Overview of Business Responsibility and Sustainability Reporting (BRSR) Practices

Table of Contents

1. Identifying material issues
2. Costs of integrating BRSR practices
3. Lack of data and independent third-party opinions
4. Lack of a skilled talent pool
5. Difficulty in measuring and reporting on metrics

Check out Taxmann's ESG & BRSR Reporting which is thoroughly overviews Environmental, Social and Governance (ESG) and Business Responsibility & Sustainability Reporting (BRSR). It covers key concepts, practices, challenges, and the format of BRSR. This discussion in this book ranges from sustainability reporting to responsible investment and guides professionals and leaders to comprehend ESG significance and reporting.

1. Identifying material issues

One of the challenges in the adoption of BRSR practices is identifying which issues are most material to the organization and its stakeholders. Companies often face challenges in prioritizing BRSR issues because they may have limited resources and expertise, and there may be conflicting opinions on what is considered most important. This can lead to confusion about which BRSR topics to focus on, and what specific actions to take to address them.

To overcome this challenge, companies need to engage in stakeholder consultation to determine the BRSR issues that are most important to their stakeholders. This can involve conducting surveys, focus groups or one-on-one interviews with employees, customers, suppliers, community members, and other stakeholders.

Additionally, companies can also conduct a materiality assessment to determine the most significant BRSR issues for the business. This involves evaluating the impact of BRSR issues on the business, its stakeholders and the environment, as well as their potential to impact the company’s financial performance. This information can be used to develop a BRSR strategy and action plan that is aligned with the most material BRSR issues for the organization.

2. Costs of integrating BRSR practices

One of the biggest challenges in the adoption of BRSR practices is the cost associated with it. Incorporating BRSR standards and sustainability practices into your business can require significant investments, including capital expenditures, operational expenses, and staff training. These costs can include:

1. Upgrades to equipment and facilities to reduce energy consumption, carbon emissions, and waste.
2. Implementation of new management systems and processes to monitor and report on BRSR performance.
3. Development of sustainability-related products and services, as well as marketing and communications efforts to promote them.
4. Hiring or training additional staff to support sustainability initiatives.
5. Engaging external consultants, auditors, and certifiers to verify and validate BRSR performance data.

While many companies see the long-term benefits of BRSR integration, it can be difficult to justify the initial costs, especially for smaller organizations or those with limited financial resources. Additionally, the investment in BRSR may have to compete with other pressing business priorities and budget constraints. However, it is important to recognize that BRSR practices can contribute to cost savings over time, and can also improve brand reputation and attract new customers, lenders, and investors.

3. Lack of data and independent third-party opinions

Another challenge in adopting BRSR practices is the lack of data and independent third-party opinions. It can be difficult to know what BRSR issues are most important and to accurately assess their impact. Some companies may not have access to reliable data, or may have difficulty assessing the impact of certain BRSR issues on their operations. In these cases, it can be difficult to develop a comprehensive and meaningful BRSR strategy that truly reflects the company’s values and priorities.

To overcome this challenge, companies may need to invest in new data collection and analysis methods, or engage external experts to help them understand their BRSR risks and opportunities. In addition, it is important to seek independent third-party opinions from organizations such as auditors, sustainability consultants, or ratings agencies to help verify the company’s BRSR performance and validate its sustainability commitments. By doing so, companies can ensure that their BRSR practices are aligned with industry best practices, and that their performance is accurately reflected in BRSR ratings and indices.

4. Lack of a skilled talent pool

Another challenge in the adoption of BRSR practices is the lack of a skilled talent pool. BRSR requires specific knowledge and expertise in areas such as environmental impact assessments, sustainability reporting, and risk management. Many companies do not have access to the necessary internal resources to implement BRSR practices effectively. It can be difficult for companies to find and retain employees who are knowledgeable about BRSR best practices and can help to ensure that BRSR initiatives are aligned with business objectives.

In order to overcome this challenge, companies may need to invest in employee training and development programs or engage external experts to help guide their BRSR efforts.

5. Difficulty in measuring and reporting on BRSR metrics

BRSR metrics can be difficult to measure and report on accurately. For example, measuring a company’s carbon footprint can be a complex process that involves tracking emissions from various sources and accounting for factors such as changes in production levels and the use of renewable energy sources.

5.1 Guidance Note For Business Responsibility & Sustainability Reporting Format

General Guidance

1. Inter-operability of reporting framework – Those listed entities which prepare and disclose sustainability reports (as part of annual report) based on internationally accepted reporting frameworks such as GRI, SASB, TCFD, Integrated Reporting, can cross-reference the disclosures made under such framework to the disclosures sought under the BRSR. Further, in case the data sought in the reporting format is already disclosed in the annual report, the listed entity can provide a cross-reference to the same.

Thus, an entity need not disclose the same information twice in the annual report. However, the entity should specifically mention the page number of the annual report or sustainability report where the information sought under the BRSR format is disclosed as part of the report prepared based on internationally accepted reporting framework.

