ESG’s Significance

ESG factors represent a comprehensive assessment of a company’s non-financial performance. Organizations that actively address ESG concerns often reap benefits such as enhanced reputation, improved risk management, and access to a pool of socially conscious investors. These factors resonate with a broader vision of success that emphasizes long-term value creation and positive societal impact.

Companies that demonstrate strong ESG performance are often seen as more sustainable and responsible. This can give them a competitive advantage in attracting customers, employees, and investors. In addition, ESG factors can help companies manage risks and identify opportunities. For example, companies that are taking steps to reduce their environmental impact may be less vulnerable to the effects of climate change.

ESG investing is a growing trend, and many investors are now looking for companies that are committed to sustainability and social responsibility. By actively managing ESG, organizations can position themselves for long-term success and make a positive impact on the world.

Evolution of ESG Reporting in India

Globally, there are several sustainability reporting frameworks such as Global Reporting Indicators (GRI), The Task Force on Climate-related Financial Disclosures (TCFD) etc. International Financial Reporting Standards (IFRS) has also recently issued two sustainability standards.

Sustainability Reporting in India has started in the year 2009 with the Ministry of Corporate Affairs (MCA) issuing National Guidelines on Corporate Social Responsibility as the first step towards mainstreaming the concept of business responsibility. Since then the reporting concept has come a long way with the introduction of Business Responsibility Reporting (BRR), Corporate Social Responsibility (CSR), Integrated Reporting (IR), National Guidelines on Responsible Business Conduct (NGRBC) & now Business Responsibility & Sustainability Reporting (BRSR) introduces by Securities & Exchange Board of India (SEBI). Below is the depiction of how ESG factors has gained importance by the years and steps taken by regulators for compliance.

Evolution Timeline of ESG Reporting in India

• 2011 – National Voluntary Guidelines (NVGs): MCA introduced NVGs to encourage transparency, accountability, and ethical conduct in businesses.
• 2012 – Business Responsibility Report (BRR): MCA mandated top 100 listed companies to disclose social, environmental, and governance initiatives under BRR.
• 2015 – Extension of BRR: The scope of BRR has been extended for 100 listed companies to 500 listed companies by their Market Capitalization.
• 2017 – Integrated Reporting (IR): SEBI introduced Integrated Reporting for top 500 listed companies on a voluntary basis.
• 2019 – National Guidelines on Responsible Business Conduct (NGRBC): MCA provided a comprehensive framework called NGRBC applicable to all business and BRR was also extended to top 1000 listed companies.
• 2020 – Business Responsibility and Sustainability Reporting (BRSR): SEBI introduced BRSR reporting for top 1000 listed companies emphasizing transparency and responsible business conduct.
• 2023 – BRSR Core, Assurance: SEBI introduced BRSR core, introducing extended disclosures, assurance and KPIs for 1000 listed companies on glide path manner to enhance ESG date quality and promote sustainability.

Business Responsibility & Sustainability Reporting – BRSR

In response to the growing emphasis on ESG considerations, the Securities and Exchange Board of India (SEBI) introduced the Business Responsibility and Sustainability Reporting (BRSR) framework. Launched in 2021, BRSR mandates the top 1000 listed companies by their market capitalisation to disclose their ESG-related information in the prescribed format, thereby fostering transparency and accountability on the factors mentioned therein.

BRSR reporting is instrumental in driving positive change within corporate practices. By mandating ESG disclosures, SEBI encourages businesses to assume responsibility for their environmental footprint, social contributions, and governance practices. This not only fosters ethical behaviour but also facilitates a culture of continuous improvement.

BRSR Framework Overview

The BRSR framework comprises a structured set of guidelines aimed at standardizing ESG reporting among Indian corporations. The nine core principles encompassed in the BRSR have been prepared in line with the National Guidance on Responsible Business Conduct (NGRBC) that encapsulate diverse aspects of business sustainability. The framework prompts companies to disclose their ESG initiatives, policies, and performance, thus allowing stakeholders to make informed decisions.

