Business Responsibility and Sustainability Report

Business Responsibility and Sustainability Report

Executive Summary:

This article covers:

• • • This article throws light on sustainability reporting process and filing of Business Responsibility & Sustainability Report (BRSR)
    • Provides a summary of the regulations that are now in place.
    • Provides an overview of the regulations that are now in effect.

Introduction:

The Securities and Exchange Board of India (SEBI) has introduced a new requisite for sustainability reporting by listed entities. The new reporting called “the Business Responsibility and Sustainability Report” which will replace the existing Business Responsibility Report (BRR). The BRR is an exposure of acquiring responsible business practices by a listed company to all its stakeholders. BRSR aims to set up link between the financial results of a business with its Environment, Social and Governance performance.

SEBI has mandated that the BRSR will be applicable to the top 1,000 listed entities for reporting on a voluntary basis for F.Y. 2021–22 and on a mandatory basis from F.Y. 2022–23.

SEBI Regulation:

According to Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021:

• – The top 1000 listed entitiessh all submit a BRR (in the format specified by SEBI),based on market capitalization, describing the initiatives taken by the listed entity with respect to an environmental, social and governance.
• – The requirement of submitting a BRR shall be discontinued after the F.Y. 2021–22 and thereafter, with effect from the F.Y. 2022–23, the top 1000 listed entities based on market capitalization shall submit a BRSR in the format as specified by the SEBI.
• – The top 1000 listed entities may voluntarily submit a BRSR in place of the mandatory BRR in the financial year 2021–22.
• – The remaining listed entities including the entities which have listed their specified securities on the SME Exchange, may voluntarily submit such reports.

The SEBI issued disclosure standards for BRSR, including environmental, social, and governance perspectives, which will apply to the top 1,000 listed businesses by market capitalization. Listed entities are required by BRSR to publish a summary of the entity’s material ESG (environmental, social, and governance) risks and opportunities, strategies to mitigating or adapting to the risks and financial consequences of the same.

Resource utilisation (energy and water), air pollutant emissions, greenhouse gas (GHG) emissions, moving to a circular economy, waste created and waste management techniques, and biodiversity are all included in environmental disclosures. The labour,  value chain, communities, and customers would all be subject to social disclosures.

Need of Business Responsibility and Sustainability Report:

BRSR, which is from an Environmental, Social and Governance (ESG) angle, is considered to enable businesses to engage more meaningfully with their stakeholders. It will encourage businesses to go beyond regulatory financial compliance and report on their social and environmental results.

Sustainability Reporting Process:

There are four steps in the sustainability reporting process:
1. Define Performance Goals and Metrics:

• – The first step is to define the sustainability  objective of  the company. The company should have an overall view as to why company wants to combine sustainability efforts into its business operations.
• – The next step is to measure progress toward those goals. By developing key performance indicators (KPIs), it will be used to measure progress towards goal. In sustainability reporting, a KPI is referred to as a sustainable performance indicator (SPI). SPIs are used as a tool to measure a company’s sustainability performance.

2. Measure Performance:

• – Data must be collected comprehensively and consistently for sustainable performance indicator (SPI). Data needs to be collected, validated and stored by using technology.

3. Evaluate Performance:

• – The purpose of the performance evaluation is to convert raw data into useful information and knowledge, to support organizational decision making. Main ingredients of the evaluation phase are data mining, data screening, data analysis and communication / presentation to stakeholders.

4. Manage Performance:

• – Top Management is responsible for management of performance by taking corrective and improvement actions based on performance reported.
• – Quality of analysis depends on the organization and its capacity to act on information learned through sustainability reporting.
• – Management should review and analyse sustainable performance information regularly.

BRSR Format: (Applicable for FY 2022-23):

The BRSR is accompanied with a guidance note to enable the companies to interpret the scope of disclosures. The format of the BRSR and the guidance note are detailed in Annexure I and Annexure II respectively.

• 1. Annexure I (as per circular SEBI/HO/CFD/CMD-2/P/CIR/2021/562): Kindly refer following link for Annexure I for BRSR Format:
  “Download-PDF”

• 2. Annexure II (as per circular SEBI/HO/CFD/CMD-2/P/CIR/2021/562): Kindly refer following link for Annexure II for Guidance note for BRSR Format:
  “Download-PDF”

Conclusion:

SEBI has mandated that the BRSR will be applicable to the top 1,000 listed entities for reporting on a voluntary basis for FY 2021–22 and on a mandatory basis from FY 2022–23. The new reporting format named BRSR, aims to set up links between the financial results of a business with its Environment, Social and Governance (ESG) performance. It is important for management to understand and implement requirements of provisions which will be beneficial to large listed and public-interest companies.

Regards,
Legal Team

Proind Business Solutions Private Limited
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