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Subject COMMERCE

Paper No and Title 4- ACCOUNTING THEORY AND PRACTICE

Module No and 2- EMERGING DIMENSIONS: GRI ETC.

Title
Module Tag COM_P4_M2

COMMERCE PAPER No.4 : Accounting theory and practice

MODULE No.2 : Emerging Dimensions: GRI etc.
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TABLE OF CONTENTS

1. Learning Outcomes
2. Introduction- Sustainability Reporting
3. Global Reporting Initiative (GRI)
3.1 Governance of GRI
3.2 GRI Guidelines
3.3 G4
3.3.1. Main features of G4 Guidelines
4. The GRI and Integrated Reporting
4.1 Relationship between Sustainability Reporting and Integrated Reporting

5. The other new initiatives

5.1 CSR index
5.2 eXtensible Business Reporting Language (XBRL)
5.3 Business Responsibility Report (BRR)

6. Summary

COMMERCE PAPER No.4 : Accounting theory and practice

MODULE No.2 : Emerging Dimensions: GRI etc.
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1. Learning Outcomes
After studying this module, you shall be able to

 Learn the need of Sustainability reporting

 Identify the developments taken place in the field on reporting, such as Global Reporting
Initiatives
 Analyze the relationship between GRI and Integrated Reporting
 Identify the main features of New GRI (G4) guidelines.
 Learn the various initiatives taken in the area of Non-financial reporting or ESG
reporting.

COMMERCE PAPER No.4 : Accounting theory and practice

MODULE No.2 : Emerging Dimensions: GRI etc.
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2. Introduction - Sustainability Reporting

Corporate reporting established solely on accounting standards are being gradually

criticized as it permits companies to externalize environmental and social costs due to the
fact that financial results are not placed within the context of the greater economy,
society or the environment in which the firms operate.
The theory of sustainability has its origins in the 1960s environmental movement when
“Problems such as resource depletion, overpopulation, , decreasing water supplies, air
pollution, and the spread of chemicals and heavy metals in nature came into limelight” .
“Sustainability” swiftly evolved to become a catchphrase for the dawning of the new
century. Being sustainable has become socially preferable approach to almost everything.
Sustainable development which is in use currently traces its origin to the 1987 Brundtland
Report of the World Commission on Development and the Environment. Expressed in
simple terms, sustainable0 development is commonly considered to be “development
should take place in such a way that it meets the needs of the present without
compromising the ability of future generations to meet their needs”.
We can define Sustainable Development as development that fulfills the needs of the
present generation without compromising the capacity of future generations to meet
their own needs. Corporate Sustainability means the ability of the corporates to maintain
economic prosperity in the perspective of environmental responsibility and social
stewardship. It is a business oriented approach that aids in creating long-term
stakeholder value by embracing opportunities and handling risks deriving from social,
economic, and environmental developments.
Sustainability reporting has become more relevant and significant in today’s
context not only from social or environmental concerns, but because, globally, we
have started realizing that our goal should not just be growth and profits, instead
we should aim at inclusive growth. Also, if the growth process is not equitable, it
cannot be sustainable.

During the 1990s, a new trend of voluntarily producing non-financial reports

reflecting stakeholder calls for more informed corporate disclosure was started by some
companies. Although, the content of these reports varies significantly, but in general, it
contains information regarding social, environmental and economic performance in a
printed format. Sustainability, Corporate social responsibility and triple bottom-line
reporting has emerged as a flourishing industry, with almost all major corporations now
issuing annual reports highlighting their social and/or environmental performance. The
principle behind these non-financial reports is that only the effects that are measured and
accounted for in a report will receive the required attention by the organization’s
management and owners. Reporting is therefore seen as crucial to ensure that
organizations are environmentally and socially responsible.

COMMERCE PAPER No.4 : Accounting theory and practice

MODULE No.2 : Emerging Dimensions: GRI etc.
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Increasing number of companies and other organizations

want to make their operations sustainable. Moreover, expectations that long-term
profitability should be in harmony with social justice and conserving the environment are
gaining popularity. These expectations are only set to escalate and intensify as the need to
move to a truly sustainable economy is understood by companies’ and organizations’
financiers, customers and various other stakeholders. Sustainability reporting helps
organizations to set goals, measure performance, and manage change in order to make
their operations more sustainable.” A sustainability report is more comprehensive than an
environmental and/or a social report, first because it includes the economic impact of the
organizations, and second because not only does it assess the enterprise’s impact on
society and compare its performance over the years, but also it assesses the sustainability
of the enterprise’s operations and products in relation to the development of society”.

