India’s top 1000 listed companies by market capitalization are required to prepare and submit a Business Responsibility and Sustainability Report (BRSR) to the Ministry of Corporate Affairs (MCA) starting with the financial year 2022-23. The submission will be through the MCA21 portal – the MCA’s e-governance application. Filing a BRSR was voluntary for the financial year 2021-22.
From BRR to BRSR
The Business Responsibility and Sustainability Report replaces the Business Responsibility Report (BRR), which the Securities and Exchange Board of India (SEBI) mandated in 2012 for the top 100 listed companies by market capitalization. Companies were to file the BRR based on the National Voluntary Guidelines (NVGs) released by the Ministry of Corporate Affairs (MCA) in 2009. In 2015, the BRR requirement was extended to the top 500 Indian listed companies, and in 2019, it was extended to the top 1,000 companies.
In November 2018, the MCA set up a committee to study reporting formats for listed and unlisted Indian companies in accordance with the National Guidelines for Responsible Business Conduct (NGRBC). In its report, the committee recommended that the BRR include ESG disclosures and be named the Business Responsibility and Sustainability Report (BRSR).
ESG – In Brief
ESG stands for Environmental, Social, and Governance. ESG disclosures are aimed at providing regulatory agencies, investors, and other stakeholders with information about the non-financial aspects of business activity. Companies use various sustainability or ESG frameworks to compile information about their interactions with the environment and society in which they operate. Some of the more popular sustainability frameworks are those by the Task Force on Climate-Related Financial Disclosures (TCFD), Sustainability Accounting Standards Board (SASB), Global Reporting Initiative, and the Integrated Reporting <IR> framework developed by the International Integrated Reporting Council (IIRC).
The SEBI has said that Indian listed entities already making sustainability disclosures based on internationally-accepted frameworks such as the ones mentioned above “may cross-reference the disclosures made under such (a) framework to the disclosures sought under the BRSR”.
ESG Disclosure Requirements in other Jurisdictions
US Climate Change Disclosure Rules: The Securities and Exchange Commission (SEC) on March 21, 2022, proposed rules for public companies to disclose climate-risk information in their filings with the regulator. Public consultation on the proposal ended on June 17, 2022. Until this point, sustainability disclosure in the US has been largely voluntary. It is expected that the SEC will adopt the climate-related disclosure rules by the end of 2022.
EU Sustainability Disclosure Regime: Reporting in accordance with the Corporate Sustainability Reporting Directive (CSRD) covering close to 50,000 EU companies will come into effect from January 2024. The CSRD replaces the Non-financial Reporting Directive (NFRD), which covered only about 12,000 EU companies.
UK Large Companies’ TCFD Reporting: The largest UK companies have started making sustainability disclosures using the Task Force on Climate-Related Financial Disclosures (TCFD) framework from April 2022.
China’s First ESG Disclosure Standard: Chinese companies began to make sustainability disclosures in accordance with a Guidance for Enterprise ESG Disclosure starting June 1, 2022. The Guidance was developed by the China Enterprise Reform and Development Society (CERDS) in collaboration with various other stakeholders. Disclosures differ based on the company types and sizes.
Differences between the BRR and BRSR Regimes
|Business Responsibility Report
|Business Responsibility & Sustainability Report
|Applies to the top 1,000 Indian companies by market capitalization
|Applies to the top 1,000 Indian companies by market capitalization. will apply to all listed and unlisted companies in the future
|Requires disclosure in annual reports
|Requires disclosure in annual reports as well as the MCA21 portal in eXtensible Business Reporting Language (XBRL) format
|Requires qualitative disclosures only
|Requires qualitative as well as quantitative disclosures
|A single template applies to all companies
|Companies that do not have prior experience filing a BRR may furnish a ‘BRSR lite’
Sections of a Business Responsibility and Sustainability Report
Section A: General Disclosures
- Details of the listed entity such as its Corporate Identity Number (CIN), name, year of incorporation, registered office address, and corporate address.
- Details about the entity’s Products and Services such as business activities that account for 90% of the turnover, and products and services sold by the entity accounting for 90% of its turnover.
