Extended Abstract:​ Sustainability Reporting in the Banking Sector

International Conference on Sustainable Management 2018

Sustainability Reporting, in an industry or sector, acts as a tool to provide information to the

external stakeholders of an organisation. This has potential benefits both for the business and the
society.
Sustainability report of any organisation reflects upon a firm’s objectives in
three focal areas - portraying the (stated) goals and motivations of the organisation; providing the
future/upcoming plans of the organisation and the steps it is going to take, and displaying the
environmental, societal and governmental outcomes that their plans and actions have had and
will have. These reports provide an overview of the organisation’s objectives for the overall
well-being of the society (social, environmental and governance included).

With the increasing awareness and concern about society and environment, various measures are
being launched by the government, including formulation of policies making sustainability
reporting mandatory. The Ministry of Corporate Affairs (MCA) had launched the National
Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business,
which were nine principles that guided businesses on adopting responsible business practices.
The perspective of businesses becoming ‘responsible’, soon concretised and became mandatory
in the form of the Business Responsibility Reporting (BRR) in 2012.
Developed countries position environmental outcomes of initiatives as most important and
crucial. Similarly, developing countries position social outcomes as most crucial.
A bank’s environmental footprint is not much, however, its overall impact becomes of great
importance. Banks lend money, and those loans have a say in how a project fares, and the kind of
impact it has on its sector. To what sector a bank lends and how much it lends goes on to
determine the impact the bank has had. Thus, sustainability reporting by banks ensures that the
contribution a bank has is acknowledged, and worked upon.

Looking into the reporting practices by organisations in the banking sector, over the last few
years, sustainability reports by some of the major Indian banks like YES Bank and HDFC bank,
show that apart from creating economic value and managing customer relationships, these banks
seem to focus on a few other key things. One of these includes making Indian population
self-reliant through financial inclusion. This has been accomplished by the banks’ tendency to
assist and support self-help groups across the countries, open more branches in remote areas and
starting new initiatives like mobile ATMs in order to make it more feasible for people to use
their services. Great effort has been put into responsible banking through special attention on
micro, small and medium enterprises.
Sustainable investing is being resorted to. This includes supporting initiatives that are focussed
towards clean and green energy and environmentally sound ideas, and also turning down

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environmentally hazardous deals. Further, there is great attention being paid on making the
process of transactions online. Different innovative forms of transactions have been used by
banks. Yes Money by YES Bank is a successful example. Apart from this, banks have come up
with new innovative technologies to reduce their carbon emissions and environmental footprint,
and continue to fund environmental research in the country. Also, banks invest a lot in human
capital, and have been launching programmes for employee engagement, keeping an ethical code
of conduct as the centre of attention in all their activities. Employee recognition and training
programmes have been rolled out by many major banks in the last few years, and employee
health and safety have been given very high priority.

YES Bank released the first ever sustainability report based on the Global Reporting Initiative
(GRI) guidelines for the year 2012-13, this can be seen as a motivation derived post the BRR
being made mandatory. It established itself as a leader in the field. Soon, HDFC Bank followed
with its own sustainability report, based on the GRI guidelines. This led to more and more banks
following the same trend. As they had started off by making reports based on international
guidelines, and soon the BRR was made compulsory, banking organisations now started
spending efforts on making two reports - one, the BRR, and the other, voluntary report made by
following integrated international reporting guidelines.
As leaders in this endeavour of comprehensive reporting, these organisations seem to be putting
in a lot of effort, but do not seem to be making any actual impact.

Three popular sustainability reporting measures have been analysed - the Global Reporting
Initiative (GRI), the Business Responsibility Reporting (BRR), and the Dow Jones Sustainability
Index (DJSI). When looking at the social, economic, government and environmental sectors, the
BRR seemed to use a simplified approach towards reporting in comparison to the international
guidelines which require stringent efforts to be made by the organisations who seek to meet
them. Furthermore, the simplification of BRR meant that the organizations who were earlier not
interested in doing any kind of sustainability reporting were now willingly working towards
meeting the BRR guidelines and did not feel much pressure when BRR reporting was made
compulsory.
However, this simple framework of the BRR comes across as lacking in certain aspects,
primarily the impact analysis of the work done by the reporting organizations, something that is
one of the key features of the DJSI and the reason behind it being highly regarded. BRR does not
seek any information about the description of the tasks undertaken by the organization in order to
meet the guidelines. The report does not talk about any expenditures that the institution might
have incurred in order to abide by the reporting framework and any projects that they might have
started. Basically, the report is unable to capture the interest of any of the sectors of stakeholders
that it tries to reach.

