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Is Your Annual Report a Reflection Of Stakeholder Sustainability? The focus continues to shift, purely from shareholder value to stakeholder value

By Hussain S. Kalolwala

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The evolving regulatory norms and involvement of multiple institutions for reporting best practices have brought the annual report back into the limelight. Do you know annual reports now cover (or are expected to cover) meaningful disclosures that provide insightful information about key stakeholder engagement? The focus continues to shift, purely from shareholder value to stakeholder value.

So what has changed?

Most significantly, the increasing thrust on reporting recommendations and standards defined by the formation of independent international bodies, non-profit organizations, and a global coalition of regulators, academia, and NGOs. The growing prominence of regulatory frameworks prescribed by globally acknowledged entities such as Global Reporting Initiative (GRI), CDP Global, The International Integrated Reporting Council (IIRC), The Division for Sustainable Development Goals (DSDG) in the United Nations Department of Economic and Social Affairs (UNDESA), United Nations Framework Convention on Climate Change (UNFCCC) and World Business Council for Sustainable Development (WBSCD) and others have brought the spotlight back to an "inclusive approach' to stakeholder reporting. The need to ensure transparency and a requirement to portray a strategic narrative has augmented the need for inclusive reporting and even governments at regional levels have mandated similar structures for corporates.

The introduction of Business Responsibility Report (BRR) by the Securities and Exchange Board of India, PMO's initiatives supported by NITI Aayog, National Guidelines of Responsible Business Conduct (NGRBC) and National Voluntary Guidelines on Social, Environmental and Economic Responsibilities (NVG-SEE) by the ministry of corporate affairs (MCA) have further encouraged (and to a large extent mandated) inclusive reporting for Indian corporates, factoring all stakeholders.

A critically appraising and growing stakeholder fraternity—involving employees, customers, suppliers, regulators, and investors—are now playing a dominant role in the business functioning. The global and regional guidelines comprehensively cover major stakeholder issues, requiring the companies to disclose appropriate (if not largely) action plans and their approach towards each framework. A corporate strategy today needs to be "inclusive and sustainable' rather than just crafted for achieving financial milestones. More and more investors, decision-makers, and financial institutions now look upon companies that are reporting in a meaningful manner, covering aspects of sustainability and value-creation in their annual reports.

Consider the case of Nike Inc. which surprisingly brought forward its business model that involved child labor, then being scrutinized for promoting unfair practices. Increasing deregulation and growing globalisation led the company to revisit its code of conduct, regulate operating procedures, and rebuild its corporate brand—that was by then, severely impacted.

To summarise in two words, everything changed. And, for the better.
Not only for Nike but for any and all business houses.

While Nike reworked and regained its allure over the years, what has followed is responsible reporting. The companies today are proactive, identifying disclosures covering every stakeholder issue and reporting them, more as a responsibility than a regulatory burden.

Even investors today are looking beyond numbers. "Responsible Investing' is the new "mantra'.

There are several companies, in India and across the globe, who now report responsibly, finding the right balance between their board room strategy and a perfect business model. Closing the gap, if any, that persists between delivering value in financial terms and non-financial metrics, is the need of the hour.

We all know the iconic slogan of Nike. All one can say now is—the clock is ticking.

Hussain S. Kalolwala

Founder & CEO, Kalolwala & Associates

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