Companies must link CSR to business value: Raajeev Batra

Interview with head, governance risks & compliance services, climate change and sustainabilty, KPMG India

A recent analysis by KPMG India of quantitative and qualitative aspects of corporate responsibility (CR) reporting by top 100 listed companies (by gross revenue) confirmed the worst fears of corporate India. Amid an increase in the uptake of CR disclosures by companies, the quality of disclosure lags far behind that of other global peers. Raajeev Batra, head, governance risks & compliance services, climate change and sustainabilty, KPMG India, tells Sudipto Dey that Indian companies have a long way to go when it comes to linking strategic business needs to their CSR objective. Edited excerpts:

What is your assessment of India Inc's corporate social responsibility (CSR) preparedness?

Corporate Responsibility on a broader sense refers to economic, environmental, social and governance responsibilities of business. Indian companies have traditionally linked CR to corporate social responsibility, which was more philanthropic in nature. The preparedness of India Inc on broader CR is gaining momentum, but companies have to clearly link their CR agenda to business value to ensure sustainability and wide acceptance of these initiatives within the organisation.

This will also help companies devise strategies to leverage their core competencies in delivering better economic, environment and social value to their stakeholders.

The mandate from Sebi to the top hundred listed entities to report in line with the National Voluntary Guidelines on social, environmental and economic responsibilities of business gave many companies a framework to work with. But strategic linkage of CR among Indian companies is still at nascent stages.

What are the gaps that corporates need to work on in their CSR policy?

The way an Indian corporate will look into the CSR policy will go through a paradigm shift because of the Section 135 requirements of the new Companies Act.

The important aspect of this is improved governance of CSR. CSR becomes a board-level issue, and moves out of philanthropy and donation. The draft rule in support of the act also brings in shared value concept, which if implemented in the right spirit, will be a game changer in the overall way the corporate was earlier conducting CSR activities.

How do you assess the quality of CR reports that companies come out with?

CR reporting in India has soared to 73 per cent among top 100 companies (by revenues). The analysis of CR reporting quality among top 100 companies in India clearly shows that Indian companies lag when compared to their global peers.

Indian CR reports tend to have relatively better disclosure on stakeholder engagement, but disclosure on how this stakeholder engagement results into actions taken needs improvement. Almost 70 per cent of Indian CR reports have presented both risks and opportunities related to CR, which is a positive trend. However, they have low disclosure on CR impacts of their supply-chain and products and services. They miss out reporting the key challenges and dilemmas.

How does India stack up compared to other emerging markets in CSR survey?

Our KPMG Survey of Corporate Responsibility Reporting 2013 has analysed reporting trends across 41 countries, represented by 4,100 companies. The India survey report is a supplement to this global publication. At the regional level, Americas has overtaken Europe as leaders in CR reporting and Asia Pacific has seen the highest growth rates in CR reporting compared to 2011. Some of the emerging economies like India, South Africa, Malaysia, Indonesia, Nigeria and Chile lead the pack of countries with higher CR reporting rates. This trend is primarily driven by regulations promoting CR reporting in these countries.

Are Indian corporates looking at integrating strategic business needs with CR objectives?

CR is now becoming a mainstream business agenda. Progressive companies not only look at CR from the traditional perspective of just managing reputation or brand value, but also identify key CR risks and opportunities that can impact business. Almost half of the CR reports mention innovation as a key opportunity for companies to provide sustainable products and solutions.

This is followed by opportunities identified (26 per cent) for cost-savings through operational efficiencies, especially energy and resource efficiency. Apart from competitive risks, companies relate to physical risks such as climate change, energy and material resource scarcity and water scarcity.

These trends clearly reflect that many companies associate CR with resource related risks and opportunities, which have a direct linkage to business continuity, operational costs and increased revenues.

Almost two out of three CR Reports (69 per cent) claim that a strategy is in place to manage the CR agenda of the company. To sum it up, the linkage of strategic business needs with CR objectives is on the rise among Indian companies, but there is a long way to go when compared to global leaders from developed economies.