Interlinked Global Foundations: National Voluntary Guidelines + Sustainable Development Goals (SDGs) + Annual Business Responsibility Reporting + Paris Agreement on Climate Change + United Nations Guiding Principles (UNGP) → National Guidance on Responsible Business Conduct (NGRBCs).

“The BRSR framework seeks to drive sustainable practices across various dimensions of business operations, fostering a comprehensive approach that benefits companies, society, and the environment alike.”

Exploring the Nine Principles of BRSR

The principles under the BRSR are bifurcated into Essential Indicators and Leadership indicators.

• Essential Indicators: These are the mandatory elements of the Business Responsibility and Sustainability Reporting (BRSR). They provide fundamental information about a company’s operations, including details about products, services, locations, and employees.
• Leadership Indicators: These are voluntary. Companies use these to demonstrate a higher commitment to sustainability. They include disclosures related to the value chain of the listed entities and are a way for companies to position themselves as sustainability leaders.

We shall deep dive into each principle as given in the BRSR:

1. Principle 1: Businesses should conduct and govern themselves with integrity, and in a manner that is ethical, transparent, and accountable.

This principle emphasizes ethical conduct across a business’s operations, stressing transparent disclosures on decisions affecting stakeholders. It acknowledges businesses’ role in society and their accountability for adopting and revealing their performance. The reporting under this Principle includes the following:

• Fines and penalties borne by the company for breaching any of the principles or complaints related to conflict of interest.
• Trainings provided to Employees, KMPs/directors and value chain partners of the companies on various principles.
• Details on company’s Anti-corruption/anti bribery policy.

2. Principle 2: Businesses should provide goods and services in a manner that is sustainable and safe.

Aligned with SDG 12, this principle emphasizes the connection between sustainable production and consumption, enhancing quality of life while preserving resources. It urges businesses to prioritize safety and resource efficiency throughout the product lifecycle, minimizing environmental and societal impacts. The BRSR requires the following disclosures for monitoring compliance with this principle:

• Whether any R&D has been done to improve companies ESG standing or whether the company has procedures to procure Goods and services from sustainable sources and whether any recycled goods is purchased by the company.
• Company’s policies and procedures for waste disposal.
• In case Life cycle assessment, if the company comes through a potential harm to environment, whether the company has taken measures to minimize that harm.

3. Principle 3: Businesses should respect and promote the well-being of all employees, including those in their value chains:

This principle encompasses policies and practices related to fair treatment, dignity, and well-being of employees across a business and its value chain, aligned with Sustainable Development Goal 8. It emphasizes equality, non-discrimination, and diversity. Few of the factors that are focused on by this principle are as follows:

• Are the employees given relevant insurance, paternity/maternity benefits and retirement benefits.
• Does the company give equal opportunities and fair treatment to differently-abled persons.
• Is there a procedure available to employees for handling their grievances.
• Are all the employees given trainings on ensuring best health and skill upgradation along with their career developments. Does the company have in place provisions for health and safety of their employees.

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

This principle acknowledges that businesses affect a broad spectrum of stakeholders and the environment. It highlights the responsibility of businesses to protect the interests of all stakeholders, especially vulnerable groups. The principle also emphasizes the need for businesses to create positive impacts and reduce negative effects on stakeholders through their operations. It involves transparent recognition of impacts, engaging stakeholders, and resolving conflicts fairly. This principle underscores businesses’ accountability to their ecosystem while aiming for positive contributions and equitable outcomes.

5. Principle 5: Businesses should respect and promote human rights

This principle upholds universal human rights without discrimination. Aligned with India’s Constitution and the International Bill of Rights, it highlights the state’s role in safeguarding rights. Guided by UN principles, businesses prevent adverse impacts, ensure awareness, establish policies, conduct due diligence, rectify harm, and offer redressal mechanisms. This encompasses employee training, wage compliance, addressing issues like child labour, forced labour, harassment, and discrimination. It emphasizes businesses’ duty to protect and uphold rights.

