In recent years, measuring corporate performance through various indicators has become a crucial priority for companies, irrespective of their size, global presence, or business operations. Recognizing the significance of responsible business conduct and sustainability, Securities and Exchange Board of India ("SEBI") mandated the ESG disclosures for the top 1000 listed companies in the prescribed Business Responsibility and Sustainability Report (BRSR), starting from the fiscal year 2022-23.
BRSR has been structured into three sections, encompassing (a) general disclosures, (b) management and process disclosures, and (c) category-wise performance disclosures. These categories align with the nine principles specified in the 'National Guidelines on Responsible Business Conduct' (NGRBC), offering companies the flexibility to report under each NGRBC principle with two performance levels/indicators: "essential" (mandatory) and "leadership" (voluntary).
On July 12, 2023, SEBI introduced BRSR Core, which is a sub-set of BRSR, with the objective of establishing measurable criteria for reporting on the nine principles under BRSR. The focus shifted towards measurable, outcome-oriented Environmental, Social, and Governance (ESG) metrics, accompanied by robust methodologies for data verification.
As of FY 2023-24, the top 1000 listed entities are now obligated to disclose their BRSR Core reports as part of their Annual Reports.
The updated BRSR Core format brings several changes to the reporting landscape. Nine new attributes have been introduced across the nine principles, spanning various aspects. These include the concentration of trades with trading houses, dealers, and related parties, accounts payables days, spending on employee welfare activities, gross wages paid to women employees as a percentage of the total wage bill, and details of sexual harassment complaints received. Notably, environmental disclosures now encompass water intensity and greenhouse emissions adjusted for Purchasing Power Parity (PPP). The use of PPP data holds the potential to establish links between the size of an economy and its impact on climate, revealing correlations with climate-related costs, socioeconomic consequences, and financing for climate change mitigation and adaptation efforts.
Furthermore, the BRSR Core underlines a focus on job creation in smaller towns, urging companies to disclose wage distributions across rural, semi-urban, urban, and metropolitan locations. Some disclosures, previously voluntary, have now become mandatory, including the reporting of data breaches.
Additionally, companies are required to disclose information about their value chain in their annual reports. The value chain should encompass the top upstream and downstream partners, accounting for 75% of purchases/sales (by value). Listed entities must report Key Performance Indicators (KPIs) in the BRSR Core related to their value chain partners, ensuring transparency and clarity in reporting. The top 250 listed entities must comply with value chain disclosures on a "comply-or-explain" basis by FY 2024-25, and limited assurance on these disclosures will be required by FY 2025-26.
To bolster the credibility of the disclosed information, SEBI has introduced the concept of "assurance providers." These providers are tasked with validating the BRSR Core reports for listed companies and must possess the relevant expertise while avoiding any conflicts of interest. This move is expected to enhance comparability and reliability of disclosures among various companies.
The timeline for providing reasonable assurance is staggered, starting with the top 150 listed companies complying in FY 2023-24, followed by the top 250 listed companies by FY 2024-25, and finally, the top 1000 listed companies adopting this by FY 2026-27. With BRSR Core requirements now in effect, companies are urged to swiftly assess the changes in light of their internal policies and processes. This evaluation will help identify any gaps and facilitate the implementation of newly introduced reporting requirements, particularly related to PPP adjustments. While the requirements for providing reasonable assurance and reporting on value chains begin in the following years on a staggered basis, companies need to prepare for a more intense exercise and thoroughly evaluate their control environment. Audit teams are expected to play a crucial role in driving compliance with the reasonable assurance requirements.
In conclusion, India's commitment to corporate sustainability reporting through BRSR Core signifies a significant step towards fostering responsible business practices and transparency among listed companies. By aligning with measurable ESG metrics and reinforcing assurance mechanisms, India seeks to promote a more sustainable and accountable corporate landscape.
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