Business responsibility and sustainability report (BRSR)

Economic Affairs Financial Markets

12-May-21

Context: Recently, Securities and Exchange Board of India (SEBI) issued a circular notifying new disclosure norm on sustainability related reporting for the top 1,000 listed companies by market cap by FY23.

These are to be based on the new business responsibility and sustainability report (BRSR) format.
Voluntary till FY22
Mandatory from FY23

Norms

The companies will need to provide an overview of their material environmental, social, governance risks and opportunities and approach to mitigate or adapt to the risks along with financial implications.
Sustainability related goals and targets and performance and environment-related disclosures covering aspects such as resource usage (energy and water), air pollutant emissions, greenhouse emissions, transitioning to circular economy, waste generated and waste management practices and bio-diversity may have to be provided.
The social-related disclosures will cover the workforce, value chain, communities and consumers.
Companies will have to disclose the gender and social diversity of employees, including measures for differently-abled employees and workers, turnover rates, median wages, welfare benefits to permanent and contractual employees / workers, occupational health and safety and trainings.
On the community front, companies need to make disclosures on social impact assessments (SIA), rehabilitation and resettlement and corporate social responsibility.
For consumers, they have to make disclosures on product labelling, product recall and complaints in respect of data privacy and cybersecurity.

Background

In 2012, SEBI mandated the top 100 listed entities by market capitalization to file Business Responsibility Reports (BRR) as per the disclosure requirement emanating from the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business’ (NVGs).
These guidelines contained comprehensive principles to be adopted by companies as part of their business practices and a structured business responsibility reporting format requiring certain specified disclosures, demonstrating the steps taken by companies to implement the said principles.
In 2015-16, the requirement for filing BRRs was extended to the top 500 entities companies by market capitalization.
In 2019, SEBI extended the BRR requirement to the top 1000 listed entities.

Business Responsibility and Sustainability Report (BRSR)

BRSR disclosures are intended to enable businesses to engage more meaningfully with their stakeholders and encourage them to go beyond regulatory financial compliance and report on their social and environmental impacts.

Purpose

Provide all stakeholders with one-stop source on non-financial disclosure.
Utilized by several credit rating agencies, banks, financial institutions, that will use the disclosures made for data analytics and ascertaining the credibility of the company.
Used by Government for procurement purposes and such businesses will be preferred that demonstrate good business conduct.

Environmental, Social and Governance (ESG) goals

ESG investing means sustainable investing or socially responsible investing.
It is a kind of mutual fund which focuses on companies which have adopted environment-friendly practices, ethical business initiatives and employee-friendly norms.
The fund is regulated by Securities and Exchange Board of India (SEBI).
It is a subset of non-financial performance indicators which include sustainable, ethical and corporate governance issues such as managing a company’s carbon footprint and ensuring there are systems in place to ensure accountability.