A committee appointed by the Ministry of Corporate Affairs (MCA) has made a case for developing sector-specific Business Responsibility and Sustainability Reporting (BRSR) formats in the coming days.

This can help assess a sector on the social and environmental performance front, the panel said in its report made public few days ago. Sustainability reporting has gathered pace in India in recent years, especially after SEBI mandated top-listed companies by market capitalisation to come up with Business Responsibility reports as part of their annual financial statements.

The MCA Panel has pointed out that the BRSR formats proposed in the report were “generic” in nature and that they cut across all business sectors. There may therefore be some questions that may be less relevant to some sectors while there may be others that need to be added for other sectors, said the panel headed by MCA Joint Secretary Gyaneshwar Kumar Singh.

The committee hopes that as non financial/sustainability disclosures grow in eminence, this information would be used by banks, credit rating agencies and other financial institutions, along with financial information to assess credibility of a company/business.

The panel has recommended that the disclosures under BRSR formats may be made effective from the financial year 2021-22 so that time is available for adaptation. A five-year time period may be explored for phasing the implementation to cover all companies gradually, it added.

Sanjeev Singhal, Partner, SR Batliboi and Co LLP, told Businessline that, “Sector-specific sustainability formats are limited mainly to the US. In other jurisdictions, sustainability reports are common for all industries. If sector-specific formats are issued, it may impact the availability of resources and lead to higher cost of compliance. Further, in most of the jurisdictions, accounting and auditing standards are also industry agnostic and that has worked well.”

Ashok Haldia, former Secretary of the CA Institute, said that economic, social, environmental and governance aspects of sustainability are industry specific as well and have wider and deeper impact. “Their assessment, monitoring and reporting is vital. It is high time that BRSR moves to next level to also report sector specific relevant aspects based on stakeholder consultations,” he said.

Madhu Sudan Kankani, Partner, Deloitte India, said that “ Investors and other stakeholders today expect the companies to deliver beyond profits and also lay emphasis on inclusion, climate change and community development. The MCA panel recommendations thus rightly encourages the companies to focus on sustainable growth and development of the entire eco-system. A wider application of sustainability reporting by both listed and unlisted companies in a phased manner will bring more emphasis on the subject”.

Local languages

Going forward, the BRSR formats may be translated into local languages to ensure that it is comprehensible to all stakeholders of the company and does not become an esoteric activity restricted to specific departments within the organisation, the Panel has suggested.

The panel has also recommended that the proposed BRSR formats should be reviewed after three years. “Three years is a reasonable time period to observe it in operation and deduce learnings from it. Any substantive changes to the National Guidelines on Responsible Business Conduct (NGRBC) should also trigger a review of the BRSR formats,” the panel said.