India has witnessed continuous improvement in corporate disclosures in the past decade, with these disclosures being made available to investors and public at large. These efforts have nudged businesses to be accountable to stakeholders instead of just shareholders, and simultaneously align with global developments prompting organisations to be sustainable and responsible towards their environment and society.

In India, the evolution of business responsibility goes back to 2009 with the issuance of corporate governance voluntary guidelines followed by a notification on mandatory filing of Business Responsibility Report (BRR) for top 100 companies by market capitalisation. This led to qualitative disclosure requirements for social, environmental, and economical responsibilities of businesses, followed by quantitative disclosures based on materiality.

The transition from BRR to Business Responsibility and Sustainability Report (BRSR) will bring maturity to the disclosure requirements, which would also be in sync with global expectations.

What will change with BRSR?

The new reporting aims to establish linkages between financial results of business with its Environmental, Social, and Governance (ESG) performance. This made it easier for regulators and investors, and allied stakeholders to obtain a fair estimate of overall stability and growth of business (earlier based on financial disclosures alone).

Such disclosures will make it easier for even a retail investor to understand if the company’s future growth is based on sustainable products or services with long-term demand and minimal regulatory or societal pressures. For instance, if an automobile sector player with a significant market share were to rely on existing technologies without making investments in future technologies, investors could identify this as a long-term investment risk.

Disclosures around patents will further improve confidence amongst stakeholders that the business may introduce new offerings in the near future, resulting in potential for increased investment opportunities and stable stock prices.

BRSR requirements are also expected to provide adequate flexibility for developing cross-linkages with internationally accepted reporting frameworks, such as Task Force on Climate Related Financial Disclosures (TCFD), Sustainability Accounting Standards Board (SASB), and Global Reporting Initiative (GRI). This makes it easier for companies to give consistent representations across frameworks, resulting in improved trust amongst stakeholders.

The BRSR notification followed by disclosures will bring several companies that are not making any structured ESG disclosures on the radar of ESG rating agencies. A higher ESG rating can help enable better access to capital required for business growth.

BRSR has been introduced and notified keeping in mind future requirements. The current disclosure ecosystem offers limited opportunities to review a company’s historical performance and draw a comparison amongst companies for specific disclosures or ESG performance indicators. To standardise information availability, BRSR has introduced uploading of the BRSR disclosure on the Ministry of Corporate Affairs portal.

Companies looking to transition to BRSR ahead of the mandatory disclosure timeline should examine sections of the BRSR template and identify material aspects to their businesses. This will help them understand various interlinkages between financial and non-financial performance and how the disclosures would be read, analysed, and interpreted. Businesses should know that a digital history of their submissions and representation will now be available on the MCA portal. Thus, sanitised, correct, and verified data should be uploaded.

With BRSR, businesses in India are expected to reach a higher disclosure level in their quest to be socially, environmentally and ethically responsible.

Nikhil is Partner and Leader, and Inderjeet is Director, Forensic − Financial Advisory, Deloitte India

Related Topics
comment COMMENT NOW