The month of May 2024 saw two important developments on the Business Responsibility and Sustainability Report (BRSR) applicable to top 1000 listed companies in India (by market capitalisation):
An Expert Committee under SEBI released draft recommendations to ease reporting under BRSR.
The National Stock Exchange (NSE) released FAQs-related to BRSR, clarifying common errors and inconsistencies that it had noticed in the past years.
SEBI’s recommendations
The Expert Committee’s notification was three-fold, involving topics such as value chain reporting, green credit program and BRSR assurance. Here is a brief summary of the proposed changes:
i. Value Chain Reporting:
It is proposed to redefine value chain partners to include only those upstream and downstream partners that individually comprise 2% or more of the entity’s sales/ purchases (by value) respectively.
This would not only put a bracket on maximum partners (50) covered under the BRSR Core reporting, but also eliminate fragmented partners that may be too small in size.
It is further proposed to keep ESG disclosures for value chain partners in FY 2024-25 voluntary, instead of ‘comply or explain’ basis.
This shall provide the regulated entities some time to place systems and processes to collect relevant information for value chain reporting.
ii. Green Credit Program:
In view of the ‘Green Credit Rules, 2023’ notified by the Indian Council of Forestry Research and Education, it is proposed to include number of green credits generated by the Company and its value chain partners (as per the revised definition) as a leadership indicator under Principle 6.
While the rules are still under implementation, it provides a great chance for entities to demonstrate their stewardship on environmental matters. By including it as a leadership indicator, i.e. a voluntary disclosure, companies would not face a burden of compliance.
iii. “Assessment” over “Assurance”:
It is proposed to replace ‘reasonable/limited assurance’ with ‘assessment’, which shall be conducted as per the standards as may be specified by the Industry Standards Forum (ISF) in consultation with SEBI.
While assurance is an extensive process, and comes with meticulous standards going beyond mere verification, an assessment would provide much more flexibility and ease compliance. Companies may however, voluntarily choose to conduct reasonable/limited assurance.
For FY 2023-24, it is proposed to provide an option to either undertake ‘assessment’
or ‘reasonable assurance’ of BRSR Core disclosures. For FY 2024-25 and onwards, ‘reasonable/limited assurance’ must be substituted with ‘assessment’.
Kindly note, these are only recommendations of the Committee set-up by the SEBI and are yet to be adopted. The full draft can be accessed here.
2. FAQs & General Observations by NSE:
i. FAQs: The stock exchange clarified some general queries with respect to BRSR reporting including:
· Applicability of BRSR
· Reporting on voluntary basis
· Requirement for reasonable assurance
· Mode and timeline for submission of BSRS to stock exchange
· Reference to/through other internationally accepted standards
ii. Observations: The exchange pointed out certain inconsistencies and urged companies to report uniformly, in line with the framework and guidance provided by SEBI. Some of the key observations are as follows:
The BRSR format requires Companies to provide a Yes/ No response to a set of questions on Policy formulation across 9 principles. However, some Companies have either not disclosed information in the prescribed format or not provided mapping of answers to questions under BRSR format with their sustainability report (applicable in case sustainability report is published).
Companies have not provided details like break up of contract workers enrolled, break up of employees or workers or break up of permanent and non-permanent employees.
For Principle 2 - Point 1, some Companies have disclosed absolute values instead of percentage as required in Percentage of R&D and capital expenditure investments.
A lack of uniformity was observed between disclosures made under measures of well-being of employees / workers and the disclosures under the employees and workers (including differently abled) provided in General Disclosure – Point 21a. & b. If there is any difference in either of the categories, the reason for such difference shall be provided in “Add notes” column.
Companies are required to disclose skill upgradation training provided to employees and workers whether permanent or non-permanent. It was observed that Companies have provided the said disclosures only for permanent employees and have not included non permanent employees and workers under the skill upgradation data.
For details of total energy consumption (in Joules or multiples) and energy intensity, some Companies have disclosed the data in units other than joules.
Companies have provided the disclosures of waste management at an aggregated level instead of providing details in a bifurcated manner as provided under the format for specific heads (i.e. e-waste, plastic waste etc.).
Companies have made disclosures for waste management in Metric tonnes or kilograms or kilo tonnes. Companies are advised to provide the said details in Metric tonnes only.
For Information relating to data breaches, the Companies have provided reference relating to general complaints which do not pertain to data breach and have provided little to no disclosures regarding instances of data breaches during the year. Companies shall ensure to provide the details only for data breach under this category.
The full list of FAQs and observations may be accessed through this link.
For more assistance, kindly reach out to us at info@esgityadvisors.com.
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