Introduction

SEBI had mandated top 1,000 listed entities (by market capitalisation) to file BRSR (“extant BRSR”) as part of the Annual Report with SEBI from FY 2022-23 onwards. In February 2023, SEBI issued a consultation paper to widen the periphery of ESG disclosures and proposed phased manner of applicability of BRSR Core, value chain disclosure and assurance thereof.

SEBI through a notification dated 14 June 2023 amended the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) to introduce the BRSR Core and BRSR Core for a company’s value chain. Subsequently, on 12 July 2023, SEBI issued the framework (“the framework”) prescribing the disclosure and assurance requirements for BRSR Core, ESG disclosures for value chain, and assurance requirements.

In the sections below, we intend to give our synopsis on the framework as issued by SEBI vide Circular no. SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122 dated 12 July 2023).

The framework enumerates disclosure requirements and assurance applicability in a glide path and can be divided into THREE categories:

• BRSR Core (sub-set of extant BRSR)
• Updated BRSR (extant BRSR + BRSR Core)
• BRSR Core for Value Chain (Cumulatively comprising 75% of its purchases / sales (by value) by the top upstream and downstream value chain partners of a listed entity)

* Reporting may be segregated for upstream and downstream partners or can be reported on an aggregate basis
* Scope of reporting and any assumptions or estimates, if any, should be clearly disclosed

Nine Attributes Of BRSR Core

Changes In The Extant BRSR To Incorporate BRSR Core KPIs

* New Insertion in Essential Indicator (N)
* Transposition from Leadership to Essential Indicator (T)

Criteria When Selecting BRSR Core Assurance Provider

Expertise: The listed entity’s Board should confirm that the chosen assurance provider for the BRSR Core possesses the necessary competence to execute reasonable assurance.

No Conflict of Interest: The listed entity needs to ascertain that there’s no conflict of interest with the selected assurance provider in charge of assuring the BRSR Core disclosures.

For example, the entity must ensure that neither the assurance provider nor any of its affiliates market their products or offer non-audit/non-assurance services, such as consulting, to the listed entity or its group companies.

Conclusion

An important feature of the circular is its focus on inclusion of value chain disclosures. Though this will contribute to a comprehensive assessment of a company’s environmental, social, and governance impact, this approach significantly increases the burden of compliance, as integrating sustainability policies within the supply chain becomes a complex and laborious task. The responsibility for reporting still lies with the listed entity. However, the circular encourages value chain partners to align with the company’s sustainability policies, as they risk losing business from the listed entities if they don’t comply.

Why Choose InCorp?

InCorp Advisory provides a complete ecosystem and support for your BRSR needs. Our team of experts conducts a 360-degree assessment to identify and highlight potential risks and opportunities which can arise with BRSR reporting. Our clients range from listed companies to investors as we help them not only improve their ESG reports but also help create valuable investments.

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As India’s top 1000 companies are gearing to adopt and publish the first set of mandatory BRSR reports, SEBI on 20th February 2023 released its ESG Committee’s recommendations on streamlining the ESG disclosures, ESG Ratings, and ESG Investments in India.

The recommendations put a strong emphasis on improving the quality of BRSR disclosures such that stakeholders can have a stronger reliance on the information disclosed. The top 6 highlights of the recommendations of SEBI’s ESG Committee which increase the scope, utilitarian value, and quality of BRSR are as follows:

A: BRSR Core Assurance:

The simplest way to build reliance on BRSR disclosures is by a third-party assurance. BRSR currently covers a wide range of disclosures, hence, to limit the cost of compliance the committee has proposed rolling out assurance in a phased manner. The said assurance is only applicable to the most critical disclosures of BRSR, named as BRSR Core by the consultation paper. BRSR Core covers the assurance of GHG footprint, water consumption and discharge, R&D and capex expenditure in reducing environmental footprint, addressing waste disposal, employee wellbeing, and safety, gender diversity, POSH complaints, purchases from MSME and small producers, job creation in tier-3 towns, percentage of negative media sentiment and average days of payment to vendors and openness of business.

B: Upgrade to BRSR Comprehensive Framework:

Many KPIs suggested in the BRSR core are currently not in BRSR comprehensive framework. Hence the committee has proposed to amend BRSR comprehensive framework and include additional KPIs. Reasonable assurance is required from an assurance provider for such KPIs mentioned under the BRSR core option.

C: Essential Supply Chain Disclosures:

For the current financial year, the BRSR disclosure requirements buckets supply chain indicators under leadership indicators. However, for certain companies, significant GHG emissions may be captured in the supply chain and hence it becomes essential for them to report the same. Keeping the complexity of getting the relevant data for the companies in the initial year, the ESG committee recommends making it an essential indicator in the coming years under the BRSR disclosure requirements. The disclosure shall be on a “comply-basis and will be rolled out in a phased manner.

