ESG Compliance Services
Introduction to ESG and BRSR Reporting
Environmental, Social, and Governance (ESG) factors are increasingly important for investors and stakeholders. In India, the Business Responsibility and Sustainability Reporting (BRSR) framework provides guidance for companies on ESG reporting.
Why is Sustainability Important?
United Nations Sustainability Development Goals
Sustainability and Business
Sustainability is about Integrating Environment, Social and Governance related factors into business decision
Key is to identify and break down to structured and manageable elements/sub elements ‘material’ to the stakeholders, sector, industry, geography and business
What is ESG?
Environmental, Social, and Governance (ESG) factors are a set of standards that investors and stakeholders are increasingly using to evaluate a company’s sustainability and societal impact. The environmental aspect of ESG encompasses a company’s impact on the natural environment, including its greenhouse gas emissions, resource usage, waste management, and environmental policies and initiatives. This helps assess a company’s environmental stewardship and its efforts to mitigate its ecological footprint.
The social component of ESG examines a company’s relationships and treatment of its employees, customers, suppliers, and the communities in which it operates. This includes labor practices, workplace safety, diversity and inclusion, human rights policies, and community engagement programs. Strong social performance can indicate a company’s commitment to ethical and responsible business practices.
The governance aspect of ESG focuses on a company’s leadership, executive compensation, audits, internal controls, and shareholder rights. Effective corporate governance structures and practices help ensure transparency, accountability, and ethical decision-making, which are crucial for building stakeholder trust and long-term sustainability.
Environmental
ESG encompasses a company’s impact on the environment, including emissions, resource use, and waste management.
Social
It examines a company’s social responsibility, including labor practices, human rights, and community engagement.
Governance
ESG includes the company’s corporate governance practices, such as board composition, executive compensation, and transparency.
Key Elements of ESG
| Environmental Elements | |
|---|---|
| Climate Change | Natural Resources |
| GHG Emissions | Hazardous & Non-Hazardous Waste |
| Water Footprint | Toxic Emissions |
| Biodiversity & Land Use | Raw Material Sourcing |
| Social Elements | |
|---|---|
| Human Capital | Labour Management |
| Health & Safety | Supply Chain Management |
| Chemical Safety | Stakeholder Dialogue |
| Community Development | |
| Governance Elements | |
|---|---|
| Corporate Governance | Anti-Corruption |
| Anti-competitive Behavior | Diversity |
| Equal Wages | Code of Conduct |
| Prevention of Sexual Harassment | Non- discrimination |
Environmental Factors in ESG
Climate Change Mitigation
Companies are increasingly focusing on reducing their carbon footprint and investing in renewable energy sources
Resource Conservation
ESG reporting involves evaluating how companies manage their water, energy, and material use to minimize waste and maximize efficiency
Pollution Control
Companies are expected to adopt sustainable practices to minimize their environmental impact and comply with pollution regulations.
Sustainable Operations
ESG principles promote the use of eco-friendly technologies and materials in product design and manufacturing processes.
Social Factors in ESG for Indian Companies
The social component of ESG reporting examines how Indian companies manage their relationships and impact on employees, customers, suppliers, and local communities. This includes evaluating labor practices, workplace safety, diversity and inclusion policies, human rights protections, and community development initiatives.
In India, the Companies Act mandates that certain large corporations spend at least 2% of their profits on Corporate Social Responsibility (CSR) activities, which are now integrated into ESG disclosures. This helps assess a company’s commitment to ethical and responsible business practices that benefit society.
Effective management of social factors is crucial for maintaining a company’s social license to operate, strengthening stakeholder relationships, and contributing to long-term business sustainability in the Indian market.
Governance Factors in ESG
Governance factors in ESG encompass the leadership, structure, and practices that ensure transparency and accountability within a company. Strong corporate governance promotes ethical behavior, risk management, and compliance with relevant regulations. Key aspects include board composition and independence, shareholder rights, executive compensation, and anti-corruption measures.
