BRSR – A Renewed Approach to Sustainability Reporting

Dec 6, 2022

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Sustainability Reporting in India – A look back at the work done

Sustainability Reporting in India has been evolving for more than a decade. Initiated in 2011 by the release of the National Voluntary Guidelines (NVG) via the Ministry of Corporate Affairs (MCA) – the NVG looked at the Social, Environmental and Economic Responsibilities of businesses in the country.

Although sustainability reporting is at a nascent stage in the country, the last decade has seen dramatic changes for the better. This is in terms of the number of companies voluntarily disclosing non-financial information and the provisions, frameworks, and standards used or mandated by regulatory authorities.

Business Responsibility Report (BRR)

An effort to mainstream responsible business practices led to the introduction of the Business Responsibility Report, as the accepted framework for companies. When the NVG aligned with the UN Millennium Development Goals (UNMDGs), the Security and Exchange Board of India (SEBI) took inspiration and in 2012, introduced the Business Responsibility Report (BRR).

The BRR was India’s first attempt at creating an Environmental, Social, and Governance (ESG) regulatory framework. It is actually the predecessor to the Business Responsibility and Sustainability Reporting (BRSR) framework.

To begin with, the BRR was mandatory for the top 100 listed companies, according to market capitalization. However, by 2019, this evolved to include the top 1000 listed companies by market capitalization.

Need for the Business Responsibility and Sustainability Reporting (BRSR)

It is pertinent to note that sustainability reporting has evolved over time and across regions. Over the years, expectations from stakeholders have changed and now include a growing trend to assess a company’s non-financial performance. In turn, it nudged companies to adapt their reporting to the needs of the market. This has been the case in India as well.

Businesses have come to realize that their activities have significant impacts on the world’s ability to achieve climate change goals. In addition, transparent sustainability disclosures and reporting have been shown to provide businesses with an advantage over peers by ensuring sustainable value-generation potential over the long term.

This leads us to a fundamental difference between BRR and BRSR. While BRR focused more on the economic accountability of companies, BRSR is the first framework to truly address environmental, social, and governance issues in India. Therefore, due to these changing expectations and external pressures, BRR became irrelevant and was shown to lack in quality (of disclosures) by a 2018 NSE report. This eventually resulted in the creation of a more robust reporting framework – the BRSR – that was globally aligned in terms of reporting standards.

What is the BRSR?

Nowadays, investors and stakeholders demand more than just financial disclosures. They also actively look at investing in companies that are environmentally and socially responsible while having the necessary governance structures in place, to ensure long-term value generation. That is, they don't only focus on financial gains but also find it just as vital that reporting companies showcase their ESG metrics.

In 2019, MCA formed a committee to align the BRR formats in line with the NGRBCs and provide new formats. The work that this committee did along with the Securities and Exchange Board of India (SEBI) resulted in the creation of BRSR or Business Responsibility and Sustainability Reporting. In 2020, the MCA adopted the National Guidelines for Responsible Business Conduct (NGRBC) which subsequently led to the replacement of BRR with BRSR.

BRSR Versions - Comprehensive and Lite

The BRSR has two versions which are ‘Comprehensive’ and ‘Lite’, as suggested by the NGRBC. The ‘Comprehensive’ version is for the listed companies and therefore, mandatory. The ‘Lite’ version is to encourage unlisted companies of any size to get into the practice of sustainability reporting. The value chain of listed companies with vendors and suppliers encouraged to collate and disclose sustainability data also uses the ‘Lite’ version.

In BRSR, the reporting guidelines comprise three sections that include: Section 1- General Disclosures, Section 2- Management and Process Disclosures, and Section 3- Principle-wise Disclosures.

Section 1 is mandatory and as the name suggests, includes disclosures of a general nature that sets the context such as basic information on the company. Section 2 is also mandatory and includes information that is related to company policy and governance.

There are 9 specialized focus areas/principles, split into two categories ‘Essential Indicators’ and ‘Leadership Indicators’. This is the third section – Principle-wise Disclosures. Within this section, ‘Essential Indicators’ are mandatory, while the ‘Leadership Indicators’ are currently voluntary for companies to disclose.

The 9 principles on which BRSR guidelines are based have the following instructions to businesses:

• Businesses should conduct and govern themselves with integrity, and in a manner that is ethical, transparent, and accountable
• Provide goods and services in a manner that is sustainable and safe
• Respect and promote the well-being of all employees, including those in value chains
• Respect the interests of and be responsive to all its stakeholders
• Respect and promote human rights
• Respect and make efforts to protect and restore the environment
• When engaging in influencing public and regulatory policy, do so in a manner that is responsible and transparent
• Promote inclusive growth and equitable development
• Engage with and provide value to consumers in a responsible manner

Key Differences and Advantages of BRSR

One of the key aspects of reporting using BRSR is data. There are a significantly larger number of data points that companies need to collect, structure, assess, and disclose, in comparison to BRR.

It is significant to note that companies collating raw data from across departments (Finance, Health, Safety, and Environment or HSE, supply chain, operations, etc.) and using it across the 9 principles is a time and resource-intensive exercise. The advantage is that companies that start the process and improve on it year-on-year will see tangible benefits in business such as cost savings and a positive impact on their ESG metrics.

Another advantage of disclosing through BRSR is the inherent alignment with global reporting standards such as the Global Reporting Initiative Standards (GRI Standards) and the Task Force on Climate-Related Financial Disclosures (TCFD). This is uniquely beneficial as Indian companies will be able to produce data and information that is easily comparable with international or multi-national organizations. This can result in huge benefits such as attracting potential foreign investors while ensuring better investment decision-making.

Thirdly, BRSR is relevant as companies that use the framework for their sustainability reporting will get significantly deeper insights into non-financial business risks and opportunities. This better understanding of the organization’s ESG metrics will also allow it to make corrections, improve and plan for a more sustainable future.

The specific differences from adopting BRSR as a replacement to BRR are:

• The scope of reports is enhanced and covers more than financial accountability to include environmental, social and governance metrics as well
• BRSR allows for more accurate reporting due to the heavy data requirements

In Conclusion

While BRSR is mandatory for the top 1000 listed companies starting FY 23, it is safe to say that the framework acts as a reflection of the growing salience of non-financial disclosures in addition to financial disclosures. Although it is yet to be seen if BRSR would gain acceptability amongst other global frameworks and act as a singular source of information on companies in India.

Disclosures will vary depending on the company. They may choose to report these via an integrated report, annual report, or as a separate sustainability report (or ESG report). What is undisputed is that companies using the BRSR framework will begin to increase the amount of data collected, enhance data quality and result in more transparent reports.

To ease the process of switching to BRSR compliance, companies can now partner with Report Yak (check out our work here), an award-winning corporate reporting agency that has designed and written content for Annual, Integrated, Sustainability, and ESG Reports for large corporations. Report Yak’s design and content teams have the expertise to support organizations in their transition to BRSR, while seamlessly weaving their growth story for enhanced storytelling.