Sustainability • ESG Governance ICAI Journal Ref: August 2021 • Vol. 70 • No. 2 • pp. 43–49 (159–165) SEBI Circular May 10, 2021 • BRSR Master Guide

Sustainability Reporting Frameworks and SEBI Circular on BRSR

NU
Naimish Upadhyay
Sustainability Expert • naimishupadhyay@gmail.com

“A growing realization that non-financial aspects are critical to positive business outcomes in the long term, coupled with rising disclosure expectations from investors and stakeholders on these issues, has led to a proliferation of new frameworks to support non-financial reporting among corporates. While several global coalitions and standards setting bodies have taken a lead in this direction, the launch of Business Responsibility and Sustainability Reporting (BRSR) framework as well as the SEBI mandate for BRSR reporting for the top listed companies signify an important milestone in propagating sustainability and business responsibility principles among Indian companies, through an India-made and India-centric framework. Read on…”

1 Growing Focus on Corporate Sustainability & Stakeholder Capitalism

As the COVID-19 pandemic continues to test our societies and economies in drastic, unforeseen ways, it has also brought an unprecedented shift in the business environment. Corporates are re-doubling efforts to strengthen their organizational purpose, chart out strategies to ensure long-term resilience and redefine the metrics of success and value creation. This emergent crisis has presented an opportunity for businesses to sharpen their priorities and re-focus on the role they play in larger society and the planet. Together with the growing urgency around climate change, natural resource constraints and social inequities, the pandemic has served to sharply put the spotlight back on several critical issues around the triple bottom lines of People, Planet and Profits. The Global Risk Report 2021 released by the World Economic Forum strikingly captures the key risks arising out of these issues.1

All of these varied crises have accelerated the momentum around corporate sustainability and responsible business conduct. Companies today are expected to perform well on a range of metrics beyond financial performance, underlining the realization among investors that Environmental, Social and Governance (ESG) factors often have a material outcome on a company’s long-term growth and success. There is also growing awareness and appreciation for the various forms of ‘values’ that a business creates beyond what gets reflected in traditional balance sheets. Such non-financial value is often intangible and difficult to quantify, but can have far-reaching impacts beyond the investors and shareholders of a company. These emerging concepts have aptly been described under the moniker of ‘Stakeholder Capitalism’ by the World Economic Forum, which describes it as a form of capitalism in which companies seek long-term value creation by taking into account the needs of all their stakeholders, and society at large.2

The Institutional Investor Driver: While organizations are internally recognizing that social and environmental responsibility can lead to positive business outcomes, investors are one of the key stakeholder groups driving momentum around ESG actions and disclosures from the outside. Institutional investors are raising the stakes when it comes to assessing company performance using ESG factors. Recent Institutional Investor Surveys indicate that ESG information has become significantly important, with the majority of investors surveyed (98%) signalling a move to a more disciplined and rigorous approach to evaluating non-financial performance of companies. Specifically, 91% of respondents said that non-financial performance played a pivotal role in their investment decision-making. The call for action and demands for transparency on sustainability aspects is also being supported by other stakeholder groups, including issue-driven civic society organizations, an informed customer and employee base, as well as activist media, all of whom are eager to commend positive actions and call out failures in the corporate world.

2 Emergence of Global Sustainability Reporting Frameworks

As sustainability, corporate responsibility and ESG issues continue to evolve as strategic business imperatives, there is a greater demand from companies to communicate more information pertaining to their performance, material risks and opportunities as well as strategies around these issues. Investors and other stakeholder groups are keen to assess whether companies are adopting sustainable and resilient business models. Insightful reporting that provides a clear understanding of those models and communicates the company’s performance on a broad variety of metrics is becoming critical for stakeholders while making informed decisions on investment, procurement and other forms of business relationships. The need for sustainability information that is consistent, high-quality, material and easily accessible within the public domain was recently reemphasized by BlackRock CEO Larry Fink in his annual letter to CEOs in 2021.3

A large number of reporting standards and frameworks have emerged globally over the last decade in response to the growing demand for non-financial information. They help provide structure to the multitude of thematic areas and diversity of topics that constitute corporate sustainability. These frameworks are most commonly developed by standard setting bodies, not-for-profit bodies, investor-backed coalitions and analyst agencies. While some frameworks have attempted to comprehensively address the broad spectrum of sustainability and ESG topics, others are more thematic and focussed on individual issues such as climate change. Six prominent global reporting frameworks are detailed below:

I. Global Reporting Initiative (GRI) Standards

Formed in 1997, GRI developed the first and most widely used global standards for sustainability reporting useful to a broad set of stakeholders. It covers a wide range of topics under the triple bottom line approach (Economic, Environmental and Social performance), with each topic individually comprising a series of quantitative and qualitative indicators. The principle of materiality guides reporting organizations in prioritizing topics which “have a direct or indirect impact on an organization’s ability to create, preserve or erode economic, environmental and social value for itself, its stakeholders and society at large”.4 Widely adopted for standalone Sustainability Reports.