An effective governance structure is crucial for driving sustainable business practices and safeguarding the interests of all stakeholders. A diverse and independent board of directors, with the right mix of skills and experience, can provide robust oversight and strategic guidance. Policies around executive remuneration, whistleblowing, and political lobbying help to align management incentives with long-term value creation and deter unethical conduct.
Transparent disclosure of financial and non-financial information, including the company’s environmental and social impacts, is another important governance factor. This enables investors, regulators, and the public to hold the company accountable for its actions and performance. By prioritizing good governance, companies can enhance their reputation, attract investment, and create sustainable value for their shareholders and the communities they serve.
Importance of ESG Reporting
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Investor Confidence
ESG reporting enhances transparency and accountability, building trust with investors and stakeholders.
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Risk Management
ESG reporting helps organizations identify and mitigate environmental, social, and governance risks.
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Competitive Advantage
Strong ESG performance can attract investors, customers, and talent, providing a competitive edge
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Improved Operations
ESG reporting promotes sustainable practices, leading to operational efficiency and cost savings
BRSR Reporting Roadmap
Business Responsibility and Sustainability Reporting (BRSR) is a reporting framework under which the top 1000 listed companies (by market capitalisation) are mandated to disclose their ESG performance in a quantitative and standardised format from FY 2022–23 onwards.
The obligated entities were initially encouraged to adopt the BRSR framework voluntarily in FY 2021–22.
To further strengthen the BRSR framework and enhance the reliability of ESG disclosures, SEBI introduced BRSR Core in 2023.
This is a subset of BRSR and requires disclosure of a company’s performance against nine ESG attributes. Each attribute comprises select key performance indicators. It is a more stringent approach to sustainability reporting than BRSR as the disclosures under BRSR Core require reasonable assurance. Reasonable assurance refers to getting affirmation from a third party (assurance provider/auditor) that the information provided is correct. It ensures that the disclosures are reliable and credible, enhancing investor confidence in them. In addition to complying with BRSR, the top 150 companies (by market capitalisation) are mandated to report their sustainability performance in the BRSR Core format from FY 2023–24. The applicability of BRSR Core will gradually increase from 150 companies in FY 2023–24 to 1000 by FY 2026–27.
In addition, the top 250 listed companies are mandated to disclose the ESG footprint of their value chain from FY 2024–25 and obtain assurance through third-party auditors on a comply-or-explain basis from FY 2025–26*.
Overview of BRSR Reporting in India
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Framework
The Business Responsibility and Sustainability Reporting (BRSR) framework was introduced by the Ministry of Corporate Affairs (MCA) in India.
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Objective
It aims to promote sustainability reporting by Indian companies.
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Scope
Applies to certain listed companies and large unlisted companies.
The BRSR framework aligns with the principles of ESG reporting and incorporates a set of disclosures covering environmental, social, and governance aspects.
It provides a comprehensive framework for companies to report on their sustainability performance and practices. The framework is designed to enhance transparency and accountability in corporate sustainability practices.
Key BRSR Reporting Requirements for Large Indian Corporations
1. Applicability to Top 1,000 Listed Companies
The Business Responsibility and Sustainability Reporting (BRSR) framework mandates sustainability disclosure for the top 1,000 listed companies in India, ranked by market capitalization. This ensures that the largest and most influential corporations, which have a significant environmental and social impact, are required to report on their ESG performance and initiatives.
2. Comprehensive ESG Disclosures
The BRSR framework requires companies to provide detailed information on a wide range of environmental, social, and governance (ESG) factors. This includes disclosures on energy and water consumption, greenhouse gas emissions, workforce diversity, employee training, board composition, anticorruption policies, and supplier sustainability practices, among other key metrics.
3. Annual Reporting Cycle
BRSR reporting is mandated on an annual basis, aligned with the company’s fiscal year. This ensures that stakeholders have access to up-to-date, consistent, and comparable ESG data, enabling them to track the progress and sustainability performance of these major corporations over time.
