With the latest SEBI Amendment, the top 1000 listed companies (by market cap) are required to mandatorily produce the BRSR starting from FY 2022-23. The majority of companies are not prepared for meeting this compliance requirement as their internal teams are not mature/trained for the same.
The onus lies on the company secretaries to coordinate between the internal teams and external vendors to get the job done. The following article is an attempt to ease their work by addressing the most frequently encountered challenges.
First and foremost the confusion is regarding the fundamental difference between CSR & BRSR. To put it simply, CSR is how you put your profits to social causes while ESG (BRSR) is how profits are earned in the first place. The latter is concerned with the entire business operations and not only about the bottom line. The BRSR is an attempt to capture the thrust of a business in terms of Environmental (E), Social (S) & Governance (G) parameters. In fact, questions pertaining to CSR are a part of the BRSR standard as well. So, the former is essentially a subset.
Next up is whether there is a need to set up an internal committee for the BRSR or can the CSR committee overlook the BRSR committee. As per the company law, there is no mandate for the time being to have a separate board-level committee for BRSR. However, there is a direct mention of whether the company has a separate committee/director(s) to monitor the BRSR implementation for the company. It is highly likely the regulators might ask for an exclusive oversight for BRSR very soon. It is encouraged that the committee should comprise an independent director alongside executive directors(s) of the company to ensure smooth execution of the BRSR.
Another frequently asked question is how and where should the BRSR be disclosed. The Board level policies should be disclosed on the corporate website. The links for policies related to principles No 1-9 can be mentioned against the corresponding questions in the framework else it needs to be described accordingly. This is to ensure transparency which is a core element of the BRSR. The final BRSR document must be submitted to the MCA21 portal in the XBRL format.
There are a lot of discussions regarding the training and sensitization/orientation approach for internal/external stakeholders for BRSR implementation. Implementation has to be an outlook in the whole company. It is a pan-organizational activity that has to take place. Training and sensitization are highly essential for the company. When new BRSR policies and initiatives are sought to be implemented in a company, orientation has to be a part of the training process of internal stakeholders in particular and external stakeholders wherever applicable. It is not a one-time process but a continuous journey. It has to be initiated from the Board level and percolate all the way up to the contract workers. The objective is to take everyone along. Identifying and engaging stakeholders to target the sensitization programs accordingly is the key.
Now, let's focus on the assurance mechanism required for BRSR. As of now, there is no legal requirement for a BRSR/non-financial report to be audited by any internal/external assurance agency. However, external stakeholders always prefer the BRSR to be audited since it helps in bridging the trust gap and is anyways congruent to the annual report.
A lot of people believe that there is no need for BRSR if the entity is already reporting as per other frameworks viz. GRI/TCFD/IR. Well, the BRSR has the option of interlinking/cross-referencing the relevant disclosure points with globally accepted frameworks. However, it is mandatory to produce the BRSR as an independent document. Since the data has been collated for other frameworks, it becomes an easier task to fulfill the BRSR requirements.
The elephant in the room is ‘how to tackle the data collection process’. It is true that the BRSR journey is a data-intensive exercise. At regular junctures, appropriate quantification is required. Moreover, some disclosure points like emissions, energy, water, waste, etc. need comparative data (change over successive FYs). It is hereby advisable to initiate the data collation process as early as possible, preferably at the beginning of a financial year.
What if the BRSR is not a matter of compliance? SEBI has come up with a trimmed-down version of the essential indicators mentioned in the BRSR document known as BRSR Lite. The objective of such a standard is to encourage non-listed companies/startups to disclose their sustainability initiatives/policies. It can serve as a differentiator in their marketing activities/PR campaigns. Of late there has been a rising trend of raising sustainability linked loans by producing an ESG report. Moreover, the Business Responsible Index to be launched by SEBI would rate companies. Therefore, it makes sense in that regard to produce the BRSR-Lite to be aware of the present standing of the company.
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