From Voluntary to Mandatory: How BRSR is Changing Corporate Transparency - ezine articles

From Voluntary to Mandatory: How BRSR is Changing Corporate Transparency - ezine articles

Why are firms rushing to publish comprehensive reports regarding their environmental and social impact? India’s pioneering Business Responsibility and Sustainability Reporting (BRSR) Framework is the reason. What commenced as a proactive optional practice has now been legally enforced for large companies. It has been radically changing how elite companies engage with their constituents.

What does the shift from optional to required reporting mean for Indian corporations? BRSR holds companies responsible for everything from employee relations to carbon footprints; it is not a new set of compliance obligations. This transformation is creating a new paradigm where companies will be required to provide data and outcomes to substantiate claims of sustainability. 

In 2021, the previous Business Responsibility Report (BRR) was superseded by the BRSR. From 2022-23, all listed companies in the Indian vertical have been asked to submit their BSRs.

The BRSRs are constructed on the basis of 9 principles of NGRBC (National Guidelines for Responsible Business Conduct) introduced by SEBI. 

The BRSR reports consists of 3 sections: 

General disclosures – Gives the fundamental background information needed to comprehend the business concept and operational breadth.

Management disclosures – Provides an in-depth analysis of the company’s strategy for ethical business practices.

Principle-wise disclosures – Brings a detailed approach to governance procedures, social responsibility programs, environmental impact management, and stakeholder engagement results.

In contrast to its predecessor, BRSR now requires businesses to provide data as well as qualitative disclosures. Due to this equilibrium, businesses are unable to get away with making ambiguous claims. They must give actual numbers and measurable outcomes to back up their claims.

Companies in India used to share sustainability information if they wished to for a long time. Hard and fast rules did not exist. For this, it was challenging to believe what was being conveyed or compare reports.  While some companies spoke very little, others did a fantastic job.  There was no set procedure for reporting.

A major change was brought about by the BRSR Core, which required the top 1,000 listed businesses to use a uniform reporting format. The clarity, dependability, and comparability of sustainability reporting among companies have improved as a result of this statutory mandate, which has guaranteed uniform disclosure on important problems.

This significant transition happened in several stages:

At first, only a small number of forward-thinking businesses took the voluntary initiative to issue sustainability reports. There was no industry standard structure or system. So, these reports were very different in quality and scope.

Mandatory Corporate Social Responsibility (CSR) expenditures for specific eligible corporations were introduced by the Corporations Act of 2013. This was the first significant building block towards compulsory CSR in India.

The Business Responsibility Report for the leading listed firms was introduced under SEBI. This was primarily qualitative and allowed room for significant flexibility. 

The latest reprise of the BRSR framework contains the most comprehensive and stringent reporting requirements to date. It relies on a mixture of principles with quantifiable disclosures. Such changes reflect that there is an increasing global acceptance of the necessity of corporate transparency for sustainable development.

BRSR provides a distinct structure for reporting on sustainability and responsibility, which encompasses the environment, society, and governance. Companies must report information including overall energy consumption, employee treatment practices, and operational management. This provides investors and the general populace with a holistic view of the company.

Moving to BRSR has, therefore, resulted in significant changes that are improving the disclosures of corporates:

BRSR expects businesses to furnish detailed quantitative data across multiple parameters. All must report specific metrics related to energy, water, waste, and even the demographic composition of employees, as well as community engagement. This quantifiable model of reporting removes the ambiguity that reports in the previous frameworks had.

As opposed to voluntary reports in the past with creative presentations, BRSR comes with a uniform approach. Now, all companies will have to incorporate templates and questions framed on the basis of NGRBC 9 principles. This change will enable investors, regulators, and other interested parties to serve the purpose of benchmarking between companies easily.

While external verification of BRSR reports (Business Responsibility and Sustainability Reporting) is currently encouraged but not mandatory, many forward-looking companies have begun engaging independent third parties to validate their reports. This trend reflects a growing emphasis on transparency, credibility, and stakeholder trust.

The regulatory roadmap for mandatory assurance has also been laid out:

This Framework has placed the responsibility of the preparation and presentation of the CSR and sustainability reports on the senior management team. The BRSR disclosures are now the responsibility of the organizations’ respective CEOs and board members. This led to the shifting of organizational leadership responsibility for sustainability outcomes.

BRSR enhances confidence and makes it easier for investors, clients, and the public to understand the initiatives being taken by various firms. It assists companies in identifying opportunities and improving productivity. Those who meet their obligations are rewarded with additional support. 

The Framework assists firms in communicating relevant, accurate, and honest information about an organization’s environmental, social, and governance (ESG) performance. Since there is a single template, it is easier to compare firms and identify leaders in sustainable development.

In addition, the BRSR reporting is beneficial in several aspects, such as:

Other constituents, along with investors, can now obtain comparable information about a corporation’s sustainability profile. This access improves decision-making, and more responsible companies are preferred for better capital allocation.  

Boundless frameworks establish obligatory reporting procedures. To make stakeholders act more logically, businesses must explain their performance and actions.

Companies with a high degree of sustainability can now be evaluated using certain criteria. This advantage is hurt by the competition and promotes more corporate accountability.

The ability of businesses to reduce ESG risks is enhanced by corporate reporting. Businesses can anticipate problems well in advance by addressing all aspects of environmental or social impact concerns.  

BRSR is a tool rather than just a rule.   It enables companies to honestly and transparently convey their impact, fostering trust with customers, investors, and the public at large.

So, in this new world of reporting, SGS keeps companies ahead of the curve.  Our experts support the BRSR process through training and audits.  Here, we acknowledge the difficulty of this change.  As a result, we offer comprehensive support, from understanding the structure to producing flawless reports.  Our team helps you interpret complex regulations into clear actions and enables you to fulfil the standards with confidence.

So, if you are prepared to gain confidence by reporting accurately and clearly, let’s connect to strengthen your sustainability story.