Bhaskar Nath Biswal
Sustainability reporting is gaining momentum worldwide as a significant communication tool for corporate entities to disclose their sustainability plans, concerns and performance to achieve confidence of stakeholders. Although Indian regulatory authorities issued guidelines from time to time, the norms are still not clear as to what to report and how to report.
In its circular issued on May 10, SEBI notified the format of Business Responsibility and Sustainability Report (BRSR) which will be applicable to the top 1000 listed corporate entities by market capitalisation. However, the reporting of BRSR shall be voluntary for FY 2021-22 and mandatory from FY 2022-23. It is a right move taken by the regulator which is expected to bring in greater transparency in the reporting of business entities which enables stakeholders to assess the sustainability related information for identifying risks and opportunities.
Global Reporting Initiative defines a sustainable report as ‘a report published by a company or organisation about the economic, environmental and social impacts caused by its everyday activities. A sustainability report also presents the organisation’s values and governance model, and demonstrates the link between its strategy and its commitment to a sustainable global economy.’
SEBI has taken many steps for sustainability reporting by the corporate world. SEBI mandated transparent disclosing and reporting norms for top 100 listed companies by market capitalisation to submit Business Responsibility Reports (BRR) in 2012 as per the disclosure requirement recommended by the National Voluntary Guidelines (NVGs) on Social, Environmental and Economic Responsibilities of Business. Indian companies gradually paid attention to sustainability and started to establish a clear relation between sustainability and risk management. It has been observed that the triple bottom line elements – planet, people and profits become a part of their internal audit so that the issues are better discussed at the board level. The Ministry of Corporate Affairs revised the NVGs in 2019 and formulated the National Guidelines on Responsible Business Conduct (NGRBC). SEBI extended the BRR requirement to the top 1000 listed entities by market capitalisation, from the financial year 2019-20. By replacing BRR with BRSR the regulator emphasised on quantifiable metrics facilitating measurement and intercompany comparisons. The disclosures of environmental, social, and governance (ESG) goals and a company’s progress towards them will result in enhanced corporate reputation, strengthening stakeholder’s confidence, and better risk management.
How a company manages its waste, controls pollution, ways of energy use, greenhouse emissions, bio-diversity, responsibility of conservation of natural resources, come under the environmental criteria. Social criteria aim at examining the organisation’s relationship with employees, suppliers, creditors, customers, value chain and communities where it operates and how far it fulfilled its aims and objectives. Companies have to disclose gender and social diversity of employees, welfare measures for general and differently-abled employees and occupational safety initiatives. Social Impact Assessment is to be made on the community front. Governance deals with the company’s accounting policy, leadership, management, internal control and opportunities given to the shareholders.
The philosophy of responsible business is to take the above decisions to fulfil the objectives as per the expectations of the society. Apart from providing good returns to the shareholders, the organisations are expected to be responsible and sustainable towards the environment and society.
The COVID-19 pandemic has also highlighted the need for inclusion of ESG considerations in the corporate reporting to create desired awareness among investors for sustainable investing. It will help them in providing required information so as to enable the investor to make a rational and prudent judgement while choosing his investment. Global organisations like the International Monetary Fund (IMF), the Institute of International Finance (IIF), the International Finance Reporting Standards (IFRS) Foundation, the International Organisation of Securities Commissions (IOSCO) are advocating better ESG disclosures by the corporate entities with stress on a common global framework.
SEBI’s BRSR format is a right start for the India Inc. to initiate ESG based disclosure with materiality indicators and measurements. It is a significant step towards bringing the sustainable reporting at par with the financial reporting which enables investors to have access to standardised disclosures on ESG parameters. Finally, the standard ESG disclosures will help in more transparency for the organisations and attract more investment of capital.
The writer is Head, Department of Commerce, Nowrangpur College, Nabarangpur.
