time for stakeholders to make informed decisions. Clarity Information should be made available in a manner that is understandable and accessible to stakeholders using the report. Reliability Information and processes used in the preparation of a report should be gathered, recorded, compiled, analysed, and disclosed in a way that could be subject to examination and that establishes the quality and materiality of the information.

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1.2 Standard Disclosures

Standard Disclosures are sub - divided in three categories which are as follows, Profile Disclosures Strategy & Analysis of the organization Organizational Profile Report Parameters for the organization Governance, Commitments and Engagements of the organization

Disclosures on Management Approach Disclosure on Performance Indicators Economic Environmental Social 1. Labour Practices and Decent Work 2. Society 3. Human Rights 4. Product Responsibility

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GRI Application Levels

Upon finalization of their report, preparers should declare the level to which they have applied the GRI Reporting Framework via the "GRI Application Levels" system. This system aims to provide:

Report readers with clarity about the extent to which the GRI Guidelines and other
Reporting Framework elements have been applied in the preparation of a report. Reporting Framework over time.

Report preparers with a vision or path for incrementally expanding application of the GRI
Declaring an Application Level results in a clear communication about which elements of the GRI Reporting Framework have been applied in the preparation of a report. To meet the needs of new beginners, advanced reporters, and those somewhere in between, there are three levels in the system. They are titled C, B, and A. The reporting criteria found in each level reflects an increasing application or coverage of the GRI Reporting Framework. An organization can self - declare a "plus" (+) at each level (C+,B+,A+) if they have utilized external assurance. An organization self - declares a reporting level based on its own assessment of its report content against thecriteria in the GRI Application Levels. In addition to the self declaration, reporting organizations can choose one or both of the following options:

Have an assurance provider offer an opinion on the self - declaration. Request that the GRI check the self - declaration

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International and National

Scenario...
1. International Scenario
Of the 250 largest global companies, over 65% are already publishing a sustainability report. More than 3,000 companies across the world report on how they minimise their environmental footprint, engage with stakeholders, adopt fair social practices or embed sustainability into their day - to - day business, R & D or marketing practices. Companies across Europe, Canada, Australia, Japan and USA and across sectors have been coming up with the sustainability reports for 6 to 10 years now. Companies like BP, ABN AMRO, BT, Novo NORDISK etc. have been rated amongst the top reporters for years now.

2. National Scenario
The reporting in India is still at a nascent stage with nearly 80 companies (some are enlisted in Annexure I), out of 7000 listed companies, disclosing their sustainability performance. Out of these 80, there are about 60 companies which have publicly declared that they use
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GRI Guidelines. And out of these 60, only 51 sustainability reports are registered on the GRI database. Reporting companies are mainly from Oil and Gas, Mining, Cement, Steel, Minerals, Automotive, etc. Reliance, ITC, Dr. Reddy's, Jubiliant Organosys, Tata Steel, Tata, Lafarge are some of the most active companies reporting themselves. Reliance and ITC are the highest rating (3 A+) companies.

2.1 Indian Policies and Legislative Environment

With increasing importance of India as a global economy and its role at crucial international forums dealing with economic and climate change issues, the Finance Ministry decided to expand the scope of the annual Economic Survey to include a chapter on the topic of financing climate change. Indian Banks, realising their need at the hour, have incorporated evaluation on sustainability as one of the key inputs to their decision on financing and valuation of projects. Financial reporting in India now mandatorily includes reporting on environment and social matters.

2.2 ScenarioAcross key Industrial Sectors in India

Oil & Gas Companies falling in this category are commonly perceived as an amalgam of organizations mainly finite and non-renewable resources, whose long - term exploitation leads to a decline in the quantity of reserves/available land and increasing solid wastes, chemical, water consumption and emission of polluting effluents. A relatively higher number of companies from this sector that provide reports are in line with the global reporting trend. Annexure 1 enlists some key reporters from this industry. Information Technology (IT) IT sector has also emerged as one of the leaders in reporting though it is traditionally recognised to be a less polluting industry. This high adoption rate could be because most Indian IT companies adopt a service model for outsourcing activities and adopt a global business model spreading across geographies with a significant customer base in the developed countries. It is believed that investors and customers in these economies would be more likely to base their decision of investment relations on sustainability parameters in addition to other financial and operational issues. Annexure 1 enlists some key reporters from this industry. Metals and Mining