- Details about the entity’s Operations such as the number of locations where its plants and/or operations/offices are situated. This also includes the markets served by the entity, its customers, and the contribution of exports as a percentage of its total turnover.
- Details about Employees such as the total number of employees and workers at the end of a financial year; the number of differently-abled employees and workers; the participation, inclusion, and representation of women; and the turnover rate for permanent employees and workers.
- Details about Holding, Subsidiary, and Associate Companies, including joint ventures.
- Details about Corporate Social Responsibility such as whether CSR is applicable per section 135 of Companies Act, 2013; turnover and net worth in rupees.
- The Entity’s Transparency and Disclosures Compliances such as complaints or grievances on any of the nine principles under the National Guidelines on Responsible Business Conduct and an overview of the entity’s material responsible business conduct issues.
Section B: Management and Process Disclosures
This section includes details on the entities and Governance, Leadership, and Oversight.
- Do your entity’s policies cover each principle and core element of the NGRBCs? Has your Board approved the policies? Web link of the policies, if available.
- Has your entity translated the policies into procedures?
- Do the policies extend to your value chain partners?
- Names of the national and international codes, certifications, labels, and standards your entity has adopted and mapped to each principle. These codes or labels could be of the Forest Stewardship Council, Fairtrade, Rainforest Alliance, etc., while the standards could be SA 8000, OHSAS, ISO, or BIS.
- Specific commitments, goals, and targets that the entity has set with defined timelines.
- The entity’s performance against the specific commitments, goals, and targets, along with the reasons for possibly not meeting them.
Governance, Leadership, and Oversight:
- Statement of the director responsible for the business responsibility report, highlighting the ESG-related challenges, targets, and achievements.
- Details of the highest authority responsible for the implementation and oversight of the Business Responsibility policy or policies.
- Does the entity have a specified Committee of the Board or a Director responsible for decision-making on sustainability-related issues? If yes, what are the details?
- Details of the entity’s review of the NGRBCs.
- Has the entity carrying out an independent assessment or evaluation of the working of its policies by an external agency? If yes, the entity must provide the name of the agency.
Section C: Principle-wise Performance Disclosure
We mention the nine principles of the National Guidelines for Responsible Business Conduct below. Each of these principles is further divided into Essential Indicators and Leadership Indicators. It is mandatory for companies to report their performance on the Essential Indicators. They may voluntarily disclose their performance on the Leadership Indicators.
The Nine NGRBC Principles:
- Businesses should conduct and govern themselves with integrity, and in a manner that is ethical, transparent, and accountable.
- Businesses should provide goods and services in a manner that is sustainable and safe.
- Businesses should respect and promote the well-being of all employees, including those in their value chains.
- Businesses should respect the interests of and be responsive to all their stakeholders.
- Businesses should respect and promote human rights.
- Businesses should respect and make efforts to protect and restore the environment.
- Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent.
- Businesses should promote inclusive growth and equitable development.
- Businesses should engage with and provide value to their consumers in a responsible manner.
How Companies can Comply with the BRSR Requirement
Companies intending to file a BRSR because they belong to the top 1,000 listed companies by market cap or because they voluntarily want to do so can follow this four-step process.
Understand the New Format with Expert Assistance: The first step for companies would be to understand what is expected of a BRSR document. A SEBI circular dated May 10, 2021, mentions the basic requirements, with more detailed information available in Annexure I and Annexure II. Companies may use expert assistance to understand BRSR requirements and the filing format.
Prepare a Reporting Timeline for Efficient Compliance: The second step in the process would be to prepare a compliance timeline and work accordingly. A timetable is an absolute necessity when multiple teams are involved in the disclosure process. The senior management and sustainability reporting teams might have to collaborate to formulate business responsibility disclosures.
Get a Technology Provider’s Assistance for XBRL Reporting: XBRL report creation is a technical process that companies’ in-house compliance teams cannot handle by themselves. Companies need to choose XBRL reporting software or service providers and rely on their technical expertise. XBRL is a machine-readable format that makes reports more accessible, easier to analyze, and comparable.
Follow the Lead of Companies that have Already Filed a BRSR: Companies preparing BRSR documents for the first time can refer to the reports of companies that have already complied with the requirement. Here are the BRSR documents of Tata Power and HDFC.