SEBI Makes BRSR Mandatory For The Top 1000 Listed Businesses in India

The top thousand listed businesses in India are expected to submit an annual report that includes a Business Sustainability Report to the stock exchanges. The Business Sustainability Report, or BRR, includes the businesses’ Environmental, Social, and Governance (ESG) strategies in the format specified by SEBI, or the Securities and Exchange Board of India. Through a notification on May 5, 2021, SEBI revised some sections of the SEBI regulations, bringing the requirement of BRSR into play.

What does BRSR, or Business Responsibility and Sustainability Reporting, mean?

SEBI mandates BRSR, or Business Responsibility and Sustainability Reporting, for the first 1000 listed businesses (by market capitalization). Business Responsibility and Sustainability Reporting is a technique to promote an organization’s commitment to sustainability and transparently demonstrate it to the relevant parties, rather than just presenting the data gathered.

The Business Responsibility and Sustainability Reporting aims to give investors access to standardized disclosures on Environmental, Social, and Governance factors. It helps investors identify and evaluate sustainability-related opportunities and risks of organizations and also helps them make wise investment decisions with access to pertinent and comparable information. With the help of BSRS, climate- conscious businesses will also be able to more clearly communicate their sustainability goals, positioning, and performance, which will lead to the creation of long-term value. Overall, more rigorous Environmental, Social, and Governance (ESG) disclosure and transparency norms will aid in luring more money and investment.

Environmentally relevant disclosures include information on the use of resources (such as water and electricity), emissions of air pollutants and greenhouse gases, the move toward a circular economy, waste production and disposal methods, and biodiversity. The workforce, value chain, communities, and customers would all be included in socially connected disclosures.

In social disclosure, according to SEBI, entities must disclose information about gender and social diversity, including policies for hiring and retaining employees or workers with disabilities, median wages, turnover rates, welfare benefits for both contractual and permanent employees and workers, occupational health and safety, and training.

The NGBRCs, or The National Guidelines on Responsible Business Conduct, contain nine principles, and the BRSR requests disclosures from listed entities regarding their performance against each of these principles. Each principle’s reporting is broken down into essential and leadership indicators. Though the reporting of leadership indicators is voluntary, the reporting of essential indicators is always mandated. The listed entities should try to submit the reports of the leadership indicators.

How did Business Responsibility and Sustainability Reporting start?

A company’s economic, environmental, and social repercussions as a result of its business operations are summarized in sustainability reporting. It makes sure that businesses think about how their actions may affect sustainability issues and gives them the freedom to be open about the opportunities and risks they encounter. To further safeguard both citizens’ and environmental rights, governmental regulation on environmental, social, and governance (ESG) issues has increased.

Among its international competitors, SEBI was one of the pioneers in the adoption of sustainability reporting for all listed businesses. For listed organizations, the submission of the BRR comprising Environmental, Social, and Governance (ESG) disclosures was first implemented in the year of 2012.

Following the National Guidelines’ framework for Responsible Business Conduct, the Ministry of Corporate Affairs (MCA) established a Committee on Business Responsibility Reporting (BRR) in November 2018 to finalize Business Responsibility Reporting formats for listed as well as unlisted enterprises. The BRSR, or Business Responsibility and Sustainability Reporting, is an update to the current BRR (Business Responsibility Reporting) that incorporates the most recent international standards for non-financial sustainability reporting based on the NGRBCs. The Committee discussed numerous issues and aspects that could enhance the quality and utility of disclosures in August 2020 and recommended BRSR as a replacement for BRR.

Is Business Responsibility and Sustainability Reporting really needed?

The top 1000 listed entities must report on their business responsibility and sustainability, according to a SEBI circular on that topic (by market capitalization). A change to Regulation 34(2) (f), notified on May 5, 2021, has allowed BRSR to become a part of the regulatory provisions. Additionally, SEBI introduced the BRSR format and the guidance notes in a circular on May 10, 2021, allowing sustainable businesses to interpret the disclosures’ scope.

The reporting of Business Responsibility and Sustainability Reporting will be optional for FY 2021–2022 and compulsory from FY 2022–2023 in order to provide enterprises time to adjust to the new standards. Businesses, on the other hand, are urged to embrace the BRSR as soon as possible in order to lead the way in sustainable reporting.

What is the basis of Business Responsibility and Sustainability Reporting?

The current BRR, or Business Responsibility Report, and the NGRBC (National Guidelines on Responsible Business Conduct) principles, which themselves derive from SDGs, or the Social Development Goals, serve as the foundational text from which the BRSR has evolved. The nine principles that make up the foundation of BRSR reporting have all been aligned with the seventeen Social Development Goals established by the United Nations, which constitute the backbone of the NGRBC’s principles.

What are the advantages of Business Responsibility and Sustainability Reporting?

The BRSR seeks to actively solve the ESG issues by implementing the NGRBC principles rather than merely reporting on them. The majority of the material has been worked on to make it quantifiable, which will make reporting easier for the companies. However, if possible, the report asks the companies to provide details about their policies and methods, in addition to disclosing that they have acceptable safeguards in place. This guarantees that a corporation adheres to ESG regulations in both law and spirit.

While the BRSR aids stakeholders in recognizing a firm’s adherence to ESG standards, it also aids ESG-compliant companies in gaining numerous advantages from the BRSR’s exposure to the general public and the public’s recognition of the company. It could soon assist a business in luring skilled employees, ethical investors, easier access to finance, devoted customers, value generation for shareholders, and much more.

BRSR is the redesigned version of the Business Responsibility Report (BRR). The disclosures that must be provided have changed, and numerous new items have been added. The environmental, social, and governance (ESG) disclosures made in the BRSR are meant to help businesses interact with their stakeholders more deeply and to motivate them to go beyond merely reporting financial information as required by law to also address their social and environmental impacts.

The Committee on Business Responsibility Reporting’s Report [2], released by the Ministry of Corporate Affairs (MCA) on August 11, 2020, and marked the beginning of the path toward BRSR. The committee made a number of additions with the goal of making BRR a one-stop shop for all non-financial, sustainability reporting. The Committee suggested renaming the BRR as the BRSR and implementing the reporting requirement gradually and in phases to properly represent its aim and scope.

In Conclusion

The growing importance of non-financial disclosures guarantees that the organization explicitly recognizes its environmental and social responsibilities in addition to its annual financial statements. As sustainability disclosures gain popularity, it is hoped that banks, credit rating companies, and other financial organizations will utilize the data in conjunction with financial data to evaluate a company’s or business’s reliability.

It will be interesting to observe if the BRSR gain acceptance and credibility across international frameworks as a unique source of knowledge for businesses in India, serving as a key document for business assessment as the authorities had intended.

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