All about Business Responsibility and Sustainability Report!

Background

he year 2021 has shown to be the year of sustainability reporting and disclosures. Reaching the fifth-year benchmark of the Paris Agreement while tackling a global pandemic, the importance of a company’s sustainability achievements has never been more critical. Investors have been putting truck load of push on companies to report their sustainability performance to maintain transparency with stakeholders. Sustainability reporting frameworks have evolved over time and companies worldwide have adopted these frameworks for measuring, monitoring, and disclosing performance in areas related to environmental, social and governance (ESG).

Transforming ESG reporting in India?

As per CDP India, there were 67 investor-driven Indian companies – worth over US$697 billion market cap – that reported to CDP in 2020. Around 45 companies have adopted the Integrated Reporting framework and more than 80 companies are using the GRI format for their sustainability reporting. The National Stock Exchange of India conducted a study on the data compiled of the 100 listed companies from the Business Responsibility Report (BRR) in FY 2016-17. 50% developed Sustainability Reporting; 22 published Integrated Reporting; 90% identified environmental risks; 33% identified climate change as a risk to business; 42% took carbon reduction targets; 11% have committed to SBTs and 6% adopted the TCFD framework. 42 Indian companies have adopted the TCFD framework, according to their own sources, 19 of which also report to CDP.

In line with the global ESG disclosure developments, the Securities and Exchange Board of India (SEBI), on 15th May 2021 introduced new reporting requirements for sustainability by listed entities.?This was done to enhance disclosures on ESG standards, introduced new requirements for sustainability reporting by listed companies. The new reporting format named, Business Responsibility and Sustainability Report (BRSR), aims to establish links between the financial results of a business with its ESG performance.

The new reporting format outlines mandatory ESG policies and requirements for the top 1000 listed companies by market capitalization. The reporting format is mandatory from FY 2022-23 but is voluntary for FY 2021-22. This is to provide companies with sufficient time to adapt to the new reporting compliance. Companies are encouraged, however, to adopt the BRSR early.

BRSR structure

At the outset, the Committee recommends that the format be called ‘Business Responsibility and Sustainability Report (BRSR)’ instead of Business Responsibility Report. The BRSR has three sections and the purpose and structure of each of these three sections is given below:

Section A: General disclosures

The objective of this section is to obtain basic information about the company – size, location, \products, number of employees, corporate social responsibility (CSR) activities, etc. The proposed formats include additional disclosures on material issues that pose environmental and social risks, the associated financial impact and the actions taken to mitigate them.

Section B: Management and process

In this section, the company is required to disclose information on policies and processes relating to the NGRBC Principles concerning leadership, governance, and stakeholder engagement. Wherever relevant, companies have been asked to provide links to their websites where these policies are available. The purpose of this section is to understand whether the company has the building blocks in place that will enable and ensure responsible business conduct. It reflects the belief that policies and processes are foundational in nature to ensuing action.

Section C: Principle-wise performance

Responses to Section C indicate how a company is performing in respect of each Principle and Core Element of the NGRBCs. This section requires companies to demonstrate their intent and commitment to responsible business conduct through actions and outcomes. The questions in this section have been divided into two categories:

• Essential: Those that are mandatory for all companies. These are referred to as E1, E2 in the latter sections of the document.
• Leadership: Those that are voluntary, and which provide an opportunity for companies to present their impacts and outcomes. It is expected that in the next cycle of review, questions from the Leadership category would be moved to the Essential category and so companies should see this as a pathway to transitioning to a more comprehensive disclosure regime. These are referred as L1 and L2 in the latter sections of the document.

The National Guidelines for Responsible Business Conduct (NGRBC) is comprised of nine principles, namely:

Principle 1: Businesses should conduct and govern themselves with integrity, and in a manner that is Ethical, Transparent and Accountable.

Principle 2: Businesses should provide goods and services in a manner that is sustainable and safe. Principle 3: Businesses should respect and promote the well-being of all employees, including those in their value chains.

Principle 4: Businesses should respect the interests of and be responsive to all its stakeholders.

Principle 5: Businesses should respect and promote human rights.

Principle 6: Businesses should respect and make efforts to protect and restore the environment. Principle 7: Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent.

Principle 8: Businesses should promote inclusive growth and equitable development.

Principle 9: Businesses should engage with and provide value to their consumers in a responsible manner

How BRSR principles are aligned with SDGs ?

Conclusion

The growing salience of non- financial disclosures along with annual financial disclosures ensures that the business explicitly recognize their environmental and social responsibilities. As the sustainability disclosures grow in eminence, it is hoped that the information would be used by banks, credit rating agencies, and other financial institutions, along with financial information to assess credibility of a company/business.

It is to seen whether the BRSR gain acceptability and credence among global frameworks as a singular source of information for companies reporting in India, such that they serve as a primary document for assessment of businesses as it has been hoped by the regulators.

For the ESG and sustainability professionals who would want to know more about the BRSR reporting pattern and structure can follow this link published by SEBI. Hope this would be helpful in your career