Sebi’s new non-financial disclosure norms to help investors gauge firms’ biz sustainability

The new business responsibility and sustainability report (BRSR), which is an optional disclosure requirement for listed companies this year and is designed to be mandatory from FY23 onwards, would help investors to identify firms’ business sustainability risks, analysts said.

The ministry of corporate affairs’ (MCA) aim is to make BRSR reporting format a single source for all non-financial disclosures. Besides, it seeks to balance the objective of self-regulation through disclosures, while ensuring that no undue compliance burden is imposed on companies.

In May, the Securities and Exchange Board of India (Sebi) introduced the new sustainability reporting requirements under the BRSR. Key disclosures newly sought are environment, social and governance (ESG)-related risks and opportunities.

The other version that has prevailed for many years – business responsibility report (BRR) – is seen to be insufficient to gauge ESG risks. Since FY20, top 1,000-listed companies by market capitalisation had to file BRRs with Sebi. In May 2020, a committee set up by the MCA came out with a report on improving and revising the format of business responsibility reporting. Based on the panel’s report, SEBI released the new format of BRSR, which is mandatory for listed companies from FY23 and optional for FY22.

Welcoming the development, AMRG & Associates CEO, Gaurav Mohan said this provides equal importance to sustainability reporting at par with financial reporting. “The sustainability of a business has gained much more relevance in the post pandemic world, this is seen from the shift of investors towards sustainable investing,” he added.

EY India national leader (climate change and sustainability services), Chaitanya Kalia pointed out that several organisations have been disclosing non-financial information to stakeholders using different frameworks. Now with BRSR, all top 1,000-listed firms will disclose their KPIs using the same framework.

“It will help stakeholders and investors to analyse and most importantly, compare the non-financial performance which is a reflection of how organisations are creating long term sustainability in a responsible manner. I believe the market will slowly, but surely start recognising the importance of non-financial performance along with financial performance to create long-term value,” he noted.

Nangia & Co LLP associate director (audit & assurance), Ankit Agarwal explained that the disclosures are framed keeping in mind internationally accepted reporting frameworks like Task Force on Climate Related Financial Disclosures (TCFD), Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), etc.
“These disclosures on climate and social (employees, consumers and communities) related issues of the entity have been significantly enhanced and made more granular. This will enable investors to identify and access sustainability related risks and rewards of the company to make an informed and calculated investment decision,” he said.