2. Consistency in reporting boundary – The BRSR seeks disclosure of the reporting boundary i.e.,whether the reporting is done for the entity on a stand-alone or consolidated basis (Reference: Question 13, Section A). Listed entities shall ensure consistency in reporting boundary across the report.
3. Applicability – Some of the disclosures sought under the BRSR may not be applicable to certain industries, say the service industry. In such cases, the entity can state that such disclosure is not applicable along-with reasons for the same.
4. The term “reporting period” refers to the financial year for which BRSR is being prepared.
5. The listed entity should endeavour to provide clear, complete and concise responses. The web-links to the relevant document may be provided, if available.
6. The information sought on complaints in the format are accompanied with a column of “Remarks” where entities can explain reasons for pending complaints (if any) or can give a brief on the nature of the complaints, wherever required
7. With regard to disclosures relating to gender, the format specifies male and female, however in case the entity has employed persons who have not disclosed gender or belong to any other gender, a separate column of “Other” may be added for such disclosures.
8. The term “Principles” refers to the principles 1 to 9 as laid down in the National Guidelines for Responsible Business Conduct (available at the following link: https://www.mca.gov.in/Ministry/pdf/NationalGuildeline_15032019.pdf).
9. In addition to the disclosures sought under the format, the entity may disclose any other relevant sustainability related information at appropriate places.

Note: This guidance note has been prepared using references from the National Guidelines for Responsible Business Conduct (NGRBCs), GRI sustainability reporting standards and various laws issued by the Government.

5.2 Assurance & Structure of ESG Disclosures

SEBI vide Circular No. SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122 dated July 12, 2023 had prescribed the BRSR Core & updated BRSR format with an overview on Framework for Assurance & ESG Disclosure for Value Chain.

From FY 2023–2024, the top 1000 listed entities (by market capitalization as per Circular No. SEBI/HO/CFD/CMD-2/P/CIR/2021/562) shall make disclosures as per the updated BRSR format, as part of Annual Report.

(a) Assurance

In order to achieve the twin objectives of improving credibility and limiting the cost of compliance, BRSR Core has been developed for reasonable assurance which consists of select Key Performance Indicators (KPIs) under each E, S and G attributes/areas that needs to be reasonably assured. The BRSR Core framework also specifies the methodology to facilitate reporting by corporates and verification of the reported data by an assurance provider.

Listed entities shall mandatorily undertake reasonable assurance of the BRSR Core, as per the glide path specified in the following table:

Assurance Provider

The Board of the listed entity shall ensure that the assurance provider of the BRSR Core has the necessary expertise, for undertaking reasonable assurance.

The listed entity shall ensure that there is no conflict of interest with the assurance provider appointed for assuring the BRSR Core. For instance, it shall be ensured that the assurance provider or any of its associates do not sell its products or provide any non-audit/non-assurance related service including consulting services, to the listed entity or its group entities.

ESG Disclosure for Value Chain

Disclosures for value chain shall be made by the listed company as per BRSR Core, as part of its Annual Report. For this purpose, value chain shall encompass the top upstream and downstream partners of a listed entity, cumulatively comprising 75% of its purchases/sales (by value) respectively.

Listed entities shall report the KPIs in the BRSR Core for their value chain to the extent it is attributable to their business with that value chain partner. Such reporting may be segregated for upstream and downstream partners or can be reported on an aggregate basis.

• Assurance Applicability for Disclosures of Value Chain:

1. 1. ESG disclosures for the value chain shall be applicable to the top 250 listed entities (by market capitalization), on a comply-or-explain basis from FY 2024-25.
   2. The limited assurance of the above shall be applicable on a comply-or-explain basis from FY 2025-26.

(b) Structure of BRSR Reporting

BRSR Core & Updated BRSR

The BRSR Core is a sub-set of the BRSR, consisting of a set of Key Performance Indicators (KPIs)/metrics under 9 ESG attributes. Keeping in view the relevance to the Indian/Emerging market context, few new KPIs have been identified for assurance such as job creation in small towns, openness of business, gross wages paid to women etc. Further, for better global comparability intensity ratios based on revenue adjusted for Purchasing Power Parity (PPP) have been included. The format of BRSR Core for reasonable assurance is placed at Annexure I. The BRSR format after incorporating new KPIs of BRSR Core is placed as Annexure II.

In order to facilitate the verification process, the BRSR Core specifies the data and approach for reporting and assurance. It is however clarified that the approach specified is only a base methodology. Any changes or industry specific adjustments/estimations shall be disclosed.

The following are the details of:

1. Annexure I – BRSR Core
2. Annexure II – Business Responsibility and Sustainability Report Updated Format as per SEBI
3. Linkage of GRI Standards with SEBI BRSR Reporting requirements
4. Linkage of SDG & BRSR Principles
5. Case Study

ANNEXURE I – BRSR Core Attributes