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Indian legislation subjects mining projects to rigorous approvals, but concerns however continue to mount on long term sustainability of their operations. Given the high impact from operations on the environment and community, prevailing detailed sustainability disclosures from 50% of the top companies from this sector is encouraging, and underlines the need for wider adoption. Annexure 1 enlists some key reporters from this industry. Financial Services This sector in India, in particular, has not been on the forefront of reporting phenomenon. However globally, this sector has been setting trends in sustainability reporting and accounts for the largest number of companies from an individual sector that report under sustainability parameters. Given the influence that they exercise over their clients and investing companies, which, in turn, have a chain of companies and suppliers who are controlled or significantly dependent on them, a higher participation by this sector could revolutionize the reporting landscape on India. Annexure 1enlists some key reporters from this industry. Power & Utilities Globally this sector has been positioned in the higher echelons of the reporting grid but in India, only a handful of companies in this sector prepare SRs. The government companies in this sector lead the reporting trend though a growing number of private sector companies are also in the process if imbibing the formal sustainability reporting parameters. Annexure 1enlists some key reporters from this industry.

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Why are we lagging

behind...?
Most of the companies do not have regular checks and internal assurance protocol in place. Most of the reports issued by Indian companies fail to define clear focus areas and identifying key stakeholders. Very few Indian reporters have sustainability strategy with well - defined objectives and SMART (Specific, Measurable, Achievable, Realistic and Time-bound) targets. This clearly indicates that although many companies have started reporting their sustainability performance they have not channelled their efforts under a well defined sustainability strategy. The SRs issued during the last few years are highly packaged but lack emphasis on the main issue of sustainability. Climate change has emerged on the key sustainability risks across industries but only small number of companies report on climate change risks.

What can be done...?

The expectations from Indian reporters going forward are to focus on presenting information related to:

Sustainability issues, challenges, dilemmas and opportunities. Regulatory environment and fact-based information. Information of interest to investors such as materiality of issues in financial terms,
vision and strategystatements, goals and targets, etc. Explanation on identification and prioritization of material issues. Reader friendly report design.

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ANNEXURE I
List of Indian companies with GRI based Sustainability Reports
Sr. No 1 2 3 4 5 6 Organization Sector Starting Year

Mumbai International Airport Private Limited Ambuja Cements JSW Steel Jubilant Industries Limited Transport Corporation of India (TCI) UltraTech Cement

Airport operator Construction Metals Products Chemicals Logistics Construction Materials Construction Agriculture Conglomerates Energy Automotive Financial Services Energy Financial Services

2012 2011 2011 2011 2011 2011

7 8 9 10 11 12 13 14

HCC Jain Irrigation Systems JSW KOEL Maruti-Suzuki Multi Commodity Exchange of India (MCX) Oil and Natural Gas Corporation (ONGC) Small Industries Development Bank of India (SIDBI) SreeSanthosh Garments (SSG) Grasim Industries

2010 2010 2010 2010 2010 2010 2010 2010

15 16

Textiles and Apparel 2010 Construction Materials Other Mining 2009

17 18

Moser Baer India V. S. Dempo& Co.

2009 2009
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19 20 21 22 23 24 25 26 27 28 29 30 31 32

Wipro Ltd ABN AMRO INDIA BPCL ChemplastSanmar Dr. Reddy's Laboratories India Indian Oil Infosys Technologies India Larsen & Toubro Mahindra MSPL SRF Sterlite Industries Tata Motors Tata Tea

Computers Financial Services Energy Chemicals

2009 2008 2008 2008

Healthcare Products 2008 Energy Utilities Computers Conglomerates Conglomerates Mining Conglomerates Mining Automotive 2008 2008 2008 2008 2008 2008 2008 2008

Food and Beverage 2008 Products Equipment Computers Mining Construction Materials Conglomerates Chemicals Conglomerates 2008 2007 2006 2005

33 34 35 36

Varroc Engineering Tata Consultancy Services (TCS) Sesa Goa Shree Cement

37 38 39

ITC Jubilant Life Sciences Ltd Reliance Industries Limited

2004 2004 2004

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40 41 42 43 44

Tata International Ford India Paharpur Business Centre Tata Steel TATA

Conglomerates Automotive

2004 2002

Commercial Services 2002 Metals Products Automotive 2002 2001

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