Is BRSR yet another compliance?

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Business Responsibility and Sustainability Report(BRSR)

The Security and Exchange Board of India (SEBI) introduced Business Responsibility and Sustainability Reporting (BRSR) through a circular dated May 2021.

BRSR, an evolved version of Business Responsibility Report (BRR), is an Environmental, Social, and Governance (ESG) framework, which is benchmarked to global frameworks such as GRI, TCFD, SASB, etc. SEBI has mandated India’s Top 1000 listed companies (by Market Capital) to submit the comprehensive version BRSR for FY 2022-23 and onwards.

Gyaneshwar Singh, Joint Secretary, Government of India, said, “Disclosures sought under the BRSR will provide much-needed uniformity as it draws inputs from global sustainability reporting frameworks.”

(The global reporting frameworks referred here are GRI, CDP, SASB, TCFD, and IR, among others)*

India is already a compliance-heavy market, ranked 62 on the Ease of Doing Business ranking. BRSR may seem like another compliance mandate for businesses, but in fact, BRSR will replace the existing BRR compliance.

Unlike other compliances and reports (like CARO, which target specific stakeholder), the BRSR targets an extensive spectrum of stakeholders. It is structured to uncover the non-financial risk indicators – for multiple stakeholders such as – investors, shareholders, bankers, employees, community, regulators, customers and suppliers.

The variety of raw data required to submit a BRSR report also make this compliance unique. The BRSR framework is significantly data-heavy – with 120+ parameters to be reported across nine core principles. Each of these 9 principles focus on a specific reporting area. The raw data is spread across multiple departments (and often across locations) – for example environment related data will be collected from Environment, Health and Safety (EHS) team at location level, employee benefit data will come from Human Resources (HR) team at corporate level, while community initiatives would be driven by the Corporate Social Responsibility (CSR) team. This shall require a high degree of coordination among various departments.

Rating agencies, both domestic (e.g. CRISIL) and global (e.g. Dow Jones Sustainability Index – DJSI, Morgan Stanley Capital International – MSCI, etc.), have already published ESG ratings and industry benchmarks for companies based on their ESG performance. BRSR will provide consolidated data for these rating agencies to benchmark companies on ESG performance. Similar to financial rating, ESG rating is already impacting market cap and institutional / retail investments.

Conclusion

ESG reporting is picking up in India. SEBI is taking the lead and setting up policy and framework norms for ESG rating agencies and expanding the ESG coverage include more entities (some mutual funds as well!). The next 10 years, as awareness for measuring and reporting non-financial risks grows, companies that are late adopters for ESG will be penalized by all stakeholders. While BRSR adoption is a challenge for many companies, it is a move in the right direction for Indian companies to integrate with the global business environment.

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GRI – Global Reporting Initiative

SASB – Sustainability Accounting Standards Board

TCFD – Task Force on Climate-Related Financial Disclosures

CDP – Carbon Disclosure Project