Over the past decade, there has been a dramatic increase in the number of countries that mandate yearly disclosures to include information about environmental, social, and governance (ESG) factors.
What is BRSR?
In response to these worldwide shifts, the Securities and Exchange Board of India (SEBI) has implemented new mandates for sustainability reporting by listed businesses. Business Financial Results and Environmental, Social, and Governance (ESG) Performance is Linked in a New Reporting Format Called “Business Responsibility and Sustainability Report” This can help government agencies, investors, and other stakeholders get a more accurate picture of a company’s long-term viability, growth potential, and sustainability (hitherto based on financial disclosures alone). For FY2021-22, SEBI has mandated optional BRSR reporting by the top 1,000 listed businesses (by market capitalization), with mandatory reporting beginning in FY2022.
Background of BRSR:
India is an early adopter of sustainability reporting for listed firms. With stricter regulations and market reforms, India wants enterprises to be environmentally and socially responsible. In recent years, regulators have prioritised complete corporate disclosures beyond financial disclosures. In 2012, the Securities and Exchange Board of India (SEBI) required the top 100 listed entities by market capitalization to file Business Responsibility Reports (BRR) as part of their annual reports to comply with the “National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business” (NVGs). In 2015, the top 500 listed businesses by market capitalization have to file BRRs, and in 2019, the top 1000. After SEBI’s 2017 soft law on top 500 listed businesses’ voluntary adoption of integrated reporting, market-driven integrated reporting has grown.
The new National Guidelines on Responsible Business Conduct were announced in March 2019. (NGRBCs). In 2020, the Ministry of Corporate Affairs Committee on Business Responsibility Reporting suggested renaming the Business Responsibility Report to the Business Responsibility and Sustainability Report (BRSR) to better represent the reporting requirements. In May 2021, SEBI established the Business Responsibility and Sustainability Report (BRSR) for listed businesses to provide quantitative, qualitative, and standardised ESG disclosures. The BRSR departs from the BRR and moves sustainability reporting closer to financial reporting.
BRSR framework:
The BRSR framework is based on the 9 principles of the NGRBC, which include: being ethical, transparent, and accountable; providing goods and services in a sustainable manner; protecting the environment and keeping in mind sustainable production; being responsive to all stakeholders; promoting human rights; complying with the regulations; and ensuring the well-being of employees (including those in their value chains). Information on each of these tenets is gathered from companies using the BRSR framework.
All relevant information about environmental, social, and governance (ESG) factors is required to be disclosed by companies using the BRSR framework. Environment and social elements are analysed for their potential risks and possibilities, as well as the leadership’s interpretation of those risks and opportunities, plans to reduce and adapt to those risks and chances, and the financial repercussions of those actions.
To further understand the BRSR architecture, we can break it down into its three distinct parts. Specific disclosures, disclosures on management and process, and disclosures regarding performance according to guiding principles.
The new National Guidelines on Responsible Business Conduct were announced in March 2019. (NGRBCs). In 2020, the Ministry of Corporate Affairs Committee on Business Responsibility Reporting suggested renaming the Business Responsibility Report to the Business Responsibility and Sustainability Report (BRSR) to better represent the reporting requirements. In May 2021, SEBI established the Business Responsibility and Sustainability Report (BRSR) for listed businesses to provide quantitative, qualitative, and standardised ESG disclosures. The BRSR departs from the BRR and moves sustainability reporting closer to financial reporting:
Section A: General Disclosures:
Companies are obligated by the general disclosures to report information comprising the following types of information:
Company’s Identity
Operations
Stakeholder Engagement
Section B: Management and Process Disclosure:
Information on the organisational framework, policies, and procedures for implementing NGRBC principles and key aspects must be made public. It features a statement from the director responsible for the business responsibility report that emphasises risks, targets, and milestones linked to ESG issues and includes information about governance, leadership, and supervision.
Sector 3: Principle-wise Performance Disclosures:
Business information relevant to the aforementioned nine principles is gathered using the BRSR framework. Environmental and social responsibility are central to the principles, which outline how a company should operate.
The questions have been divided into two types:
Essential indicators (mandatory)
Leadership indicators (voluntary)
The nine principals of NGRBC:
Principle 1: Businesses should conduct and govern themselves with integrity and in a manner that is ethical, transparent and accountable.
The principle promotes ethical behaviour across all operations, functions, and processes, serving as the foundation for businesses in governing their economic, social, and environmental responsibilities. It recognizes that businesses are integral to society and must be accountable for effectively adopting, implementing, and disclosing their performance.
Principle 2: Businesses should provide goods and service in a manner that is sustainable and safe.
The principle emphasizes that businesses should prioritize safety and resource efficiency in product design and manufacturing, ensuring value creation while minimizing environmental and societal impacts throughout their life cycle, and recognizing all material sustainability issues related to their product life cycle and value chain.
