Indian firms adapting to better governance, reveals India Disclosure Index
The digital age has transformed the way we consume. Thanks to the availability of information, we have started to consider the environmental footprint of our buying decisions. We also look at the corporate image. When a company acts more responsibly, we feel more comfortable purchasing its products or services.
Consequently, global companies are increasingly becoming concerned about environmental and social responsibilities. Some of the buzzwords at international management forums and trade conferences are:
- Corporate social responsibility,
- Environmental impact assessment,
- Energy efficiency,
- Occupational health,
- Employee safety,
- Sustainable supply chain and
- Ethical labor practices.
However, global companies are not exclusively addressing these topics. National governments and supranational bodies are doing their bit in bringing about positive changes as well. The most famous example is the Kyoto Protocol of the United Nations (UN).
How is India doing?
If recent media reports are anything to go by, Indian companies have ample room for improvement. For example, 56 of the top listed Indian companies have failed to comply with the Securities & Exchange Board of India’s (SEBI) directive to appoint at least one woman director on their boards.
The list includes large private and public sector companies from various industries, such as Construction, Infrastructure, Retail, Oil and Gas , Energy, Banking and Financial Services. However, the corporate affairs ministry has initiated prosecutions against these companies.
On the governance front, fortunately, India is doing much better with the implementation of the new Companies Act 2013. As per SEBI stipulations, top 500 listed companies must submit business responsibility reports along with their annual reports.
As a result, the regulatory disclosures and communications of Indian firms have changed significantly over the past 24 months. According to Frost & Sullivan, sustainability-reporting numbers across the globe have increased from 26 companies in 1992 to 6,893 in 2014; while in India, they have increased from 20 companies to 170.
45% Indian companies score high on India Disclosure Index
FTI Consulting has published the second edition of its India Disclosure Index 2016. The index ranks the top 200 BSE (Bombay Stock Exchange)-listed Indian firms based on their compliance with regulatory requirements. The rankings reflect the standing of companies in a composite disclosure scoring system, with seven mandatory disclosures and seven voluntary disclosures.
Around 45% of the studied companies had a composite disclosure score of eight or more, which is up from 26% in 2015.
Eight of the BSE-listed 100 companies – Axis Bank, Bharti Airtel, Federal Bank, IndusInd Bank, Infosys, Shriram Transport, Sun Pharma, and Vedanta – achieved the maximum score of 10. Among the BSE-listed 200 companies Biocon, Cholamandalam, Jubilant Lifesciences, L&T Finance, SKS Microfinance and Welspun scored 10/10. Only three companies have a mandatory disclosure score of less than 2.5.
While Indian, private firms are heading in the right direction, there are some disappointments as well. India’s two largest public sector companies in the Oil & Gas sector have sprung a surprise by being the worst performers in the composite disclosure score.