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Sustainable - Coggle Diagram
Sustainable
2. Global Frameworks and Goals
The 17 Sustainable Development Goals (SDGs)
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The Rule
: The 17 SDGs were adopted by UN Member States in 2015 as a blueprint for global development[cite: 1013].
Meaning Explained
:
Think of these as a global "to-do list" for creating a more prosperous, equitable, and sustainable world by 2030. They cover everything from ending poverty to protecting the oceans.
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Examples of Goals
: No Poverty, Zero Hunger, Good Health & Well-Being, Quality Education, Gender Equality, Clean Water & Sanitation, Climate Action[cite: 1013].
Global Reporting Frameworks
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The Rule
: These are standardized systems that help organizations report on their ESG impacts[cite: 1004].
Meaning Explained
:
Just like accounting standards (like Ind AS) tell companies how to report financial information, these frameworks provide guidelines for reporting non-financial, ESG information.
Key Frameworks
:
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Global Reporting Initiative (GRI)
: The most widely used framework, helping organizations report on economic, environmental, and social impacts for all stakeholders[cite: 1004].
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Carbon Disclosure Project (CDP)
: Focuses on environmental data related to climate change, water, and forests, primarily for investors and buyers[cite: 1004].
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International Integrated Reporting Framework (IIRC)
: Aims to create a single "integrated report" that connects financial performance with ESG factors[cite: 1004].
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International Sustainability Standards Board (ISSB)
: A new body created by the IFRS Foundation to establish a global baseline of sustainability disclosure standards, primarily for investors[cite: 1005].
Integrated Reporting \<IR\> and the Six Capitals
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The Rule
: \<IR\> is a form of reporting that demonstrates the link between an organization's strategy, governance, and financial performance and the social, environmental, and economic context within which it operates[cite: 1004].
Meaning Explained
:
Instead of a separate financial report and a separate sustainability report, \<IR\> combines them to show how a company uses different types of resources (or "capitals") to create value over time.
The Six Capitals
:
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Financial Capital
: The pool of funds available to an organization[cite: 1015].
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Manufactured Capital
: Man-made physical objects like buildings, equipment, and infrastructure[cite: 1015].
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Intellectual Capital
: Intangible assets like patents, copyrights, and organizational knowledge[cite: 1006].
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Human Capital
: People’s skills, competencies, and motivations[cite: 1015].
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Social and Relationship Capital
: The relationships within and between communities, stakeholder groups, and other networks[cite: 1005].
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Natural Capital
: All renewable and non-renewable environmental resources and processes that provide goods or services (e.g., water, land, minerals, forests)[cite: 1015].
3. ESG in India: The BRSR Framework
Business Responsibility and Sustainability Report (BRSR)
The Rule
: A mandatory reporting framework introduced by SEBI, replacing the previous BRR. [cite_start]It is applicable to the top 1,000 listed companies by market capitalization from FY 2022-23[cite: 1007, 1008].
Meaning Explained
:
This is India's official, standardized scorecard for how large companies are performing on ESG issues. It allows investors and the public to compare companies on a like-for-like basis.
Structure of the Report
:
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Section A – General Disclosures
: Basic company information (products, employees, operations)[cite: 1008].
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Section B – Management and Process Disclosures
: Information on policies, governance, and leadership related to ESG[cite: 1008].
Section C – Principle-Wise Performance Disclosures
: Reporting on performance against the 9 principles of the NGRBC. This includes:
Essential Indicators (Mandatory)
: Key performance indicators that all companies must report.
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Examples
: Data on energy usage, water consumption, greenhouse gas emissions, and waste management[cite: 1008].
Leadership Indicators (Voluntary)
: Additional indicators for companies that want to demonstrate a higher level of commitment to ESG.
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Examples
: Details on life cycle assessments, conflict management policies, and biodiversity data[cite: 1008].
Assurance in BRSR
The Rule
: The increasing importance of ESG data requires assurance to ensure it is credible and reliable. [cite_start]ICAI has issued standards for these engagements[cite: 1009].
Meaning Explained
:
Just like a financial audit verifies a company's financial statements, an ESG assurance engagement involves a professional (like a CA) checking the company's BRSR data to confirm it's accurate and trustworthy.
Relevant Standards
:
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SSAE 3000 (Standard on Sustainability Assurance Engagements)
: The overarching framework for assurance on sustainability information[cite: 1010].
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SSAE 3410 (Assurance Engagements on Greenhouse Gas Statements)
: A specific standard for providing assurance on an entity's GHG emissions data[cite: 1010].
The Role of the Auditor in ESG
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The Rule
: The auditor must consider climate-related risks and their relevance to the financial statement audit[cite: 1011].
Meaning Explained
:
The auditor's job is expanding. They now need to think about how issues like climate change could impact the company's finances. For example, a factory in a flood-prone area might have its value impaired, or a company might face future fines for pollution.
Key Actions for the Auditor
:
[cite_start]Assess if climate-related risks could lead to
material misstatements
in the financial statements[cite: 1011].
[cite_start]Consider using an
Emphasis of Matter Paragraph (EOMP)
in the audit report to draw attention to significant climate-related disclosures made by the company[cite: 1011].
[cite_start]Review the BRSR and other public information for
consistency
with the audited financial statements, as required by
SA 720
[cite: 1011].
1. The Concept of Sustainable Development
Origin and Meaning
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The Rule
: Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs[cite: 1001].
Meaning Explained
:
It's about finding a balance. We can grow our economy and improve our lives today, but we must do it in a way that doesn't harm the planet or use up all the resources, leaving nothing for our children and grandchildren.
The Three Pillars of Sustainability
1. Environmental (E)
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The Rule
: Refers to a company's impact on the living and non-living natural systems, including land, air, water, and ecosystems[cite: 1002].
Meaning Explained
:
This pillar is all about how a company interacts with the planet. It looks at the resources it consumes and the waste it produces.
Key Elements & Examples
:
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Climate Change
: Carbon Emissions, Product Carbon Footprints, Climate Change Vulnerability[cite: 1012].
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Natural Resources
: Water Stress, Bio-diversity & Land Use, Raw Material Sourcing[cite: 1012].
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Pollution & Waste
: Toxic Emissions, Packing Material and Waste, E-Waste[cite: 1012].
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Environmental Opportunity
: Clean Tech, Green Building, Renewable Energy[cite: 1012].
2. Social (S)
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The Rule
: Pertains to the impact a company has on its key stakeholders, especially its employees, customers, and the communities it operates in[cite: 1002].
Meaning Explained
:
This pillar focuses on how a company treats people. It's about its relationships with employees, customers, suppliers, and the wider society.
Key Elements & Examples
:
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Human Capital
: Labour Management, Health & Safety, Human Capital Development, Supply Chain Labour Standards[cite: 1012].
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Product Liability
: Product Safety & Quality, Chemical Safety, Privacy and Data Security[cite: 1012].
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Social Opportunity
: Access to Finance, Access to Health Care, Opportunities in Nutrition & Health[cite: 1012].
3. Governance (G)
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The Rule
: Involves the entity’s internal systems of practices, controls, and procedures used to govern itself, make effective decisions, and comply with the law[cite: 1002].
Meaning Explained
:
This pillar is about how a company is managed from the inside. It's about ethics, transparency, and how decisions are made at the top.
Key Elements & Examples
:
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Corporate Governance
: Board Diversity, Executive Pay, Ownership Structure, Accounting Practices[cite: 1012].
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Corporate Behaviour
: Business Ethics, Anti-Competitive Practices, Corruption, Tax Transparency[cite: 1012].