II. Sustainability Accounting Standards Board (SASB)

First published in 2018, the SASB Standards comprise globally applicable standards for 77 different industry sectors, identifying the minimal set of financially material sustainability topics and associated metrics for each sector. The standards are structured as the SASB Materiality Map, engineered to help companies and investors analyze material ESG issues directly affecting a company’s financial performance.5

III. Taskforce on Climate-Related Financial Disclosures (TCFD)

Created by the Financial Stability Board (FSB), TCFD in 2017 released climate-related financial disclosure recommendations designed to help companies, banks and institutional investors support informed capital allocation. Recommendations are structured around four thematic pillars: Governance, Strategy, Risk Management, and Metrics & Targets.6

IV. Climate Disclosure Standards Board (CDSB)

An international consortium of business and environmental organizations committed to equating natural capital with financial capital. It provides a framework for integrating environmental and climate change information directly into mainstream financial reporting (such as Annual Reports) with the same rigor as financial statements.7

V. International Integrated Reporting Council (IIRC)

A global coalition of regulators, investors, companies, and the accounting profession propagating integrated thinking and reporting. Its <IR> Framework uses a value creation model founded on six capitals: Financial, Manufactured, Intellectual, Human, Social & Relationship, and Natural capital.8 Commonly used in conjunction with GRI indicators.

VI. CDP (Formerly Carbon Disclosure Project)

An international non-profit helping companies and cities disclose environmental impacts across three focus areas: Climate Change, Water Security, and Forests. Its annual survey questionnaires are backed by over 590 institutional investors representing over USD 110 trillion in combined assets.9

Global Convergence Initiatives & Creation of the Value Reporting Foundation

The proliferation of multiple reporting frameworks created a crowded landscape with overlapping requirements and reporting fatigue. In response, three critical consolidation movements took shape:

  • Statement of Intent (September 2020): Five leading independent standard setters—CDP, CDSB, GRI, IIRC, and SASB—facilitated by the Impact Management Project, committed to work together towards a comprehensive corporate reporting system complementary to Financial GAAP.10
  • Value Reporting Foundation (June 2021): IIRC and SASB officially merged to establish the Value Reporting Foundation (VRF) to integrate integrated reporting and industry-specific SASB metrics into a unified structure.11
  • IFRS Foundation Sustainability Standards (COP26 Roadmap): The Trustees of the IFRS Foundation initiated consultations confirming the urgent need for a dedicated Sustainability Reporting Standards Board (ISSB) to establish a global baseline of investor-oriented sustainability standards in time for COP26 in November 2021.12

3 Background & Evolution of Business Responsibility Reporting in India

Over the past decade, Indian corporates have witnessed a manifold growth in voluntary sustainability disclosures through Sustainability Reports or Integrated Reports based on global frameworks. The regulatory evolution has progressed through decisive national milestones:

Regulatory Evolution Timeline: NVG (2011) → BRR (2012) → NGRBC (2019) → BRSR (2021)

  • 2011 – National Voluntary Guidelines (NVGs): Ministry of Corporate Affairs (MCA) released the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, articulating nine core principles rooted in India’s socio-cultural context.13
  • 2013 – Companies Act Fiduciary Mandate: Section 166(2) of the Companies Act, 2013 cast a statutory fiduciary duty on directors to act in good faith to promote the objects of the company in the best interests of employees, community, shareholders, and for the protection of the environment.
  • 2012 to 2019 – SEBI BRR Mandate: SEBI made the Business Responsibility Report (BRR) mandatory for the top 100 listed entities by market capitalization in 2012, subsequently extending it to top 500 in 2015, and top 1000 listed entities in 2019.
  • 2019 – National Guidelines on Responsible Business Conduct (NGRBC): In 2019, MCA revised the NVGs into NGRBC to align with emerging global priorities and UN SDGs.14

The Nine Core Principles of NGRBC

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.

