The Securities and Exchange Board of India (SEBI) has announced the implementation of new standards for business sustainability reports by listed entities. This latest report is named the Business Responsibility and Sustainability Report (BRSR), which will replace the current Business Responsibility Report (BRR).
A Brief Background
SEBI first mandated the top 100 listed entities, as per market capitalisation, to file Business Responsibility Reports (BRR) in 2012. These reports were based on disclosure requirements from the ‘National Voluntary Guidelines on Social, Environmental, and Economic Responsibilities of Business’ (NVGs). In 2019, the Ministry of Corporate Affairs revised the NVGs with the National Guidelines on Responsible Business Conduct (NGRBC). Later that year, SEBI extended the BRR requirement to include the top 1000 listed entities by market capitalisation from the financial year 2019-20.
Understanding Market Capitalization and Listed Entities
A listed entity refers to a company whose shares are traded on an official stock exchange. Market capitalisation is a measure of a company’s worth, as determined by the stock market. The total market value of all outstanding shares determines this worth. A company’s market cap can be calculated by multiplying the number of outstanding shares by the current market value of one share.
About BRSR: A New Perspective
The BRSR, driven by an Environmental, Social, and Governance (ESG) perspective, aims to facilitate more meaningful interactions between businesses and their stakeholders. The goal is for businesses to not just focus on regulatory financial compliance, but also shed light on their social and environmental impacts. The BRSR applies to the top 1000 listed entities (by market capitalisation) and will be voluntary for FY 2021-22, transitioning to a mandatory requirement starting FY 2022-23.
The Importance of Sustainability Reporting
Sustainability Reporting is a comprehensive disclosure of a company’s environmental, social, and governance (ESG) goals—as well as the progress made towards these targets. The benefits of such reporting extend to several areas, including enhancing corporations’ reputations, establishing consumer trust, spurring innovation, and improving risk management.
Understanding Environmental, Social, and Governance Goals
ESG goals represent a set of operational standards that companies need to follow. These standards encourage ethical practices, environment-friendly measures, better governance, and sustainable social responsibility. Environmental criteria assess a company’s stewardship of nature, social criteria measure its relationship with employees, suppliers, customers, and communities in which it operates. Governance standards address aspects related to the company’s leadership, executive pay, audits, internal controls, and shareholder rights.
The Principle of Responsible Business
Responsible business operation is based on being accountable to all stakeholders concerning worldwide developments. Increasing global issues such as climate change, environmental risks, and growing inequality prompt businesses to re-evaluate their role within society. Businesses are now being seen as more than just economic units generating wealth; their performance is evaluated on how they achieve their environmental, social, and governance objectives.
