Could India’s new Business Responsibility and Sustainability Report framework provide the quantitative measures investors have been looking for?


Rajesh Sehgal


As the world focuses on Environmental, Social and Governance (ESG) factors and finding a path to a sustainable future, investors are adapting and seeking to understand the significance of sustainable development to their portfolios as businesses seek to be responsible and sustainable towards the environment and society. While it is easy to talk about the qualitative aspects of making progress, the one area ESG and impact investing have underperformed in is measuring output quantitatively.

Investors, after all, are quantitative people looking to measure each aspect of a business. They must drill down and focus on finding key areas that matter, and the performance indicators that can be used as a benchmark to assess them. Reporting of a company’s performance on sustainability-related factors has become as vital as reporting on financial and operational performance. Quantitative metrics therefore help them judge whether businesses are truly living up to their ESG and Corporate Social Responsibility (CSR) values or whether it is drivel meant to satisfy the earnest.

The new Business Responsibility and Sustainability Report (BRSR) framework in India seeks to address these deficiencies by requiring companies to drill down and actually measure each factor if they are to satisfy investors. 

Where we’ve come from

ESG reporting in India started in 2009, with the Ministry of Corporate Affairs (MCA) issuing the voluntary guidelines on CSR in the form of National Voluntary Guidelines (NVG). Since then, sustainability reporting has evolved through the introduction of the Business Responsibility Report in 2012, Integrated Reporting in 2017, National Guidelines on Responsible Business Conduct (NGRBC) in 2019 and now the Business Responsibility and Sustainability Report (BRSR). In May 2019, the Securities Exchange Board of India (SEBI) came out with a circular stating that the top 1,000 listed companies in India would have to adhere to a new reporting framework from FY2023, which for most companies will be from April 2022 to March 2023.

What is BRSR?

The Committee on Business Responsibility Reporting constituted by the MCA in 2018 recommended that the BRR be rechristened to BRSR, in which disclosures are based on ESG parameters, and compel organisations to holistically engage with stakeholders and go beyond a compliance focus in reporting and measurement. While reporting is mandatory from FY 2022-23, SEBI recommends that companies report their performance starting FY 2021-22 in order to be better prepared to adopt the framework.

What will companies need to report?

The BRSR framework provides for 3 main report sections:

Section A: General disclosures

This section will contain details of the company, such as its products/services, operational framework, number of employees and corporate structure (holding companies, subsidiaries, joint ventures, and associated entities, etc.).

Section B: Management and process disclosures:

This section will require companies to disclose details pertaining to policy and management processes, governance, leadership and oversight.

Section C: Principle-wise performance disclosures:

This section will require companies to report KPIs in alignment with the 2019 NGRBC principles. The section classifies KPIs into two sub-categories:

i) Essential indicators (mandatory): This includes data on training programmes conducted, environmental data on energy, emissions, water and waste, social impact generated by the company, etc.

ii) Leadership indicators (voluntary): To promote better accountability and responsibility, companies can include KPIs 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

Global alignment

The BRSR has been developed keeping in mind global ESG and sustainability frameworks like the Global Reporting Initiative (GRI), the Integrated Reporting Framework, the Sustainability Accounting Standards Board (SASB), the United Nations Global Compact and the United Nations Sustainable Development Goals (SDGs). It is a standardised framework designed to bring Indian reporting standards to the global stage. As practices and situations evolve, it will be imperative to keep revisiting existing frameworks to maintain a high standard in corporate sustainability and ESG reporting.

The future

Once companies are reporting in line with the BRSR framework, investors will have a better, standardised view on how the businesses they are evaluating live up to their promises and add yet another benchmark that can help them distinguish the wheat from the chaff. They must peel the onion and look beyond flowery disclosures that talk about qualitative measures and processes, and investigate whether companies are truly living up to their claims. Investors must engage in dialogue with companies and communicate the need for impact measurement, and require companies to showcase the results of their efforts in order to bring Indian businesses to the forefront by using reporting standards that are useful on a global stage.

Rajesh Sehgal is the Founder and Managing Partner of Equanimity Investments. He is a TiE Mumbai Board Member and co-chairs TiE’s FinTech Special Interest Group. He is a member of the Steering Committee of NASSCOM 10,000 Startups.  Rajesh has been an active secondary market investor for the last 24 years, 17 years of which he worked with the emerging markets group of Franklin Templeton. He also managed Franklin Templeton’s emerging markets private equity investments. He is a CFA charterholder and has also earned a post graduate diploma in securities law from Mumbai. Rajesh has chaired CRUF India since 2015.

Disclaimer: The views expressed in the blog are those of the author and do not necessarily represent the views of all CRUF participants. To read more about the CRUF’s views on this and other topics, please visit the ‘Our Views’ section of this website.


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