View from India: Economic and environmental sustainability go hand in hand

The financial reporting system is undergoing a makeover with digitalisation. Digitisation encapsulates manual processes into a digital format. Digitalisation collects the digital data and analyses it to make informed decisions, generate streams of revenue and create new business models.

“Covid-19 has led to the digitalisation of the accounts procedures including the entire accounts auditing and reporting system,” said Subhash Chandra Garg, former finance secretary of India, speaking at a virtual conference, ‘Financial Reporting and Control, Recent Developments and Challenges’ organised by the Associated Chambers of Commerce & Industry of India (ASSOCHAM). “Another Covid outcome is that the initial online payment gateways are joined by many more. In some way, they are like digital rupee,” he added.

A close look at the financial landscape indicates that businesses should create value to shareholders and stakeholders through digitalisation. Real-time reports happen digitally and audit ledgers can be monitored from any location. By digitising the audit practices, vendors will get precise updates. This serves as a database to give a direction to the business providers, value to customers, generate profits for owners and provide employment. It also generates tax revenue for the government. This is what drives the financial reporting system. “Software solutions are being customised to deliver process-oriented outcomes that cover fraudulence, governance and give desired results to stakeholders and shareholders,” said Dr Sanjev Gemabat, executive director, Dalmia Bharat Ltd. 

Besides organisations, the government-initiated Goods and Services Tax (GST) is being digitalised. As per the GST norms, companies worth Rs 100 crore (a billion rupees) have transited to an e-invoicing system since January. This gives real-time updates to vendors.  

The audit trail which was to come into effect from 1 April 2021 has been deferred to 1 April, 2022. “The accounting software will record an audit trail of every transaction. It will bring transparency to the system. It will improve compliance and lower issues of fraud and tampering in the corporate dealings. Another aspect is that audit trail can be used to measure the impact of the pandemic on the environment,” said Aravind KS, associate vice president, Tally Solutions Pvt. Ltd.

While financial systems are being digitalised, the pandemic has made many companies rethink their environment strategy. ESG, short for environment, society and government standards, has always been on the corporate agenda. But now it is felt that ESG should come under the scope of digitalisation. “The pandemic has changed the manner in which entities operate. The different segments of the ecosystem are interdependent to ensure socio-economic prosperity of the organisation. Environmental hazard is a grim concern and requires technology to tackle it,” said Dr Sanjeev Singhal, chairman, Sustainability Standards and Reporting Board, ICAI, by way of explanation.

Data consolidation is important for environmental and economic sustainability. Accounts should be digitally ready and companies should work towards environment sustainability to lower carbon emission. BRSR (business responsibility and sustainable reporting) should become mandatory for all organisations. “To alleviate social problems begin by tackling districts that are least developed. Make the solutions scalable,” advised Abhijit Gulanikar, president - business strategy, SBI Life.  

A pandemic effect, sustainability in terms of climate risk is of paramount importance. “The issue of risk should go beyond short-term measures. A significant amount of volatility is demonstrated by nature in terms of rainfall pattern, monsoon delays, melting glaciers and drought. Technology can be used innovatively to address vagaries of nature and lower carbon emission and global warming,” highlighted Dhanpal Jhaveri, vice chairman, Everstone Group and CEO, EverSource Capital.

The challenge lies in integrating tangible financial results with intangible non-financial issues such as the environment and its protection. Environmental risk management should form the core of ESG. “Sustainable investments are the way forward, and companies should make it part of their value propositions. Sustainable reporting requires a cohesive approach to bring credibility to the overall reporting framework,” summed up Sandip Khetan, partner and national leader (FAAS), E&Y Associates LLP.