This article has been written by Sagar Narendrakumar Surana, pursuing a Diploma in Technology Law, Fintech Regulations and Technology Contracts from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction 

The evolution of environmental, social, and governance (ESG) practices in India and the integration of business responsibility and sustainability reporting (BRSR) mark significant strides in the country’s journey towards sustainable development and corporate accountability. This report delves into the nuances of BRSR, examines its impact on the evolving ESG landscape in India, and assesses the broader implications for stakeholders, including businesses, investors, and policy-makers.

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The Business Responsibility and Sustainability Report (BRSR) format was introduced in May 2021 and replaced the Business Responsibility Report (BRR). SEBI has mandated that the BRSR will be applicable to the top 1,000 listed entities (by market capitalization) for reporting on a voluntary basis for FY 2021–22 and on a mandatory basis from FY 2022–23.

The adoption of the Business Responsibility and Sustainability Reporting (BRSR) framework by India means a giant leap towards the integration of sustainability and ethical considerations into the corporate mainstream. The shift is beyond compliance; it is a strategic shift that espouses long-term value creation, which is realised through holistic consideration of the economy, environment, and social well-being. Thusly, India is not just conforming to global sustainability trends but is also setting new directions for corporate governance and responsibility in this region.

The BRSR initiatives are launched at a crucial moment when the world is facing burning environmental issues and inequality that has just become aggravated by the COVID-19 pandemic. The framework is India’s preemptive move to make sure that the corporate sector of India is at the centre stage in solving these global issues through the incorporation of ESG principles in their core business approaches. This decision underlines the fact that sustainable development is not only a matter of ethics but also a business imperative, in which risk management, competitiveness and innovation are clearly tied.

The genesis of BRSR

In addition, the BRSR framework brings India into sync with the global agenda issued by the United Nations Sustainable Development Goals (SDGs), framing an approach for businesses to significant contributions towards the SDGs. It indicates a refined comprehension that the private sector’s engagement is critical for sustainable development as its effect is quite strong on the economy, society, and environment.

The introduction of BRSR is also in-line with the mounting pressure from investors for more clear, reliable, and comparable ESG data. In a world of an increasingly globalised market, investors want to invest in businesses not only for returns but also to see them as sustainable. By mandating comprehensive ESG disclosures, the BRSR framework enhances the transparency and accountability of Indian businesses, making them more attractive to both domestic and international investors who are keen on sustainable investments.

Speaking tactically, the BRSR framework is a game- changing instrument that catapults India to the leading edge of global sustainable practice. It reveals having a complete business outlook in which success is not only measured by financial performance but it also includes a positive impact on the planet and people. Consequently, the BRSR is not just a regulatory prescription; it’s a strategic mandate that drives Indian businesses towards an emancipated, equitable, and thriving future.

The origins of business sustainability and responsibility reporting in India are greatly connected with the changing landscape of corporate governance and the growing emphasis on sustainability worldwide. From the Business Responsibility Report (BRR) to the BRSR, there has been a change in the approach, which now emphasises the role of businesses in promoting sustainable development through not only being socially responsible. This process was impacted by different individual and holistic factors, such as regional and local ones, that showed the need to have an integrated and broader approach to corporative reporting.

On the international scene, there arose more and more frameworks, among them the Global Reporting Initiative (GRI), the Task Force on Climate-Related Financial Disclosures (TCFD), and the Sustainability Accounting Standards Board (SASB), all of which pointed towards integrated reporting with the non-financial part included. These developments were relevant within the Indian context and hence the regulatory bodies and market participants lobbied for a more stringent law that covers both the impact of the company on society and the environment.

Moving beyond these changes and recognising the critical role of transparency in building trust and confidence among investors, SEBI started its journey to improve the existing BRR. It was not only to match global best practices but also to overcome the local social, economic and environmental issues that India faces. The implication was the advent of BRSR in 2021, created to foster more inclusion, considering a broad spectrum of ESG aspects, and calling on corporations to integrate sustainability into their key activities.

The BRSR framework was envisaged as a tool to encourage further disclosure of ESG-related matters in a more detailed and organised manner, thus empowering stakeholders such as investors, customers, and policymakers to make better decisions. It is a tipping point in the history of India’s corporate governance, setting a new benchmark for accountability and transparency and demonstrating seriousness about sustainable development. The fact that BRSR came into existence is simply an affirmation that a sustainable business model is a must if both organisational value and social welfare are to be achieved.

Understanding BRSR

The Framework of Business Responsibility and Sustainability Reporting (BRSR) is a shift in paradigm from how companies report based on conventional financial metrics to one that encompasses products of the nature of business and stretches to the environmental, social and governance aspects. This framework is painstakingly constructed to provide companies with a fiduciary role in disclosing material information about their ESG practices in a structured way, thereby fostering transparency, consistency and comparability in different business sectors.