4. Standardized Reporting Format
The BRSR framework prescribes a detailed and standardized reporting format to be followed by companies. This standardization promotes transparency, enhances comparability across sectors, and makes it easier for investors, regulators, and the public to assess the sustainability efforts of these large Indian enterprises
Structure of BRSR
The disclosures under BRSR are divided into three sections
Essential Indicators (mandatory) –
KPIs include data on training programmes conducted, environmental data on energy, emissions, water and waste, social impact generated by the company, etc.
Leadership Indicators (voluntary) –
Companies are expected to comply with these indicators for better accountability and responsible purpose. Some of the KPIs include data on life cycle assessments (LCAs), details on conflict management policy, additional data on biodiversity, breakup of energy consumption, Scope 3 emissions and supply chain disclosures.
NGRBC Principles as basis for BRSR
P1. Integrity, ethics, transparency and accountability
- Bribery & corruption related policy/cases
- Fines/penalties & corrective actions taken
- Awareness programs for Board & value chain partners
P2. Safe & sustainable provision of goods & services
- R&D and Capex investments
- Life Cycle Assessments (LCA)
- Extended Producer Responsibility (EPR)
P3. Employee and value chain partner well-being
- Benefits for employee & worker well-being
- Grievance Management
- Employee training
- Value Chain Partners assessment
P4. Respecting the interests of all its stakeholders
- Stakeholder identification
- Materiality assessment
- Engagement with vulnerable/ marginalized stakeholder groups
P5. Promotion of human rights
- Human rights policies, training & assessment
- Complaints and prevention mechanisms on human right issues
P6. Protection and restoration of the environment
- Energy consumption and GHG emissions
- Environmental compliances & audit
- Air, water and waste management
- Consumer complaints Impact on biodiversity
P7. Transparent policies and engagement with public
- Trade & industry chambers/ associations
- Details of public policy positions
- Corrective actions for anti-competitive conduct
P8. Inclusive growth and equitable development
- Social Impact Assessments (SIA)
- CSR projects and spend
- Local sourcing of raw materials
P9. Responsible value provision to the consumers
- Mechanism for redressal
- Product recall
- Cyber-security and data privacy
Key Fundamentals of BRSR Reporting
Materiality
The BRSR framework emphasizes materiality, requiring companies to disclose information that is relevant and significant to their key stakeholders and sustainability performance. This ensures the reporting focuses on the crucial ESG issues that have the greatest impact on the business and its stakeholders, enabling more informed decisionmaking.
Transparency
BRSR promotes a high level of transparency in corporate reporting. Companies are required to provide clear, comprehensive, and accurate disclosures on their environmental, social, and governance practices. This allows stakeholders, including investors, customers, and communities, to understand the company’s sustainability approach and performance in a meaningful way
Accountability
The BRSR framework holds companies accountable for their ESG impacts and performance. By mandating detailed reporting, companies are encouraged to take responsibility for their actions, implement robust sustainability strategies, and continuously strive to improve their environmental, social, and governance practices over time.
Comparability
The standardized BRSR reporting format allows for greater comparability of ESG performance across companies and industries. This enables stakeholders, particularly investors, to assess and compare the relative sustainability performance of different organizations, driving industry-wide progress and the adoption of best practices.
Alignment of BRSR with Global ESG Standards
Alignment with TCFD, GRI, and SASB
The BRSR framework is closely aligned with leading international ESG reporting standards such as the Task Force on Climate-Related Financial Disclosures (TCFD), the Global Reporting Initiative (GRI), and the Sustainability Accounting Standards Board (SASB). This allows Indian companies to seamlessly meet global sustainability reporting requirements.
Enhanced Transparency and Accountability
By adhering to the BRSR framework, which is modeled on global best practices, Indian companies can demonstrate transparent and accountable ESG disclosures. This enables stakeholders, especially international investors, to assess the company’s sustainability performance against robust global benchmarks.
Access to Global Capital Markets
The alignment of BRSR with prominent global ESG standards instills confidence in international investors, facilitating access to a wider pool of sustainable capital. This helps Indian companies attract foreign investment and strengthen their position in global financial markets.