3. Global Reporting Initiative

The Global Reporting Initiative (GRI) is a not for profit body that encourages economic
sustainability. It produces one of the world’s most predominant standards for
sustainability reporting- also known as ecological footprint reporting, Environmental
Social Governance (ESG) reporting, Corporate Social Responsibility (CSR) reporting,
Triple Bottom Line (TBL) reporting.. A sustainability report is a report which is made by
an organization to disseminate information about environmental, economic, social and
governance performance. GRI aims to make sustainability reporting by all organizations
as general as possible, and comparable to, financial reporting.
GRI Guidelines are regarded to be widely used. More than 4,000 organizations from 60
countries use the Guidelines to produce their sustainability reports. GRI Guidelines apply
to corporate businesses, public agencies, smaller enterprises, industry groups and others.
The Global Reporting Initiative (GRI) is a primary organization in the field of
sustainability. It has the agenda of promoting sustainability reporting as a way to making
organizations more sustainable. Organizations can contribute a lot to the sustainable
development. A sustainability report aims to convey disclosures on an organization’s
impacts – may be positive or negative – on the society, environment and the economy. In
doing so, sustainability reporting makes abstract issues tangible and concrete, thereby
helps in understanding and managing the effects of sustainability developments on the
organization’s activities and strategy. Internationally agreed disclosures and metrics
enable information contained within sustainability reports to be made accessible and
comparable, providing stakeholders with enhanced information to inform their decisions.

COMMERCE PAPER No.4 : Accounting theory and practice

MODULE No.2 : Emerging Dimensions: GRI etc.
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3.1. Governance of the Global Reporting Initiative

The “GRI” means the global network of thousands worldwide that create the Reporting
Framework, use it in unveiling their sustainability performance, demand its use by
organizations as the basis for information disclosure, or are aggressively engaged in
improving the standard.
The network is supported by an institutional side of the GRI, which is made up of the
following governance bodies: Technical Advisory Committee, Organizational
Stakeholders, Board of Directors, Stakeholder Council and a Secretariat. Various
geographic and sector constituencies are represented in these governance bodies. GRI is
headquartered in Amsterdam, Netherlands.

3.2. Global Reporting Initiative (GRI) Guidelines

In 2000 the Global Reporting Initiative issued its maiden Sustainability Reporting
Guidelines. One of the most generally used structures for reporting on sustainability is the
Global Reporting Initiative’s G3 Guidelines. Guidelines are an update and completion of
the third generation of GRI's Sustainability Reporting Guidelines, G3.This framework
has been used in nearly 7500 reports to report on sustainability worldwide and more than
100 GRI reports have been published by Indian companies so far. Global Reporting
Initiative (GRI) is a global initiative to standardize Non-Financial Reports (NFR) which
the institutions adopt and has become the de-facto standard internationally. GRI is a long-
term, multi-stakeholder, international process whose mission is to develop and
disseminate globally applicable Sustainability Reporting Guidelines. These Guidelines
are meant for voluntary usage by organizations for reporting on the social, economic and
environmental dimensions of their activities, services and products. The motive of the
Guidelines is to aid reporting organizations and their stakeholders in enunciating and
understanding contributions of the reporting organizations to sustainable development.

3.3. G4
The GRI Sustainability Reporting Guidelines are reviewed periodically to provide the
best and most up-to-date supervision for effective sustainability reporting. G4 is GRI’s
fourth generation of Sustainability Reporting Guidelines. The aim of G4 is quite simple:
to contain valuable information about the organization’s most critical sustainability-
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related issues, help reporters prepare sustainability reports