On the basis of the BRSR initiative, there is an emphasis on sustainability and responsibility. The framework encourages businesses to go beyond mere compliance and contribute actively to sustainable development by embedding ESG principles into their strategic planning, decision-making, and overall business operations. Through consideration of diverse indicators, BRSR enables companies to evaluate and report on different aspects of their impacts, for example, from environmental conservation, for instance, reduction of carbon footprint, to social responsibility like workforce practices, community relations, and human rights.

In addition, BRSR emphasises the need for governance structures to facilitate a culture of accountability and integrity in business. There is a need for the disclosure of governance processes, policies and practices that companies use in the oversight of ESG-related matters that are consistent with sustainability and social responsibility objectives.

The framework also pays much attention to stakeholder involvement, considering participation in stakeholder engagement as a key part of stakeholder’s concerns, expectations and aspirations. The intention of this part of BRSR is to develop trust and cultivate collaborative relationships between firms and their diverse stakeholders—employees, customers, suppliers, investors, communities, and policy-makers.

In essence, BRSR serves as a comprehensive tool for companies to communicate their sustainability journey, challenges, achievements, and future aspirations. It not only aids in enhancing transparency and accountability but also facilitates informed decision-making by investors and other stakeholders. By adopting BRSR, companies can demonstrate their commitment to sustainable development, thereby contributing to the creation of a more sustainable and equitable society.

Impact on the ESG landscape in India

The advent of BRSR has profoundly altered the ESG landscape in India. It resulted in boosted accessibility, as organisations must now report on the details of their ESG matters. Now they can make better decisions, taking into account not just the financial health of a company but also its sustainability performance. BRSR also facilitates better sustainability practices as the company’s ESG performance becomes public and thus subject to investor, consumer and other stakeholder scrutiny. 

Challenges and opportunities

With BRSR, there are a number of opportunities, such as attracting ESG-centred investments and creating a culture of sustainability, but also a number of challenges to be addressed. It includes the need for capacity building among companies to accurately measure and report their ESG performance, the possibility for additional compliance cost, and the danger of ‘greenwashing’ where companies may portray a positive sustainability image without taking any action.

Global context and India’s position

From a global perspective, the GRI, SASB, and Task Force on Climate-Related Financial Disclosures (TCFD) are setting precedents for sustainability reporting. The BRSR framework of India corresponds to global standards and as such, Indian companies are viewed favourably in the global markets, especially from the point of view of international investors who place much value on sustainability.

Integrating global sustainability frameworks: TCFD to ISSB transition

In 2024, India’s ESG landscape will undergo a significant transformation as companies transition from the Task Force on Climate-related Financial Disclosures (TCFD) to the International Sustainability Standards Board (ISSB) standards. This pivotal change ensures Indian firms are in step with international practices, enhancing the quality and comparability of their sustainability disclosures. By adopting the ISSB framework, businesses in India will not only meet the core TCFD recommendations but also engage with a broader set of sustainability-related financial disclosures, facilitating a more integrated approach to ESG reporting within the global context​​​​​​.

Future outlook

The ESG landscape is expected to be continuously in flux for the BRSR to evolve further to handle changes in sustainability problems and stakeholder expectations. Incorporation of emerging technologies such as artificial intelligence and blockchain could increase the credibility and validity of ESG reporting. Therefore, sector-specific ESG measures could receive a higher attention, which will result in a better level of understanding of sustainability performance in different industries.

Recommendations

To maximise the benefits of BRSR and enhance the ESG landscape in India, several recommendations are proposed:

  • Continuous capacity-building initiatives for companies to ensure accurate and effective ESG reporting.
  • Strengthening regulatory frameworks to prevent greenwashing and ensure that ESG disclosures translate into tangible actions.
  • Encouraging stakeholder engagement to foster a collaborative approach towards sustainability.
  • Leveraging technology to enhance the transparency and reliability of ESG reporting.
  • Tailoring ESG metrics to reflect the unique challenges and opportunities within different industries.

Conclusion

The emergence of BRSR sets a landmark in India’s path towards sustainable development and corporate responsibility. It suggests such traits as a coalition of economic superiority, ecological conservation and corporate social responsibility. With India embracing the ever-changing ESG landscape, BRSR will remain key in charting the sustainability course, steering corporate conduct, investment flows and the policy regime. The path is full of obstacles, but this can accelerate organisations towards building a cleaner and more equitable world.

As India forges ahead, the integration of BRSR into the corporate ethos will undoubtedly be a key driver in the nation’s pursuit of sustainable development, aligning economic growth with environmental protection and social equity.

References

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