Reporting on Business Responsibility and Sustainability (BRSR) in the annual report of the company – Disclosure challenges relating to BRSR

[2021] 129 taxmann.com 107 (Article)

At present, the top 1000 listed companies are mandatorily required to report on business responsibility report (BRR) as a part of their annual reports and also the report goes to the stock exchange (s) where the company’s securities are listed. The requirement of the business responsibility reporting is that the report is required to state the initiatives taken by the companies from the point of environmental, social and governance (ESG) perspective, as per the specified format by the Securities Exchange of Board of India.

In respect of other companies, the Security Exchange Board of India indicated that the business responsibility report may be furnished voluntarily.

Latest amendment on this by the market regulator

2. On 5th May 2021, the Security Exchange Board of India brought out amendments to the existing provisions of BRR. As per the amendments brought out by SEBI, the current reporting of business responsibility report is required to be discontinued after the financial year 2021-22. In place of the existing BRR, the companies are required to submit a new report as “Business Responsibility and Sustainability Report” based on the environmental, social and governance (ESG) parameters. The following may be noted in this respect, as per the SEBI notifications:-

1. FY 2021-22 – Voluntary – For 1000 listed companies based on market capitalization

2. FY 2022-23 – Mandatory – For 1000 listed companies based on market capitalization

3. In respect of other than top 1000 companies -Listed companies (other than top 1,000) and companies which have listed their specified securities on the Small and Medium Enterprises (SME) exchange may voluntarily submit BRSR in place of BRR effective FY2021-22 onwards.

Reporting format

3. SEBI has specified the format of the BRSR report, vide its notification dated 10th May 2021 along with a guidance note to enable companies to interpret the scope of disclosures required to be made in the BRSR report. The format specified by SEBI is much wider than the existing format on business responsibility reporting. The disclosures are designed in such a way, the recipient would be able to have an easy measurement and comparison across companies, sectors and time periods. The format also seeks disclosures on climate and social related issues of the company such as employees, consumers and communities.

3.1 Structure of the format

The Format of BRSR is divided into two categories i.e. (a) essential i.e. mandatory and (b) leadership i.e. voluntary indicators. The leading indicators in the BRSR format also include disclosures related to the value chain of the listed entities. This is in line with the thrust of the national guidelines on responsible business (NGRBC) on the responsibility of businesses to encourage and support their value chain in following the economic, social and governance (ESG) principles.

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