SEBIs BRSR Core: Are Indian companies and their Supply Chains ready?

Against the backdrop of the Covid-19 pandemic, which brought a new sense of urgency to the idea of responsible business practices, the Securities Exchange Board of India-SEBI introduced a new ESG reporting structure by the name Business Responsibility and Sustainability Report (BRSR) on 10th May 2021.  SEBI’s decision aimed to facilitate and encourage Indian companies to adopt a more sustainable approach to business and transparently disclose their non-financial parameters and sustainability goals. Disclosure on ESG practices in accordance with BRSR was mandatory for the top 1000 listed companies in India for FY 2022-23. It is proposed to be extended to all companies by 2027. 

To further strengthen the ESG ecosystem in the country, in July 2023 SEBI introduced BRSR core. The BRSR core, a subset of the BRSR, will allow for more comprehensive reporting through metrics that can facilitate comparison of ESG performances and provide ESG ratings. 

Key highlights

• It mandates disclosure on key parameters across 9 attributes for ESG reporting
• Reasonable assurance of the BRSR core, applicable to the top 150 listed entities (by market capitalization) from FY 2023-24 and gradually extended to the top 1000 by FY 2026.
• ESG disclosures and assurance introduced for the value chain of listed entities- BRSR Core component-related disclosures for the top upstream and downstream partners of a listed entity, accounting for 75% of its purchases and sales, applicable to the top 250 listed entities on a comply or explain basis from FY 2024-25 and limited assurance will be necessary for these disclosures by FY 2025-26.

From FY 2023-24, the top 1000 listed companies are required to disclose their BRSR Core reports as part of their Annual Reports. Companies must also ensure the credibility of the disclosed data through  third-party ‘assurance providers’ as detailed above. 

The updated BRSR Core format brings significant changes to the reporting landscape. It introduces nine new attributes across the nine principles, spanning various aspects. These encompass factors like trade concentration,spending on employee welfare, percentage of wages paid to women employees and details of sexual harassment complaints. Notably, environmental disclosures now include water intensity and greenhouse emissions adjusted for Purchasing Power Parity (PPP). Using PPP data has the potential to establish connections between economic size and climate impact, revealing correlations with climate-related costs, socioeconomic consequences, and funding for climate change mitigation and adaptation efforts. Some disclosures, such as reporting data breaches, which were previously optional, are now mandatory. 

An additional responsibility for companies now, is to ensure the cooperation and participation of their value chain partners in effective reporting on BRSR Core parameters. With its limited and non-extensive KPIs BRSR core facilitates this process, making it easier for smaller entities who may be part of the listed companies’ supply chains, to implement the framework. 

While a positive stride towards fostering sustainable corporate practices, this initiative poses challenges for larger companies in involving their supply chain partners and managing data aggregation. The task of collecting both internal and partner data is formidable. Additionally, some suppliers may lack awareness of ESG norms, necessitating training for data collection. Financial strain, especially on smaller firms, is also a concern. 

Despite these challenges, companies achieving effective value chain data reporting on BRSR Core, gain a pioneering edge, showcasing commitment to responsible sourcing, potentially appealing to investors and customers alike. Breathe ESG presents a comprehensive solution for businesses to handle both their internal sustainability data and supply chain concerns. Our primary offering is a tool that evaluates suppliers' readiness to meet BRSR Core criteria. This survey-based assessment offers actionable insights, enabling companies to engage with less-prepared suppliers effectively.

Delve into SEBI's transformative BRSR Core, designed to strengthen responsible practices in Indian business. Explore the dynamics of involving supply chains in ESG reporting, the challenges it poses, and how Breathe ESG's solution aims to resolve them.