6. Principle 6: Businesses should respect and make efforts to protect and restore the environment:

This principle highlights environmental responsibility for sustainable growth and well-being. It emphasizes global and local interconnections, urging action on pollution, biodiversity, resources, and climate change. Aligned with SDGs 11, 13, 14, and 15, it promotes sustainable practices, minimizes impacts, and sets targets. Key aspects involve policies, efficiency, climate action, and innovative technologies. It underscores businesses’ role in protecting the environment for a better future. The following points are covered in this principle:

• Energy consumption (renewable / non-renewable) and water consumption intensity and discharge, Air emissions.
• Compliance with Perform, Achieve, Trade (PAT) Scheme, Zero discharge strategy, Environment laws.
• Quantification of Greenhouse gases and measures taken by entity for reduction of these emissions.
• Waste management procedures.
• Business continuity / disaster management plans available with company, etc.

7. Principle 7: Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent:

This principle acknowledges businesses’ adherence to legal and policy frameworks, which guide growth and engagements with governments. It legitimizes advocacy for public good, aligning with principles, and ensuring transparent, disclosed advocacy. Collective platforms and ethical standards are emphasized, promoting fairness, human rights, and society’s benefit. It underscores businesses’ responsibility in ethical advocacy that upholds societal values.

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

This principle acknowledges India’s development challenges and aligns with government priorities. It urges businesses to contribute to inclusive progress, particularly in disadvantaged areas, through innovation and collaboration. Key aspects involve minimizing negative impacts on society, engaging in CSR activities, assessing and addressing adverse effects, innovating for well-being, aligning with development priorities, ensuring fair compensation during displacement, and respecting intellectual property and traditional knowledge. This principle underscores businesses’ role in equitable growth and societal well-being.

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

This principle emphasizes safe, valuable goods, and responsible consumption. It ensures choice, accurate info, data privacy, education, ethical ads, and accessible redressal. It highlights businesses’ commitment to consumer well-being and responsible practices.

Each principle embodies a unique facet of corporate sustainability, fostering a holistic approach that spans across organizational structures, operational practices, and stakeholder interactions.

Initiatives by SRSB, ICAI

“SRSB has taken various initiatives in Sustainability as a partner in nation building and also building the capacity of members in sustainability arena.”

The Institute of Chartered Accountants of India has formed Sustainability Reporting Standards Board (SRSB). SRSB has taken various initiatives in Sustainability as a partner in nation building and also building the capacity of members in sustainability arena. SRSB has issued Standard on Sustainability Engagement SSAE 3000 “Assurance Engagement on Sustainability Information”, Standard on Assurance Engagement SAE 3410 on “Assurance Engagements on Greenhouse Gas Statements”, several publications. SRSB has developed Sustainability Reporting Maturity Model (SRMM) Version 2.0¹, a self-assessment tool, for corporates & professional accounting firms assisting them in sustainability reporting, for assessing sustainability maturity of the companies, giving the recognition to the companies in BRSR compliance based on the score achieved by them.

New Horizons: SEBI’s Latest Amendments and Additions

Based on the recommendations of the ESG Advisory Committee and pursuant to public consultation, SEBI has introduced a regulatory framework for Assurance BRSR Core.

Applicability of BRSR Core is as follows:

Financial Year	Top Listed Entities Covered	BRSR Core Applicability
2023-24	Top 150	Initial Phase
2024-25	Top 250	Expansion
2025-26	Top 500	Further Expansion
2026-27	Top 1000	Comprehensive Coverage

This has further enriched the BRSR framework. This new facet, the BRSR Core, now enhances assurance and extends ESG disclosures to a business’s value chain. This evolution responds to the ever-evolving landscape of corporate responsibility. For ease of reference, the BRSR Core contains a cross-reference to the disclosures contained in the BRSR.

