By Sapna Nijhawan, Founder & CEO of Sustainiam
The evolution of corporate sustainability reporting has seen a significant shift towards integrating carbon metrics for transparency and accountability. This evolution reflects a growing recognition of the environmental impact of business operations and the need for companies to address climate change proactively.
In India, Corporate Sustainability Reporting has been significantly shaped by the Companies Act 2013 and the Business Responsibility and Sustainability Report (BRSR) introduced by SEBI (Securities and Exchange Board of India).
The Companies Act 2013 mandates CSR activities for eligible companies, requiring them to spend at least 2% of profits on CSR. SEBI’s Business Responsibility and Sustainability Report (BRSR) enhances transparency by requiring top listed firms to report on ESG factors like governance and social impact. Together, these frameworks promote sustainable practices, stakeholder engagement, and transparency in corporate operations across India.
Let’s take a look at how corporate sustainability reporting has progressed over time.
Originally, corporate sustainability reporting focused on basic environmental disclosures, such as waste management practices and energy consumption. Reporting subsequently expanded to include social factors (e.g., labour practices, community engagement) and governance (e.g., board diversity, ethical practices).
As awareness of climate change grew, stakeholders began demanding more detailed information on greenhouse gas (GHG) emissions and their impact. Companies started to calculate and report their carbon footprint, measuring emissions from direct operations (Scope 1), indirect emissions from energy use (Scope 2), and other indirect emissions (Scope 3).
Global Reporting Initiative (GRI) established guidelines for sustainability reporting, including specific metrics for carbon emissions, encouraging standardized reporting practices. The Task Force on Climate-related Financial Disclosures (TCFD) formed by the Financial Stability Board, developed recommendations for voluntary climate-related financial disclosures, urging companies to disclose their climate-related risks and opportunities.
Companies began integrating sustainability metrics, including carbon metrics, into their broader financial reporting frameworks. Recognizing the materiality of sustainability factors, investors and financial analysts started considering carbon metrics as indicators of long-term financial performance and risk management.
Advances in data analytics and carbon accounting software have facilitated more accurate measurement and reporting of carbon metrics. Blockchain technology has been explored for enhancing transparency in carbon reporting, ensuring the integrity and reliability of reported data.
Also, institutional investors and asset managers increasingly consider environmental performance, including carbon metrics, in their investment decisions. Consumers are more inclined to support companies with transparent and responsible environmental practices, influencing corporate behaviour.
Some jurisdictions have implemented mandatory reporting requirements for carbon emissions, driving companies to disclose more detailed information. Governments and regulatory bodies provide incentives and frameworks to encourage corporate sustainability reporting and reduce emissions.
With further integration of sustainability metrics, including carbon metrics, into integrated reporting frameworks that link financial and non-financial performance, continued advancements in technology, such as AI and IoT, will enhance data collection and analysis capabilities for carbon reporting.
This will catalyse efforts to harmonise sustainability reporting standards globally to reduce complexity and enhance comparability of data across companies and sectors.
In conclusion, the evolution of corporate sustainability reporting towards integrating carbon metrics reflects a broader recognition of the importance of environmental sustainability in business operations.
Companies are increasingly expected to transparently disclose their carbon footprint and demonstrate accountability in addressing climate change, driven by stakeholder expectations, regulatory requirements, and the imperative for long-term business resilience.