D: Indianized ESG Ratings Scores:

Apart from working on regulations framework on how ESG Rating Providers (ERPs) shall operate, the ESG committee also believes that emerging markets like India present a unique set of environmental and social challenges and therefore there is a need for a distinct set of metrics to be considered when assigning ESG ratings. In the context of India, for instance, issues such as employment creation in smaller towns, gender diversity at the employee level, and inclusive development are much more pertinent than in developed markets. Hence the committee has identified relevant 15 ESG parameters that have an Indian context.

E: ESG Core Rating based on BRSR:

SEBI Committee believes that in general ESG ratings are based on self-disclosed data. The Committee has already proposed that the BRSR core indicator shall be subject to assurance. The Committee further proposes that in addition to their general ESG ratings, ERPs shall also provide a Core ESG rating, which shall be based on assured BRSR Core parameters.

F: Mitigation of investment risks:

To mitigate the risk of greenwashing and safeguard investors SEBI committee has proposed an ESG scheme to invest at least 65% of its AUM in companies that are reporting the BRSR comprehensive version and also providing assurance on BRSR Core disclosures. The same shall come into effect on Oct 01, 2024. Additionally, third-party assurance for the ESG funds regarding compliance shall be introduced from April 01, 2023, on a ”comply-or-explain” basis.

Conclusion

Adoption of BRSR reporting is not just run-of-the-mill compliance but has a larger impact and a much wider audience. SEBI’s ESG committee with this consultation paper has redrawn the attention of listed companies who shall be releasing their first BRSR report for FY 22-23.

Why Choose InCorp?

InCorp Advisory provides a complete ecosystem and support for your BRSR needs. Our team of experts conducts a 360-degree assessment to identify and highlight potential risks and opportunities which can arise with BRSR reporting. Our clients range from listed companies to investors as we help them not only improve their ESG reports but also help create valuable investments.

Have you started collecting your BRSR data yet?

Consult an ESG expert today

Business Responsibility And Sustainability Reporting – BRSR Reporting

The BRR is the first Environment, Social, and Governance (ESG) regulatory disclosure framework in India – it precedes the current Business Responsibility and Sustainability Reporting (BRSR) requirements. BRR was based on NVG and was mandatory for the top 100 listed companies (by market capital). Gradually, the coverage of BRR increased, and by 2019 it became mandatory for the top 1000 listed companies.

Eventually, BRR’s relevance faded, owing to rapid global developments. Additionally, an NSE report (2018) revealed that the BRR Reports lacked quality, rendering the reporting unreliable. Hence the need for a more robust and globally aligned reporting – enter the BRSR framework!

Realizing the issue, the MCA adopted the National Guidelines for Responsible Business Conduct (NGRBC) in 2020. Subsequently, SEBI replaced BRR with Business Responsibility and Sustainability Reporting (BRSR), formulated by an MCA committee on BRR.

Brief Timeline Of BRSR Reporting

Some Salient Points About BRSR Reporting Are –

• NGRBC suggests two versions for BRSR reporting – “Comprehensive” and “Lite”. The ‘Comprehensive Version’ of reporting is for listed organizations, and the ‘Lite Version’ is for unlisted companies. For now, SEBI has mandated that India’s top 1000 listed companies (by market capital) submit the comprehensive version BRSR for FY 2022-23.
• A unique advantage of following BRSR requirements is that it adopts the United Nations Sustainable Development Goals (UN-SDGs) and is benchmarked with other global ESG reporting frameworks like Global Reporting Initiative (GRI), Task Force on Climate-Related Financial Disclosures (TCFD), etc.
• Reporting under BRSR guidelines comprises of three sections –
  • Section 1: General Disclosures
  • Section 2: Management and Process Disclosures
  • Section 3: Principle-wise Disclosures
• Section 1 focuses on the basic set of information at the company level. Section 2 focuses on policy and governance level questions. Both these sections are mandatory to be reported.
• Section 3 comprises nine principles, each focused on a specialized area. Disclosures in section 3 have two categories – Essential Indicators and Leadership Indicators. The essential indicators are mandatory, while the leadership indicators are voluntary.
• Method of reporting under BRSR, compared to its predecessor BRR, is considerably heavy on data requirements. It comprises more than 120 reported data points across three sections and nine principles.
• Gathering the raw data (thousands of data points!) across the Finance, HR, CSR, Supply-chain and Operations teams (and various systems such as ERP, CRM, HRMS etc.), collating and indexing it, processing it and then structuring it across these nine principles is an extensive exercise, and requires specialized focus and alignment.

Conclusion

While BRSR reporting is a compliance mandate for companies, the filing exercise may give companies deeper insights into their non-financial business risks and opportunities.

If you believe that BRSR is just another compliance, do check out this blog. We think it needs a more profound engagement within the organization to be able to build a BRSR Report.

How Can InCorp Help You?

Incorp can be the one-stop solution for all your BRSR requirements. Our professionals are trained to comply with the ESG Framework and work in the best interest of your company.

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

What Is BRSR Reporting?

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 report 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.

BRSR Reporting 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.

Our Supported ESG Reporting Framework

GRI – Global Reporting Initiative

SASB – Sustainability Accounting Standards Board

TCFD – Task Force on Climate-Related Financial Disclosures

CDP – Carbon Disclosure Project

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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