Key Benefits of BRSR Reporting for Indian Companies
Transparent ESG Disclosures
BRSR reporting requires Indian companies to provide comprehensive and transparent disclosures on their environmental, social, and governance (ESG) performance. This builds trust with investors, customers, and other stakeholders by demonstrating the company’s commitment to sustainability.
Improved Risk Management
The BRSR framework helps companies identify, assess, and mitigate key ESG risks, such as climate change impacts, resource scarcity, and human rights issues. This proactive approach strengthens the company’s resilience and long-term sustainability.
Enhanced Access to Capital
Investors, both domestic and global, are increasingly prioritizing sustainable investments. Strong BRSR reporting can demonstrate a company’s commitment to ESG, making it more attractive to these sustainability-focused investors and unlocking new sources of funding.
Competitive Advantage
By proactively adopting BRSR reporting, Indian companies can differentiate themselves from competitors, showcasing their leadership in corporate sustainability. This can enhance their brand reputation, customer loyalty, and overall market position.
Improving BRSR Reporting
Robust Data Management
Implement comprehensive data collection procedures, including cross-verifying information from multiple sources and applying rigorous quality assurance measures. This ensures the accuracy and reliability of the ESG data reported in the BRSR.
Transparency in BRSR Reporting
Clearly explain the methodologies used for data collection, estimation, and analysis in the BRSR report. Provide detailed information on the assumptions, limitations, and uncertainties involved to demonstrate an unwavering commitment to transparent and truthful disclosure
Effective BRSR Reporting
Present the BRSR report in a clear, concise, and visually appealing format. Use simple language, industry-relevant indicators, and appropriate visual aids to make the information easily understandable and impactful for a wide range of stakeholders
Alignment with Global ESG Standards
Ensure that the BRSR reporting process and disclosures are aligned with recognized global ESG standards and best practices, such as the GRI, SASB, or TCFD frameworks. This will strengthen the credibility of the company’s sustainability efforts and demonstrate its commitment to transparent and responsible corporate governance
Emerging Trends in ESG and BRSR Reporting
As sustainability and good corporate governance become increasingly important to stakeholders, companies must stay agile and adapt their ESG and BRSR reporting practices to align with evolving expectations and regulatory requirements. Those that proactively embrace these emerging trends will be better positioned to build trust, access capital, and drive long-term value.
BRSR Reporting for SMEs in India
The Business Responsibility and Sustainability Report (BRSR) is a crucial reporting framework that aims to promote responsible and sustainable business practices among India’s top 1000 listed companies. However, there is a growing emphasis on extending these BRSR reporting requirements to the broader Small and Medium Enterprise (SME) sector.
SMEs are the backbone of the Indian economy, accounting for over 30% of the GDP and providing employment to millions. Integrating BRSR reporting into the SME ecosystem can have a transformative impact, driving sustainable development, enhancing transparency, and fostering better stakeholder engagement.
For SMEs, BRSR reporting can help identify and mitigate ESG-related risks, unlock new market opportunities, and demonstrate their commitment to sustainability. It can also strengthen their relationships with investors, customers, and partners who are increasingly prioritizing environmental and social responsibility.
However, implementing BRSR reporting can pose unique challenges for SMEs, such as limited resources, lack of technical expertise, and hesitation to disclose sensitive information. To address these barriers, policymakers and industry bodies must provide SMEs with tailored guidance, capacitybuilding programs, and financial incentives to adopt BRSR reporting.
By embracing BRSR reporting, India’s vibrant SME sector can not only enhance its own sustainability and competitiveness but also contribute to the country’s overall sustainable development goals. This transition will be crucial in ensuring that the benefits of responsible business practices extend to all corners of the Indian economyAs sustainability and good corporate governance become increasingly important to stakeholders, companies must stay agile and adapt their ESG and BRSR reporting practices to align with evolving expectations and regulatory requirements. Those that proactively embrace these emerging trends will be better positioned to build trust, access capital, and drive long-term value.