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Cement, metals and mining companies are better at reporting environmental impacts, study says

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There are significant differences in sustainability reporting practices between the different sectors that NIFTY 500 companies, according to an analysis by Sculpt Partners, a sustainability-focused consultancy that partners with publicly traded companies, start-ups and impact investors.

Companies in the cement, metal and mining industry report better quality data on environmental topics. This finding is part of a first of its kind comprehensive study by Sculpt Partners of the state’s sustainability reporting by the 500 largest publicly traded companies in India as of fiscal year 2021-22. Sculpt Partners had analyzed multiple publicly available sources such as annual reports, websites, investor press releases and other documents on sustainability topics.

The Sculpt report also provides greater visibility into sustainability topics that are better reported to others. Companies are disclosing more comprehensive information and statistics for sustainability topics such as waste management, greenhouse gas emissions, water consumption and energy-efficient operations. Some of the sectors lagging behind on these parameters include healthcare, IT, financial services, and media entertainment and publishing.

From fiscal year 2022-23, the Business Responsibility & Sustainability Reporting (BRSR) guidelines introduced by SEBI require the top 1000 publicly traded companies in India (by market capitalization) to publish sustainability reports and disclose essential ESG information according to BRSR standards.

“To meet SEBI guidelines, we believe that most companies in the lagging industries need to significantly improve their environmental impact reporting practices. The Board of Directors, Chief Financial Officers (CFOs) and Chief Sustainability Officers (CSOs) of these companies need to ramp up and establish measurement mechanisms and narratives to report sustainable sustainability performance in a fair, transparent, accurate and intuitive manner,” said Kumar Subramanian, Founding Partner and Managing Director, Sculpt Partners.

Good environmental reporting practices are part of a robust governance structure to effectively oversee, manage and execute an organization’s sustainability agenda. In this regard, some of the report’s key findings include:

Less than 15 percent of Nifty 500 companies have a special committee of the board of directors to oversee the corporate sustainability agenda.

About 37 percent report significant sustainability risks based on the enterprise risk management framework.

Only 4 percent report that their board’s evaluation framework includes sustainability themes.

Only six companies have appointed a Chief Sustainability Officer (CSO) (or equivalent key management role) to lead corporate sustainability initiatives at the management level

Only 2 percent report that key sustainability indicators are linked to management pay

Only three companies disclose the exact percentage of pay associated with sustainability performance

Kumar Subramanian, Founding Partner and Managing Director, Sculpt Partners said: “The company’s sustainability mandate should be driven by the board of directors. They should integrate the sustainability agenda with their business strategy, goal setting, risk management and management incentives. regular training on contemporary sustainability topics. Where appropriate, they should co-opt an advisory board to seek advice on sustainability risks and opportunities that matter to the company. The management of these companies should sponsor, articulate and execute key sustainability initiatives within the company and in their value chain. Robust third-party collection, reporting and verification of sustainability data provides the right foundation for a data-driven sustainability strategy and practices, and provides investors with transparency on current performance and future liabilities.”

The study also examined the disclosure of sustainability information related to key value chain components such as customers, suppliers and government.

According to the survey, most Nifty 500 companies do not report material information on critical customer-related topics such as product safety and quality, product recalls and practices related to product labeling and consumer data protection.

Less than 10 percent of companies (48 out of 500) report data breach indicators and about 1 percent (7 out of 500) report product recall statistics.

On the supply side, disclosure is largely limited to sustainable sourcing policies and initiatives.

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