that matter and make such sustainability reporting standard practice. It is crucial for
society and markets that sustainability reporting evolves in terms of content, and from an
exceptional activity undertaken by a minority of leading companies to a standard
practice. Together with being more user-friendly than previous versions of the
Guidelines, G4 has an ever increased stress on the need for organizations to focus the
reporting procedure and final report on those areas that are substantial to their business
and their key stakeholders. This ‘materiality’ focus will make reports more relevant, more
credible and more user-friendly. This will, in turn, enable organizations to better inform
markets and society on sustainability matters. While organizations may monitor and
manage a far wider array of sustainability-related topics due to their everyday
management activities, this new focus on materiality means that sustainability reports
will be centered on matters that are really critical in order to achieve the organization’s
goals and manage its impact on society. The Guidelines have been developed through an
extensive process involving hundreds of reporters, report users and professional
intermediaries from around the world. G4 therefore offers a globally relevant framework
to support a standardized approach to reporting, encouraging the degree of transparency
and consistency that is required to make information useful and credible to markets and
society. G4 is designed to be universally applicable to all organizations, large and small,
across the world. The features of G4 – to make the Guidelines easier to use, both for
experienced reporters and for those new to sustainability reporting from any sector – are
supported by other GRI materials and services. As with all GRI Guidelines, G4 includes
references to widely accepted and used issue-specific reporting documents, and is
designed as a consolidated framework for reporting performance against different codes
and norms for sustainability. G4 also provides guidance on how to present sustainability
disclosures in different report formats: be they standalone sustainability reports,
integrated reports, annual reports, reports that address particular international norms, or
online reporting.

3.3.1 Main features of the G4 Guidelines

The G4 Guidelines have increased user-friendliness and accessibility. The emphasis on

what is material encourages organizations to provide only information that is critical to
their business and stakeholders. This means organizations and report users can
concentrate on the sustainability impacts that matter, resulting in reports that are more
strategic, more focused, more credible, and easier for stakeholders to navigate.

Among many other features, key enhancements in G4 include:

COMMERCE PAPER No.4 : Accounting theory and practice

MODULE No.2 : Emerging Dimensions: GRI etc.
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COMMERCE PAPER No.4 : Accounting theory and practice

MODULE No.2 : Emerging Dimensions: GRI etc.
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4. The GRI & Integrated Reporting

GRI co-founded the International Integrated Reporting Council (IIRC) because the future
of corporate reporting is the integration of financial and sustainability strategy and
results. An integrated report should be the result of an integrated strategy and an
integrated reporting process. Understanding the strategic link between financial results
and sustainability issues is critical for business managers, and increasingly connected to
short-and long-term business success and risk management. Organizations are expected
to be able to identify the material sustainability topics to monitor and manage, to ensure
positive business performance. This identification is at the core of the sustainability
reporting process provided by GRI’s Sustainability Reporting Framework. GRI offers
companies guidance on how to identify material sustainability topics to be monitored and
managed, and to prepare for the integrated thinking process, the foundation for integrated
reporting, which has been disseminated around the globe in the last years.

4.1. Relationship between Integrated Reporting and Sustainability

Reporting

Sustainability reporting is a method that supports organizations in setting goals,

measuring performance against goals and managing change towards a sustainable global
economy – one that combines long term profitability with social responsibility and
environmental care. Sustainability reporting – mainly through but not limited to a
sustainability report – is the key platform for communicating the organization’s
economic, environmental, social and governance performance, reflecting positive and
negative impacts.

Integrated reporting is an emerging and evolving trend in corporate reporting, which in

general aims primarily to offer an organization’s providers of financial capital with an
integrated representation of the key factors that are material to its present and future value
creation.

Integrated reporters build on sustainability reporting foundations and disclosures in

preparing their integrated report. Through the integrated report, an organization provides
a concise communication about how its strategy, governance, performance and prospects
lead to the creation of value over time. Therefore, the integrated report is not intended to
be an extract of the traditional annual report nor a combination of the annual financial
statements and the sustainability report. However, the integrated report interacts with
other reports and communications by making reference to additional detailed information
that is provided separately.

Although the objectives of sustainability reporting and integrated reporting may be

different, sustainability reporting is an intrinsic element of integrated reporting.
Sustainability reporting considers the relevance of sustainability to an organization and
also addresses sustainability priorities and key topics, focusing on the impact of
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sustainability trends, risks and opportunities on the long

term prospects and financial performance of the organization. Sustainability reporting is
fundamental to an organization’s integrated thinking and reporting process in providing
input into the organization’s identification of its material issues, its strategic objectives,
and the assessment of its ability to achieve those objectives and create value over time.