• The BRSR Core introduces a select set of Key Performance Indicators (KPIs) and metrics aligned with the nine ESG attributes. This subset encapsulates novel aspects like job creation in smaller towns, business openness, and gross wages for women, reflecting the Indian context. Furthermore, intensity ratios based on revenue adjusted for Purchasing Power Parity (PPP) enable global comparability, emphasizing a well-rounded perspective.
• Expanding the canvas of transparency, the BRSR framework now extends its embrace to the value chain. This holistic approach paints a comprehensive picture, incorporating the top upstream and downstream partners that collectively contribute to 75% of purchases and sales. Further, listed entities must report the KPIs in the BRSR Core for their value chain to the extent it is attributable to their business with that value chain partner. Such reporting may be segregated for upstream and downstream partners or can be reported on an aggregate basis.

A Gradual Unfolding: Adaptation and Assurance

SEBI’s strategy ensures seamless adaptation. Top 1000 entities adopt updated BRSR in FY 2023-24, setting stage for further transitions. BRSR Core assurance escalates from top 150 to 1000, reflecting careful responsibility.

Guardians, listed entity boards, ensure assurance providers’ competence, integrity, and no conflicts. BRSR Core’s assurance fortified with integrity and expertise as it evolves.

Assurance service creates opportunities for Chartered Accountants, aiding BRSR report with true disclosures. They assure BRSR core principles with expertise.

Data Collation Method for BRSR

Preparation of BRSR requires a systematic approach to collect, analyze, and present data from various departments. To achieve accurate and meaningful reporting of ESG performance, companies must adopt data-driven strategies that enable them to measure and communicate their progress effectively.

1. Data Sources and Diversity: Companies draw data from diverse sources across their operations. For instance:
   • Environmental Impact: Data on energy, emissions, water use, waste, and resources comes from manufacturing, supply chains, and facilities.
   • Social Initiatives: Information on employee welfare, safety, diversity, community engagement, and philanthropy is collected from HR, CSR, and outreach.
   • Governance Practices: Data on board diversity, compensation, compliance, and risk is gathered from legal, compliance, and executive teams.
2. Data-Driven Strategies: Employ tools like integrated systems, automation, and KPIs to ensure accurate data collection, consistency, and efficient reporting.
3. Inter-Departmental Collaboration: The BRSR process requires close collaboration among departments to provide a comprehensive view of the company’s ESG journey. Examples of collaboration include:
   • Collaborating with suppliers and vendors to ensure sustainable sourcing practices and responsible supply chain management.
   • Aligning financial data with sustainability metrics to showcase the financial impact of ESG initiatives.
   • Collaborating with communication and PR teams to accurately convey the company’s ESG achievements to stakeholders through the BRSR report.

Voluntary Implementation and its Benefits

While BRSR reporting is mandatory for the top 1000 listed companies, voluntary adoption by other businesses can yield substantial advantages. Voluntarily embracing the BRSR framework allows companies to proactively enhance their ESG practices, positioning them favorably in the eyes of investors, consumers, and regulators. This, in turn, can lead to improved market reputation, reduced regulatory risks, and increased access to capital.

Conclusion

In conclusion, the Business Responsibility and Sustainability Reporting (BRSR) framework introduced by SEBI stands as a powerful catalyst for positive change in corporate practices. By emphasizing transparency, accountability, and a comprehensive approach to ESG considerations, BRSR guides Indian corporations toward a more responsible and sustainable future. As companies collate data, leverage data-driven strategies, and foster collaboration across departments, they not only fulfill regulatory requirements but also embrace a culture of continuous improvement. With the evolution of the BRSR framework, businesses are poised to embark on a transformative journey that aligns economic growth with societal well-being, contributing to a more ethical and sustainable world.

“True leadership isn’t just about profits; it’s about making a positive impact on the world. We measure success not only by financial gains but also by the well-being of our planet and the betterment of society.”

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¹ The SRMM version 2.0 can be accessed through - https://resource.cdn.icai.org/74106srsb59994.pdf. Various other initiatives of SRSB can be viewed at https://www.icai.org/post/sustainability-reporting-standards-board.

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Author may be reached at: eboard@icai.in