Principle 3: Businesses should respect and promote the well-being of all employees, including those in their value chains.
The principle includes all policies and practices aimed at promoting equity, dignity, and well-being, ensuring decent work for every employee involved in a business or its value chain, without discrimination and while fostering diversity. It also emphasizes the importance of employee well-being and the welfare of their families.
Principle 4: Businesses should respect the interests of and be responsive to all its stakeholders.
This principle acknowledges that businesses operate within an ecosystem comprising various stakeholders, such as shareholders and investors, whose activities can affect natural resources, habitats, communities, and the environment. It emphasizes that businesses have a duty to enhance positive impacts while minimizing and mitigating any negative effects of their products, operations, and practices on these stakeholders.
Principle 5: Businesses should respect and promote human rights.
The principle acknowledges that human rights are inherent and should be upheld without discrimination, and is in line with the Indian Constitution and the International Bill of Rights, emphasizing the State’s primary responsibility to protect and fulfil these rights.
Principle 6: Businesses should respect and make efforts to protect and restore the environment.
The principle emphasizes the interconnectedness of environmental issues at local, regional, and global levels, urging businesses to tackle pollution, biodiversity conservation, sustainable resource use, and climate change. It encourages adopting environmental practices throughout the value chain and adhering to the Precautionary Principle.
Principle 7: Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent.
The principle acknowledges that businesses operate within specific legislative and policy frameworks, allowing them to engage with governments for grievance resolution and influence public policy, while also mandating advocacy aimed at promoting public good.
Principle 8: Businesses should promote inclusive growth and equitable development.
This principle recognizes the social and economic development challenges faced by the country and aligns with national development agendas based on government policies and priorities. This is particularly important in areas affected by social unrest and low human development. It emphasizes the necessity for collaboration among businesses, government agencies, and civil society in pursuing this development agenda.Furthermore, the principle reiterates that business success, inclusive growth, and equitable development are interdependent.
Principle 9: Businesses should engage with and provide value to their consumers in a responsible manner.
The principle suggests that businesses aim to provide safe, competitively priced, user-friendly, and easily disposable products to consumers, creating value for both parties. They respect consumers’ freedom to choose their usage and play a crucial role in mitigating the negative impacts of excessive product consumption on individual and societal well-being.
BRSR Core:
Scope: BRSR Core focuses on key sustainability aspects, while the BRSR Framework is more comprehensive.
Metrics: BRSR Core mandates specific KPIs for reporting performance, while the BRSR Framework offers greater flexibility.
The BRSR Core (Annexure 1) is a subset of the main BRSR form (Annexure 2). It introduces supplementary Key Performance Indicators (KPIs) for enhanced assurance across the supply chain.
The BRSR Core requires information on 9 principles that are further divided into the 3 fundamental pillars of Environmental, Social and Governance.
BRSR Assurance:
BRSR Core, needs to be assurance from any third party certified assurance provider.
The entities should ensure that the assurance of BRSR must have the necessary expertise for undertaking reasonable assurance.
The companies should mandatorily meet the metrics and data under BRSR for getting assurance.
Metrics and data for providing assurance:
How Onlygood can help in BRSR reporting?
Automation of Data Collection: Onlygood enhances the BRSR (Business Responsibility and Sustainability Reporting) process by automating the data ingestion from various departments within the organization. This streamlined approach ensures that data is collected accurately and in a timely manner, minimizing the risk of human error and reducing the administrative burden on staff. By integrating data collection across departments, Onlygood facilitates a more efficient reporting process, enabling businesses to present reliable information that reflects their sustainability efforts and compliance with regulatory requirements. This automation not only saves time but also improves the overall quality and consistency of the data used in BRSR reporting.
Departmental Workflow Integration: The platform integrates effortlessly with existing departmental workflows, enhancing the efficiency of gathering and managing data necessary for BRSR (Business Responsibility and Sustainability Reporting) compliance. By embedding itself into the daily operations of each department, the platform streamlines the process, making it easier for teams to collect relevant information without disrupting their regular activities. This seamless integration minimizes the need for manual data entry and reduces the chances of errors, ultimately leading to a more organized and efficient approach to compliance. As a result, departments can focus on their core responsibilities while ensuring that all necessary data for BRSR reporting is accurately compiled and readily available when needed.
Automated Report Generation: Onlygood facilitates the automatic generation of BRSR (Business Responsibility and Sustainability Reporting) reports, significantly reducing the need for manual efforts typically associated with this process. By leveraging advanced automation technologies, the platform ensures that the generated reports are not only accurate but also fully aligned with the latest reporting standards and regulatory requirements. This automation streamlines the reporting workflow, allowing businesses to produce high-quality reports with greater speed and efficiency.
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