Surpassing the existing business reporting norms in India, the Securities and Exchange Board of India (SEBI) in its meeting held on March 25, 2021, conceived the Business Responsibility and Sustainability Reporting (BRSR). This form of report is aimed at helping Indian companies address issues that are gaining global importance such as climate change, inclusive growth, diversification of the workforce, and a sustainable environment and society.
The roots of BRSR go back to July 2011 when the Ministry of Corporate Affairs (MCA) recognized the need for companies to report on the measures undertaken from an Environmental, Social, and Governance (ESG) perspective. Below is the framework that will help clarify the basis of the BRSR:
Back in 2011, the MCA released the National Voluntary Guidelines (NVGs), and India took its first step toward ESG reporting.
Soon after, in 2012, SEBI mandated the top 100 listed companies, or listed companies with the highest market capitalization, to undertake BRR in line with NVGs. These guidelines were to be followed in line with the annual reports that these companies were publishing.
It was in 2015 when the United Nations released the ‘United Nations Sustainable Development Goals 2030’.
SEBI realized that a major segment of companies is left out from reporting on these standards and thereby expanded its scope by mandating this reporting for the top 500 listed companies.
In March 2019, MCA revised the NVGs to National Guidelines on Responsible Business Conduct (NGRBC). This was amended to include linkages to globally accepted standards with respect to non-financial information such as the Global Reporting Initiative (GRI) standards, Integrated Reporting (IR), and Sustainability Development Goals (SDGs).
In December 2019, SEBI further extended the scope of this reporting and made it applicable to the top 1,000 listed companies.
In August 2020, the MCA released a committee report on BRR which called attention to the need of revising the BRR framework and introducing a new framework, the BRSR.
As per the Committee’s recommendations, what was required was a ‘comprehensive format’ and a ‘lite version’. Here are what these standards aim to achieve:
Comparability – These standards worked like a provision that enabled cross-mapping and reporting in line with globally accepted standards such as the GRI, Task Force on Climate-related Financial Disclosures (TCFD), and Sustainability Accounting Standards Board (SASB). This can help rank companies at a global level.
Indicators – These guidelines motivate companies to adopt the Key Performance Indicator model, thereby laying down Essential (mandatory) and Leadership (voluntary) indicators. This will eventually help evaluate business performance more accurately.
Sustainability reporting – BRSR reports are expected to showcase higher levels of transparency and accountability by companies when making disclosures. This will help provide material information for quantifying the initiatives by the companies toward sustainable aspects.
Assessment metrics – This reporting should allow for easier comparisons between companies by focusing on quantifying certain information.
On March 25, 2021, SEBI made the BRSR applicable to the top 1,000 listed companies. However, to enable companies all over India to smoothly transition to this framework, SEBI has allowed companies to voluntarily adopt it for FY 2021-22, but this will be mandated for each of these companies from FY 2022-23.
The framework of BRSR
The Committee proposed two formats for the BRSR with separate guidance notes for each. They are known as the ‘BRSR Comprehensive’ which is aimed at the listed companies and has a much wider scope and ‘BRSR lite’ for the unlisted companies who wish to voluntarily adopt these standards. The structure of the new format is as follows:
Section A – General Disclosures
The companies are required to disclose the basic details under this section. This includes factors such as the scale of the organization, its size, sector, products, employee strength, CSR activities, etc. Further, if the company has undertaken any activities to help the economy overcome an environmentally fragile situation and has worked for creating positive impacts in sensitive areas like protected zones, they should report it here.
Section B – Management and Process
The internal workings of the company, including its governance systems, policies procedures, and processes that the company has employed, will have to be disclosed in this section. This will help provide the beneficiaries of this reporting with a glimpse into the managerial infrastructure of the company.
Section C – Principle-wise Performance
Under this section, companies are required to report on how they have performed under the nine principles and the core elements of the NGRBCs. This entails effectively illustrating how the company will meet its commitment to responsible business conduct. This section is further divided into 2 categories:
The essential indicators – These are the bare minimum disclosures that a company has to report on in terms of responsible business conduct.
The leadership indicators – These are the voluntary activities undertaken by the company to go the extra mile in achieving its sustainability targets.
The BRSR Lite
The committee acknowledged that unlisted companies and other MSME organizations with no prior experience in non-financial reporting will not be able to meet the reporting requirements of the comprehensive BRSR framework. The committee thus proposed a framework called BRSR Lite, which has a different category of essential and leadership reporting. It has fewer elements than the comprehensive version and seeks information that these companies will be able to provide. This framework enables unlisted and MSME organizations to come within the ambit of those companies that carry out sustainability reporting and exemplify the impact that they are making.
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