Sebi issues Disclosure Requirements under BRSR
May 10, 2021, Mumbai: The Security & Exchange Board of India (SEBI) has issued a Circular on Disclosure Requirements under Business Responsibility and Sustainability Report (BRSR). These new disclosure requirements under BRSR covering environmental, social and governance perspectives will be applicable on the top 1,000 listed entities by market capitalisation.
As per the circular, the new report of Business Responsibility and Sustainability Report (BRSR) will replace the existing Business Responsibility Report (BRR). The BRSR is a notable departure from the existing Business Responsibility Report(“BRR”) and a significant step towards bringing sustainability reporting at par with financial reporting.
The BRSR seeks disclosures from listed entities on their performance against the nine principles of the ‘National Guidelines on Responsible Business Conduct’ (NGBRCs) and reporting under each principle is divided into essential and leadership indicators.
The essential indicators are required to be reported on a mandatory basis while the reporting of leadership indicators is on a voluntary basis. Listed entities should endeavour to report the leadership indictors also.
The BRSR is accompanied with a guidance note to enable the companies to interpret the scope of disclosures.
The filing of BRSR has been made mandatory for the top 1000 listed companies (by market capitalization) with effect from the financial year 2022-2023. However, in order to give time to companies to adapt to the new requirements for the financial year 2021-22, filing of BRSR is voluntary.
Under BRSR, listed entities need to disclose about an overview of the entity’s material ESG (environmental, social and governance) risks and opportunities, approach to mitigate or adapt to the risks along with financial implications of the same.
Environment Related Disclosures:
Environment related disclosures cover aspects such as resource usage (energy and water), air pollution, pollutant emissions, green-house (GHG) emissions, transitioning to circular economy, waste generated and waste management practices, bio-diversity.
Additionally, Sustainability related targets and performance against the same needs to mentioned in the BRSR report.
Social Disclosures:
Social related disclosures would cover the workforce, value chain, communities and consumers.
Entities would also need to disclose about gender and social diversity including measures for differently abled employees and workers, turnover rates, median wages, welfare benefits to permanent and contractual employees / workers, occupational health and safety, trainings.
At communities level, listed entities will have to make disclosures on Social Impact Assessments (SIA), Rehabilitation and Resettlement, Corporate Social Responsibility, among others.
With respect to consumers, entities need to disclose on product labelling, product recall, consumer complaints in respect of data privacy, cyber security among others.
The BRSR report would also include an overview of the entity’s material ESG risks and opportunities, approach to mitigate or adapt to the risks along-with financial implications of the same.
Rationale behind BRSR
SEBI was one of the early adopters of sustainability reporting for listed entities amongst its global peers. The filing of the BRR containing ESG (Environment, Social and Governance) disclosures was first introduced for listed entities in 2012. Since then, a number of developments have taken place.
With the adoption of the Paris Agreement on Climate Change and UN Sustainable Development Goals, adapting to and mitigating climate change impact and transitioning to sustainable economies have emerged as major issues globally.
The COVID-19 pandemic has also accelerated the relevance of ESG considerations to investors resulting in increased awareness of investors and a shift towards sustainable investing. As ESG investing becomes more mainstream, disclosure requirements need to keep pace with this change and the BRSR is a significant step towards this direction.
Access to relevant and comparable information, will enable investors to identify and assess sustainability-related risks and opportunities of companies and make better investment decisions.
At the same time, companies will be able to better demonstrate their sustainability objectives, position and performance resulting into long term value creation. Overall, higher standards of ESG disclosures and transparency, will help in attracting more capital and investment
