By: DR.R.SRINIVASAN
Introduction:
The earth is restricted and has only a certain inadequate capability. Consequently, augmentation can only occur over a limited period, until that aptitude is improved. This gives rise to the idea of sustainable development.
In short, sustainable development implies progress that meets the need of the present generation without compromising the ability of future generations to meet their own needs.
Many cultures over the course of human history have recognized the need for harmony between environment, society and economy. In 1983, the United Nations had set up an international commission to resolve the conflict between the interests of economic development and the interests of environment that has created problems round the world.
The commission’s report, “Our Common Future”, popularly known as “The Brundtland Report” (following the name of its chairperson Gro Harlem Brundtland) that coined the term sustainable development suggested that economic development cannot stop, but it must change course to fit within the earth’s ecological limits. The report observed that unintended changes are occurring in the atmosphere, in soil, in water, among plants and animals. Nature is bountiful but it is also fragile and finely balanced. There are thresholds that cannot be crossed without endangering the basic integrity of the system. The commission alerted that today we are close to many of those thresholds.
Corporate sector must make money; and staying in corporate sector and prospering is a fundamental value of any for-profit enterprise. At the same time, corporate sector is required to take into account the interests of all stakeholders that include customers, employees, investors, vendors, government and the society.
The late 1990s and early 2000s were turbulent periods for the global investment community, with vast amount of shareholder wealth being created and destroyed. Both the institutional and retail investors have learnt some painful lessons, re-examined their assumptions about what constitute tangible and intangible value, and broadened their scope to consider characteristics that could lead to long term financial success.
One area of corporate performance that has begun to capture the attention of investment professionals is sustainable development: a set of responsibilities that contributes directly to an organization’s risk management profile and is sometimes also linked with corporate responsibility.
There is considerable evidence that sustainable development contributes to shareholder value in a variety of ways-not only through tangible contribution such as risk reduction and profitability improvement, but also through intangible asset creation such as brand equity, human capital, etc. Operating Corporate by pursuing the sustainable development path strengthens an organization’s intangible assets in a number of ways that in turn leads to tangible shareholder value creation.
It is now globally recognized that following sustainable development path makes good corporate sense. This entails various approaches. For example, eco-efficiency is based on a common sense proposition that reduces waste and inefficiency in production processes, saves money and protects the environment at the same time. Life Cycle Analysis (LCA) offers a framework for understanding material flaws and potential impacts involved with providing services or products in a closed loop. Sometimes referred to as ‘cradle to cradle’ or ‘cradle to grave’, LCA looks at an enterprise in terms of input, throughput and output. This helps to identify inefficiencies that drain profit and produce waste including pollutants.
Many of these approaches: e.g. eco-efficiency, LCA, full cost accounting, industrial ecology, systems – based pollution prevention, etc. are new to the Corporate world. Businesses keen to benefit from transition to sustainable development path therefore need to prepare themselves and have a longer time horizon and a broader set of goals than traditional companies.
Realization and recognition of the significance of sustainable development approach usually starts from the top management. However, best intentions are meaningless if these are only lodged in the minds of a few individuals. Values of sustainable development have to permeate throughout the organization. Changing a company’s culture and outlook requires a contribution from everyone – starting from the chief executive officer and permeating through senior, middle, junior management and staff and all working as a team.
To make this change happen towards sustainable development approach, it is important to:
- Prepare a mission statement
- Form in-house waste reduction and pollution prevention teams
- Inform employees about economic, environmental and social trends
- Maintain regular communication lines
- Have commitment for community development efforts
- Be committed to honest and accessible public relations
- Measure and report on progress and performance
- Prepare annual sustainability report
Sustainability Reporting
As a result of global upsurge of interest in sustainable development, practice for sustainability reporting has emerged. Sustainability reporting implies reporting on the economic, environmental and social aspects of organizational performance (also known as triple bottom line reporting). The World Corporate Council for Sustainable Development defines sustainability report as “public reports by companies to provide internal and external stakeholders with a picture of corporate position on activities on economic, environmental and social dimensions.”
The Global Reporting Initiative (GRI), a multi-stakeholder, international body with a mission to develop and disseminate globally applicable sustainability reporting guidelines, has developed the framework for sustainability reporting for companies reporting on the economic, environmental and social dimensions of their activities, products and services. The broad structure of sustainability report as developed by GRI contains:
- A statement of the chief executive officer describing the key elements of the report
- An overview of the reporting company and scope of the report
- An executive summary and key indicators
- Vision of the reporting company and how that integrates economic, environmental and social performance
- An overview of the governance structure and management systems that are in place to implement the vision
- Performance across social, economic and environmental areas of impact and activity
Sustainability reporting has the potential to provide critical information for corporate analysis. This information facilitate financial reporting with forward-looking information that could enhance the report users’ understanding of such key value drivers as human capital formation in the company, corporate governance, management of environmental risks and the capacity to innovate.
Sustainability reporting has been steadily rising since 1993 and has considerably increased in the recent years. The principal Corporate drivers for sustainability reporting are to:
- Have a good brand and reputation
- Be an employer of choice
- Maintain a strong market position
- Earn trust of the financial markets
- Be innovative in developing new products and services and creating new markets
Sustainability Assurance
Companies value the overall contribution that assurance makes to the sustainability reporting process. Organizations in the forefront of sustainability reporting assurance also recognize the key role that they have in ensuring the credibility and usefulness of information flows within the organization, especially from non-traditional and non-commercial sources.
Currently, there are only two recognized professional standards for carrying out sustainability reporting assurance. These are: AA 1000 – assurance standard developed by the Institute for Social and Ethical Accountability; and ISAE 3000 provided by the International Audit and Assurance Standard Board which is a part of the International Federation of Accountants.
Trends in Sustainability Reporting
Sustainability reporting has become a common practice in a number of countries like the USA, Europe, Japan and Australia. Sustainability reporting is yet at an emerging stage in Asia, Latin, America, Africa and Russia.
Though sustainability reporting is not mandatory in India, a small but a sizeable number of both subsidiaries of multinational and local companies are preparing sustainability reports mostly based on GRI guidelines. However, majority of these companies are focused on community initiatives rather than governance risk and disclosure.
With globalization, Indian companies are increasingly realizing that they have much to lose by not following sustainability reporting norms. Indian companies now see sustainability reporting as central to corporate social responsibility with “passive philanthropy” no longer a sufficient response to rising expectations.
Wrapping up:
The goal of sustainable development requires that the businesses take responsibility for their social, environmental and economic impacts. Sustainable development can provide corporate sector with an opportunity to innovate and a means to grow at each level and step of business operation. Making the right choices within a company, whether it is newly exposed to the concept of sustainable development or is already advancing its sustainability agenda, contributes to the company’s long term success. It is a matter of making the right choices and setting the right priorities. This underlies the need for a positive mind set towards sustainable development. Wider the spread of sustainability, greater the chances of its success. In order to attain this, awareness must be created to the students of present generation and common public through education.
About the Author
Dr.R.SRINIVASAN is a Post graduate in commerce and corporate secretary ship . He received his doctoral degreein the Managementfaculty from Alagappa University in 1997. He is now Working as an ASSOCIATE PROFESSORin Post graduate and Research Department of Corporate Secretaryship at Bharathidasan Government College for Women (Autonomous), Pondicherry University, Puducherry.He currently teaches Accounting ,financial management and Research Methodology Subjects.
(ArticlesBase SC #1830600)
Article Source: http://www.articlesbase.com/ - Role Of Corporate Sector In Sustainable Development—Need Of The Hour
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