Cos to soon start biz responsibility reporting to MCA

The companies will soon have to report to the government about the manner in which they are conducting their business. To make companies accountable for their conduct and promote ethical and transparent business, the Ministry of Corporate Affairs (MCA) is in the process of drafting an e- form, which will be part of the mandatory annual filings on the lines of Corporate Social Responsibility (CSR) filing, officials close to the development said.

To start with, the new filing will be made mandatory for the top 1,000 listed companies as per their market capitalisation. The government feels that businesses are accountable not only to their shareholders but also to the society at large. "With a view to inculcate responsible business conduct by companies, the ministry is bringing the companies under the ambit of Business Responsibility Reports (BRR)," the official said, adding such reporting will help companies create a good image and raise funds, especially in the overseas markets.

The High-Level committee headed by MCA secretary Injeti Srinivas in its report submitted recently to finance minister Nirmala Sitharaman also recommended making the business responsibility reports applicable to 1,000 companies and gradually expand the ambit of reporting.

As part of the proposed non-financial reporting, the companies will be asked about their ethical business practices. The companies will also have to spell out their five-year vision, measures adopted for the welfare of their employees, such as working conditions, the percentage of women in the workforce, and steps taken for environment sustainability. A mining company, for example, should have an afforestation plan in place. Similarly, every company should have a long-term vision plan for its business.

The non-financial reporting is increasingly forming the basis for enhancing investor confidence in businesses and increasing their creditworthiness. The report to be brought out by the government will come handy when the companies go to the overseas market to raise funds.

Under the BRR, companies will also be asked to provide information about whether their business practices conform to the statutes of the respective sector. Also, the companies should be following the principals under the laws- Factories Act, 1948, Companies Act, 2013, Bureau of Indian Standards, 2016 and Trade Marks Act.

The proposed e-form is likely to be introduced for a mandatory filing from next year. "Once the draft form is ready, consultative process with the concerned ministries will start. It will be then vetted by the committee," said the official.

With the aim to inculcate responsible business conduct, the MCA, in March, had come out with the guidelines on responsible business conduct and had set up a committee to develop reporting formats for the business responsibility report. The ministry had revised National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, 2011 (NVGs).

The National Guidelines on Responsible Business Conduct (NGRBC) urge the businesses to actualise the principles in letter and spirit and are based on nine principles which emphasise on harmonising financial performance with expectations of society, the environment and stakeholders in a sustainable manner.

As part of responsible business practice guidelines, the companies need to be ethical, transparent and accountable, should be able to provide goods and services in a manner that is sustainable and safe, promote well being of employees, human rights, inclusive and equitable growth protect environment, Business should provide goods and services in a sustainable and safe manner and value to their consumers in a responsible manner.

The Securities and Exchange Board of India (Sebi) has already mandated the top 500 companies by market capitalisation to report on the implementation of these principles through the BRR. The scope of the proposed reporting to the MCA will be wider, officials said. The committee is developing Business Responsibility Reporting formats for listed and unlisted companies. The committee is mandated to come up with comprehensive yet simple formats situating the various stakeholders at the centre so as to not increase or duplicate the reporting burden.