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07 March 2017

Integrated Reporting by listed entities

Currently, SEBI mandates the top 500 listed entities in India (based on market capitalization calculated as on March 31 of every financial year) to prepare a business responsibility report describing initiatives taken from an environmental, social and governance perspective (in accordance with Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015).

SEBI has recently issued a Circular bearing reference No. SEBI/HO/CFD
/CMD/CIR/P/2017/10, dated February 6, 2017, advising such top 500 listed entities to also adopt the principles of integrated reporting and prepare an ‘Integrated Report’ (IR) on a voluntary basis with effect from the financial year 2017-18.

SEBI has advised that information relating to IR may be provided as part of the annual report with a separate chapter on IR or by incorporating in management discussion and analysis or as a separate report. In case an organisation has already provided such information in any report as per national/international framework, an appropriate reference to such IR may be provided to avoid duplication of any information. Alternatively, an organisation may host their IR on their website and thereafter provide an appropriate reference to the same in their annual report.

The International Integrated Reporting Council (IIRC) – a global coalition of regulators, investors, companies and other stakeholders - has prescribed certain Guiding Principles for preparation of an IR, which SEBI also makes reference to. These Guiding Principles include inter-alia that an IR  should (a) be concise, (b) focus on organizations’ strategy and ability to create value in short term and long term, (c) be reliable and complete, (d) disclose material information, (e) be consistent with time and comparable with other organizations, (f) be a holistic depiction of interrelation and dependency between factors which affect the organizations’ ability to create value (g) include nature and quality of organization’s relationship with its stakeholders and how the organization takes into account the interest of stakeholders and responds to such legitimate needs and interests and (h) disclose the various forms of capital to investors.

The Circular is thus an attempt by SEBI to encourage India’s largest organizations to voluntarily make additional disclosures relating to environment and corporate social responsibility, etc., in their annual report to stakeholders, thereby complying with international best practices of providing stakeholders with information useful in taking investment decisions.