BRSR filings: Not mere disclosures

It should be used to improve ESG parameters, analyse vulnerability, and build appropriate tools for supervision and regulation

The current year marks the first year of mandatory reporting under the Business Responsibility and Sustainability Report (BRSR) for India’s top 1,000 listed companies by market cap. This was a significant decision made by the Securities and Exchange Board of India (Sebi) in 2021, in line with the global thinking on sustainability reporting by corporations. 

The BRSR framework is based on nine principles under the national guidelines on responsible business conduct (NGRBC). It is a broad concept encompassing various environmental, social and governance (ESG) attributes while prescribing detailed reporting formats. With a view to focusing on important sustainability parameters and facilitating comparison across jurisdictions, Sebi has come out with the concept of “BRSR core” this year. This mandates the top 150 listed companies, starting from financial year 2023-24, to file BRSR core reports. These reports comprise key performance indicators related to nine ESG attributes, with the reported data’s accuracy reasonably assured by an independent assurance provider.

Considering that this is the first year of mandatory BRSR filing, and the fact that global sustainability reporting concepts are still evolving, with many learnings to follow, Sebi would be well advised to get an objective and comprehensive study done of the quality of filings made by the companies. The study should critically evaluate whether the disclosures made are objective, quantifiable, and as comparable as possible. It should also satisfy itself that such reporting hasn't merely been a “ticking the box” exercise. 

Sebi’s guidance note on the subject provides for interoperability of BRSR reporting framework with prevalent international frameworks, such as the Global Reporting Initiatives (GRIs), Task Force on Climate-Related Financial Disclosure (TCFD) and Sustainability Accounting Standards Board (SASB) standards. This is crucial for promoting ease of doing business. Some Indian-listed entities also adopt these formats for different reasons, including compliance with foreign investor’s requirements. The study should analyse how well the interoperability is working in practice. 

In June this year, the International Sustainability Standards Board (ISSB) released disclosure standards —IFRS S1 on general sustainability and IFRS S2 on climate change — intended to be a global framework. Sebi, in consultation with industry and other stakeholders, should examine the extent to which these are suitable for adoption in the Indian scenario. 

One of the missing pieces in the BRSR policy is that it is not sector specific. While a sector-agnostic approach was found to be convenient to get the process moving, with a view to having focused disclosures and meaningful comparisons, BRSR reporting requirements and formats need to be made sector specific. For instance, one would look for totally different parameters in BRSR filings of polluting industries like steel, cement, and chemicals, compared to companies in the service sector like banks, and IT software. 

Sebi is yet to come out with guidelines on third-party assurance providers, i.e., their eligibility criteria, mode of accreditation/registration, methodology to be followed and so on.  

Sector-specific BRSR core reporting, with credible third-party assurance, will provide an important and reliable readily available data source, which could be meaningfully used by industry, researchers, academia, and government authorities for analysis, including comparing ESG performance among companies in different sectors. 

The sector-specific BRSR core data under different NGRBC principles could be compared with the prevalent global norms in those areas. This should inspire the domestic industry to meet the best-in-class global practices subject to their capabilities and circumstances. This data would also in a way reflect the progress made by the country in meeting its various international commitments and obligations.

For instance, according to the nationally-determined contributions (NDCs) commitment under the UNFCCC, India has agreed to reduce the greenhouse gas emission intensity of its gross domestic product by 45 per cent by 2030 from the 2005 level, and achieve net zero by 2070. These targets have to be disaggregated at the sectoral level by analysing the global trends and assessing the domestic capabilities and preparedness. Also, a road map for achieving the targets needs to be prescribed, and the progress closely monitored to meet the timelines. 

Take the steel sector, for instance, which has a high carbon footprint and accounts for about 12 per cent of India’s CO2 emissions. Going by the NDC commitments for the steel sector, average CO2 emission intensity of the Indian steel industry was projected to reduce from 3.1 tonne of CO2/tonne of crude steel (tcs) in 2005 to 2.64 tonne/tcs by 2020 and 2.4 tonne/tcs by 2030. 

Total CO2 emissions intensity (Scope 1 & 2) for 2022-23, as reported under BRSR by SAIL, Tata Steel, JSW and JSPL, are 2.5, 2.38, 2.36 and 2.60, respectively.  On an average, the Indian steel sector has an emission intensity of 2.55 tonne of CO2/tcs compared with the global average emission intensity of 1.85 tonne CO2/tcs. Though the Indian average appears to be broadly in line with its NDC road map, it is 38 per cent higher than the global average.

Monitoring the carbon footprint is just one example. The disclosure of the quantity of water withdrawal by source by the company is yet another crucial information, which needs to be closely monitored, as we are fast emerging as a water scarce country. So is the disclosure about pollutants (SOx, NOx, SPM, etc.) considering that many of our cities are in the list of the most polluted cities in the world.  

While the above are some illustrations under the “environmental” pillar of BRSR, there are several similar areas under the social and governance pillars. One of the NGRBC principles relates to human rights. Another one pertains to integrity, ethics, transparency and accountability in businesses, which includes the disclosure of the anti-corruption policy of the company. India is a member of the UN convention against corruption and is obligated to implement the provisions therein. Then, there is a principle seeking disclosure of information about social impact assessments of projects undertaken by the company and rehabilitation and resettlement details.

In conclusion, BRSR filings by listed companies are not mere disclosures. They bring significant data of these companies in the public domain, which should be gainfully used to improve various ESG parameters, adopt best-in-class global practices, analyse vulnerability, build appropriate tools for supervision and regulation, and help the country in monitoring its compliance with various international commitments and obligations.

 The writers are, respectively, distinguished fellow at ORF and former chairman, Sebi, and professor at NISM