In 2018, MCA constituted the Committee on Business Responsibility to analyze lessons learnt from BRR filings. In August 2020, the Committee released its report recommending that BRR be upgraded into the Business Responsibility and Sustainability Report (BRSR).15 The Committee recommended that BRSR eventually apply to all companies (listed and unlisted), envisioned a “Lite” format for smaller unlisted entities and SMEs, proposed dual-tier Essential and Leadership Indicators, recommended MCA21 filing integration to prevent duplicate compliance, and suggested the creation of a national BRSR Index to guide public procurement preference.

4 SEBI Circular on BRSR (May 10, 2021): Architecture & Mandate

Following public comments on its August 2020 Consultation Paper, SEBI issued a landmark circular on May 10, 2021, notifying new BRSR reporting requirements for the top 1000 listed entities by market capitalization.16

Implementation Roadmap:

Filing of BRSR is voluntary for FY 2021-22 and mandatory from FY 2022-23 for the top 1000 listed companies.

Essential vs. Leadership:

Under each of the 9 NGRBC principles, Essential Indicators are mandatory, while Leadership Indicators remain voluntary for progressive companies.

Global Interoperability:

Entities reporting under global frameworks (GRI, SASB, TCFD, IIRC) may cross-reference disclosures to prevent duplicate reporting burdens.

5 Implications and Strategic Outlook of BRSR

For India Inc. & Corporate Transparency:

BRSR heralds a new age of corporate responsibility, positioning Indian corporations on par with leading global jurisdictions in ESG transparency. It offers a locally developed yet globally aligned framework, simplifying investor dialogue and providing a standardized stepping stone for companies initiating sustainability disclosures. While large entities can adapt swiftly, hand-holding and capacity-building will be essential for unlisted entities and SMEs. Robust internal controls and auditable data management systems—akin to those in financial reporting—must now be established for non-financial metrics.

For Investors & Stakeholders:

BRSR provides consistent, standardized, and comparable metrics spanning greenhouse gas emissions, water stewardship, waste management, employee safety, gender diversity, supply chain sustainability, and human rights. This empirical data empowers domestic and foreign institutional investors to allocate capital toward truly resilient, responsible business models.

For the Accountancy Profession:

For Chartered Accountants and audit professionals, BRSR presents a transformational opportunity to expand beyond conventional statutory accounting. Professional accountants are exceptionally well placed to engineer ESG data controls, conduct non-financial assurance, perform impact accounting across multi-capital value creation models, and uphold the accuracy and governance integrity of public sustainability disclosures.

References & Regulatory Notes

  1. The Global Risk Report 2021, World Economic Forum, 2021, http://www3.weforum.org/docs/WEF_The_Global_Risks_Report_2021.pdf
  2. World Economic Forum: What is Stakeholder Capitalism? https://www.weforum.org/agenda/2021/01/klaus-schwab-on-what-is-stakeholder-capitalism-history-relevance/
  3. Larry Fink’s 2021 letter to CEOs, 2021, https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter
  4. GRI Standards, https://www.globalreporting.org/standards
  5. SASB Standards, https://www.sasb.org/standards/
  6. TCFD, https://www.fsb-tcfd.org/
  7. CDSB, https://www.cdsb.net/our-story
  8. IIRC, https://integratedreporting.org/the-iirc-2/
  9. CDP, https://www.cdp.net/en/info/about-us/what-we-do
  10. Statement of Intent to Work Together Towards Comprehensive Corporate Reporting, Impact Management Project, 2020, https://impactmanagementproject.com/structured-network/statement-of-intent-to-work-together-towards-comprehensive-corporate-reporting/
  11. Answering Your Questions about the Value Reporting Foundation, 2020, https://www.sasb.org/blog/answering-your-questions-about-the-value-reporting-foundation/
  12. IFRS Foundation Trustees announce strategic direction and further steps based on feedback to sustainability reporting consultation, 2021, https://www.ifrs.org/news-and-events/news/2021/03/trustees-announce-strategic-direction-based-on-feedback-to-sustainability-reporting-consultation/
  13. National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, https://www.mca.gov.in/Ministry/latestnews/National_Voluntary_Guidelines_2011_12jul2011.pdf
  14. National Guidelines on Responsible Business Conduct, https://www.mca.gov.in/Ministry/pdf/NationalGuildeline_15032019.pdf
  15. Report of the Committee on Business Responsibility Reporting, Ministry of Corporate Affairs, 2020, https://ies.gov.in/pdfs/Report-Committee-BRR.pdf
  16. SEBI Circular on BRSR, https://www.sebi.gov.in/legal/circulars/may-2021/business-responsibility-and-sustainability-reporting-by-listed-entities_50096.html

About the Author

Naimish Upadhyay
Expert in the area of Sustainability & ESG
Email: naimishupadhyay@gmail.com