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As for Global Reporting Initiative (GRI), the reporting framework is quite vast, consisting of a
lot of information about all the initiatives taken by the institution with a proper description of
every project providing a comprehensive outlook to reporting. However, the report still lacked
the expenditures in each of the projects and the analysis of the impact that those projects had.
The institutions list down the projects but are not able to mention how society, environment or
shareholders benefited from them. Also, GRI reports led to a lot of extra information being put
down by the companies which was not required.
The Dow Jones Sustainability Index (DJSI), which is considered to be the most coveted
reporting framework across the world, seems to address most points that the above two
guidelines do not. The reporting institutions clearly mention the impacts of all their projects
numerical figures, monetary terms or qualitative proofs. Further, a lot of unnecessary
information in GRI, is not listed by the institutions following DJSI. Another important factor that
makes the DJSI framework most sought after is that it has a sector wise and region wise
separated index. GRI has come up with a sector wise index but that has not proved to be
effective while BRR is same for all sectors in the country. The problem with adopting DJSI, as
mentioned above, is that it is required to abide by its stringent guidelines on the metrics to
measure the impact of initiatives under the ESG principle. This makes it undesirable in the
Indian context because a lot of Indian organizations have just started reporting, which has only
recently been made mandatory. As a starting point, it is essential that the Indian financial
institutions are asked to report under guidelines that are not so rigid, and then the step by step
transition can be made to more effective reporting. Also, even though it is region specific, DJSI
has an index for Asian region but nothing specific to India or the subcontinent and it is highly
likely that the diversity and legislations in India make it quite different from rest of Asia.

Thus, an attempt to resolve this dissonance between banking sector’s willingness to participate in
sustainable development and the mandatory reporting guideline in India, is needed.
Essential stakeholder groups and their expectations have been identified. To assess the priority to
be accorded to each action or initiative that needs to be taken, the stakeholder power-interest
matrix theory has been used. Then, the stakeholders (categorised into dominants, latents,
marginals and observers) have been mapped to the Environment-Social-Governance principle to
identify which stakeholder group is affected the most by which action and initiative.
This principle is applied in creating a new, comprehensive and collaborative report – specialised
for the banking sector, and will fulfil the basic requirements of the BRR, as well as match up to
international standards of reporting.
The report tries to incorporate the basic assessment tools from the three standards. The report
aims at being concise,by focussing on providing a balanced mix of quantitative and qualitative
information. The proposal is to ensure that the reporting framework provided is updated every
couple of years so that it is in lieu with the trends of the time. One shortcoming that the report
has is that it will gain legitimacy only if it clears all bars of global reporting. However, the report

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will be such that organisations will be comfortable with reporting in a manner that they will not
find it difficult to transition to reporting according to DJSI guidelines. The BRR bases its
questionnaire on 9 principles. In accordance with the ESG principle, most of the focus seems to
be on the Social aspect and impact of activities, followed by Governance, and least focus on
Environment. Picking up from the trends in the reports by Indian banks, environment needs to
be given increased importance in the new proposed reporting guideline. The BRR includes an
overview of all aspects that the GRI looks into, except for environment. The DJSI includes an
array of questions. Aspects such as whether there is diversity in the board and the organisation,
how is the board selected, how effective is the board in its functioning, what are the important
material inputs for the organisation, etc can be integrated into the new framework. This will help
the reporting framework be more standardised, and also ensure that organisations willing to go
the extra mile will not find it difficult in reporting according to DJSI standards.

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Figures and Tables

The Stakeholder Power-Interest Matrix

The ESG Principle

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