The BRSR Explained: What Indian Corporates, ESG Implementors, and Investors Need to Know

In an era where stakeholders are increasingly scrutinizing not just profits but also the planet and people, Indian businesses face a crucial mandate: transparently communicate their sustainability efforts. The Securities and Exchange Board of India (SEBI) has answered this call with the Business Responsibility and Sustainability Report (BRSR), a comprehensive framework reshaping how India Inc. accounts for its environmental, social, and governance (ESG) impact.

Why the BRSR Replaced the BRR

The BRSR represents an evolution from the earlier Business Responsibility Report (BRR), introduced in 2012. While the BRR provided a foundation with qualitative disclosures based on the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (NVGs), the BRSR, introduced in May 2021 and mandatory from the financial year 2022-23 for the top 1000 listed companies by market capitalization in India, aims for more. Its structure, aligned with the nine principles of the National Guidelines on Responsible Business Conduct (NGRBC), demands more detailed and quantifiable reporting, bringing India's sustainability disclosures closer to global standards

Who Needs to Report? Applicability of the BRSR

The Business Responsibility and Sustainability Report (BRSR) is a mandatory reporting requirement for the top 1000 listed companies in India, determined by their market capitalization as of March 31st of the preceding financial year (e.g., March 31, 2024, for FY 2023-24). Furthermore, these top companies are undergoing a phased implementation of mandatory assurance on a core subset of BRSR disclosures, known as BRSR Core:

• FY 2023-24: Top 150 listed entities

• FY 2024-25: Top 250 listed entities

• FY 2025-26: Top 500 listed entities

• FY 2026-27: Top 1000 listed entities  

Beyond this mandate, SEBI encourages all other listed companies, including those on the SME Exchange, to adopt the BRSR framework voluntarily, recognizing the growing importance of ESG transparency for all stakeholders

The Three Pillars of the BRSR: Understanding Its Structure

The BRSR is strategically organized into three key sections to provide a holistic view of a company's ESG performance:

• Section A: General Disclosures: This section lays the foundational understanding of the company, covering essential information such as Company Details, Products/Services, Operational Locations, Employee data, details of Subsidiaries, Holding, and Associate Companies, and Corporate Social Responsibility (CSR) activities.

• Section B: Management and Process Disclosures: This section delves into the company's governance, policies, and processes related to ESG. It examines how the nine principles of the National Guidelines on Responsible Business Conduct (NGRBCs) are embedded within the company's operations.

• Section C: Principle-wise Performance Disclosure: The most substantial section, this requires companies to detail their performance against each of the nine NGRBC principles. Within this, BRSR Core represents a focused set of essential indicators that require more granular reporting and will be subject to mandatory assurance in a phased manner.

Who Crafts the BRSR? Roles and Responsibilities

Drafting a comprehensive and accurate BRSR is typically a collaborative effort involving a cross-functional team within the organization. While the sustainability department often spearheads the process, the accuracy and comprehensiveness of the report rely on active participation from various departments, including finance (for financial ESG data), human resources (for employee-related disclosures), legal and compliance (for regulatory alignment), operations (for environmental performance data), communications (for narrative and presentation), and top management (for oversight and approval).

Key Prerequisites for Preparing Your BRSR Report

Successfully navigating BRSR compliance requires organizations to undertake several key actions. First, a thorough understanding of SEBI's BRSR regulations and the NGRBC principles is paramount. Second, establishing robust internal processes for collecting and analyzing accurate ESG data across all relevant quantitative and qualitative parameters is crucial. This includes clearly defining reporting boundaries (standalone or value chain) and identifying material ESG aspects. Third, aligning internal policies with the NGRBC framework and setting specific, measurable ESG goals and targets are essential. Finally, implementing effective stakeholder identification and engagement strategies ensures transparent and comprehensive reporting that addresses stakeholder concerns.

Key Amendments and Updates to BRSR

Since its implementation, the BRSR framework has seen important amendments aimed at enhancing its effectiveness and ease of compliance:

• Introduction of BRSR Core (July 2023): A focused set of key ESG indicators for more granular reporting, subject to phased mandatory assurance.

• Phased Mandatory Assurance for BRSR Core (Starting FY 2023-24): Gradual implementation of reasonable assurance for the top listed entities.

• Value Chain Disclosures (Now FY 2025-26): Mandatory ESG disclosures for significant upstream and downstream partners, with a revised definition focusing on individual contributions.

• Assurance on Value Chain (Now FY 2026-27): Mandatory assessment or assurance on value chain disclosures, deferred to FY 2026-27.

• Flexibility in Assurance: "Assurance" replaced by "assessment or assurance" for both BRSR Core and value chain.

• Introduction of Green Credit Disclosure: A new leadership indicator tracking Green Credits.

• Issuance of Industry Standards for BRSR Core: To aid standardization.

• Clarifications on Intensity Calculations and Environmental Footprint Estimation.

• Mandated Use of Latest CEA Grid Emission Factors for Scope 2.

• Enhanced Employee Wellbeing and Safety KPIs with cost reporting.

Assumptions for the Future of BRSR Compliance

Looking ahead, we can anticipate a continued evolution of the BRSR framework. Expect a gradual expansion in the scope and granularity of mandatory disclosures, with a greater focus on the value chain and increasingly stringent assurance requirements. Alignment with global sustainability reporting standards like ISSB and CSRD will likely continue, alongside a potential integration with financial reporting. Technological advancements will play a key role in streamlining reporting, and we may see the introduction of more sector-specific guidelines and a greater emphasis on the impact and outcomes of sustainability initiatives, coupled with increased regulatory scrutiny.

Conclusion

In conclusion, SEBI's Business Responsibility and Sustainability Report (BRSR) marks a significant step forward in India's journey towards a more transparent and accountable corporate ecosystem. While presenting initial challenges, the BRSR provides a robust framework for Indian corporates to articulate their commitment to ESG principles, enabling investors and stakeholders to make more informed decisions. As the regulatory landscape evolves with amendments like BRSR Core and the phased approach to value chain reporting and assurance, a proactive and strategic approach to BRSR compliance will not only fulfill mandatory requirements but also unlock opportunities for enhanced reputation, stakeholder trust, and long-term sustainable value creation in the Indian business environment.