Many organizations that use the GRI Guidelines have started experimenting in the field
of integrated reporting despite the absence of an internationally accepted definition and
framework.

5. The other new initiatives

1. CSR Index

Recently the Bombay Stock Exchange and the IICA signed a memorandum to develop a
corporate social responsibility index. The index will assess the impact and performance
of companies listed at BSE in CSR activities. The index would also look at the
performance of companies in their mandatory CSR spend as per the new Act.

2. MCA mandated XBRL for specific companies

On April 16, 2013, the International Integrated Reporting Council (IIRC) issued its
“Consultation Draft of the International Integrated Reporting Framework” (the CD) as a
proposed framework for how to create an integrated report and what to include in that
report. XBRL is mentioned explicitly in this section of the CD as a possible technology
platform for integrated reporting as it is used around the world by regulators and agencies
as the standard for structured digital disclosures of financial information. XBRL is a
logical consideration for providing similar benefits to integrated reports that combine
financial and nonfinancial information.:-

COMMERCE PAPER No.4 : Accounting theory and practice

MODULE No.2 : Emerging Dimensions: GRI etc.
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1. all companies listed with any Stock Exchange(s) in India and their Indian
subsidiaries; or
2. all companies having paid up capital of Rupees five crore and above; or
3. all companies having turnover of Rupees one hundred crore and above; or
4. All companies who were required to file their financial statements for FY 2010-11,
using XBRL.
For this, new Form 23AC-XBRL (For Balance Sheet) and 23ACA-XBRL (For Profit &
Loss Account) have been made available on the MCA portal.
In India, XBRL taxonomies have been created and mandated by Reserve Bank of India
(RBI), Securities and Exchange Boards of India (SEBI), and Ministry of Corporate
Affairs (MCA). It is expected that many other regulatory and national jurisdiction bodies
such as Sales Tax and Income Tax authorities will be coming up with their specific
reporting requirement using XBRL.

eXtensible Business Reporting Language is an open, platform-independent, international

standard for the timely, accurate, efficient, and cost-effective electronic storage,
manipulation, repurposing, and communication of financial and business reporting data.

Currently, financial statements or other information prepared in Word, Excel or HTML

formats can be read but not automatically analyzed or processed according to the user’s

COMMERCE PAPER No.4 : Accounting theory and practice

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needs. XBRL enables source data to be tagged

electronically, making the data machine-readable. XBRL makes the data machine
readable with the help of two documents-taxonomy and XBRL instance document.
XBRL is a derivative of XML and as such it takes advantage of the ‘tag’ notion which
associates contextual information with data points in financial statements. When
formatted with tags, financial statements are called XBRL instance documents. The tags
themselves are based on accounting standards and regulatory reporting regimes and are
defined in XBRL taxonomies
It is a nonproprietary, open language. As a result, the definitions within the XBRL
standard are freely available.
A special characteristic of XBRL that it inherits from XML is that it is platform
independent. Just as English is the accepted language of business for most of the world,
XML runs on all of the major computer hardware under the most common operating
systems.

3. SEBI’s mandate to insert Business Responsibility Report

Ministry of Corporate Affairs, Government of India, in July 2011, came out with
‘National Voluntary Guidelines on Social, Environmental and Economic
Responsibilities of Business'. These guidelines contain comprehensive principles to be
adopted by companies as part of their business practices and a structured business
responsibility reporting format requiring certain specified disclosures, demonstrating the
steps taken by companies to implement the said principles. In line with the MCA
Guidelines and considering the larger interest of public disclosure regarding steps taken
by listed entities from a Environmental, Social and Governance (“ESG”) perspective,
SEBI decided to mandate inclusion of Business Responsibility Reports (“BR reports”) as
part of the Annual Reports for listed entities. The requirement to include BR Reports as
part of the Annual Reports is mandatory for top 100 listed entities based on market
capitalization at BSE and NSE as on March 31, 2012. Other listed entities may
voluntarily disclose BR Reports as part of their Annual Reports.

COMMERCE PAPER No.4 : Accounting theory and practice

MODULE No.2 : Emerging Dimensions: GRI etc.
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Summary

COMMERCE PAPER No.4 : Accounting theory and practice

MODULE No.2 : Emerging Dimensions: GRI etc.