The Current State of BRSR at Corporate India – Sustainability Disclosures Improving, but Data Quality Issues Persist

Contributed by
– Pankaj Sharma, Senior Manager, Capital Markets Policy, CFA Institute India
– Mohan Kumar Prabhu, CFA, Co-Chair, ESG Working Group, CFA Society India

ABSTRACT

While Indian listed companies have made significant progress in enhancing their ESG disclosures in response to a Securities and Exchange Board of India mandate on Business Responsibility and Sustainability Reporting by corporates, there is scope for further improvement in certain areas such as the need to address inconsistent data quality. This report aims to support effectiveness of these disclosures by fostering a more informed dialogue on sustainability reporting in India.

OVERVIEW

A couple of years ago, the Securities and Exchange Board of India (SEBI), the nation’s securities market regulator, implemented mandatory Business Responsibility and Sustainability Reporting (BRSR) for the top 1,000 listed companies by market capitalization.  This mandate was introduced as a step toward enhancing India-based companies’ environmental, social, and governance (ESG) disclosures.

“The Current State of BRSR at Corporate India” conveys the findings of a joint research project conducted by the National Stock Exchange (NSE), CFA Institute, and CFA Society India. The findings highlight general progress and enhanced coverage on several reporting parameters, while some key challenges remain. By discussing these issues and possible solution, this report aims to improve the quality, transparency, and comparability of BRSR disclosures, fostering a more informed dialogue on sustainability in India.

For the report, the project analyzed BRSR disclosures from 300 companies that represent approximately 70% of India’s total market capitalization. The analysis encompasses companies’ disclosures and data on key BRSR parameters, offering insights into ESG practices across corporate India.

The analysis’ primary goals were to evaluate the quality of disclosures, facilitate discussions among investors, companies, and other key stakeholders, and recommend improvements in reporting practices. The BRSR disclosures, aligned with SEBI’s nine principles of responsible business conduct, cover areas such as investments in socially and environmentally responsible products, energy consumption, emissions, and value chain assessment.

The Report’s Key Findings

“The Current State of BRSR at Corporate India” reveals that Indian companies have made giant strides in their ESG reporting. The number of data sets reported has increased, and the quality of reporting has also improved. Since these are early days, inconsistencies in data quality and reporting standards persist, however, highlighting the need for further refinement.

Important Insights:

The report delivers key insights on workforce diversity, pay disparities, and environmental efforts. Here are examples:

Representation for Differently Abled in Workforce: Participation of differently abled individuals in the workforce is below 0.5%, lower as compared to their share of 2.2% in nation’s population.

Energy Consumption: Nearly all companies (96%) reported energy consumption for FY23, while also achieving a 13% reduction in energy use per unit of revenue compared to FY22.

Emissions: Most companies (94%) reported Scope 1 and Scope 2 emissions, also showing a 14% reduction in carbon emissions per unit of revenue.

External Assurance and Value Chain Assessments: Although not mandatory in FY23, almost one-third of the companies conducted external assurance of environmental data, and 25% of companies assessed environmental impacts within their value chains.

Sourcing from MSMEs: Some two-thirds of companies reported sourcing from Micro, Small & Medium Enterprises (MSMEs), with sourcing increasing from 19% in FY22 to 22% in FY23.

Recommendations

Our report suggests several improvements to enhance the quality and comparability of BRSR disclosures. Companies should standardize their reporting units, like using megajoules (MJ) for energy consumption, to improve consistency. And they must clarify the data sources used for derived figures to prevent confusion in metrics like energy or emissions intensity. Reporting should be tailored to specific sectors, because not all metrics are relevant to every industry. Simplifying data presentation, based on clearly defined categories, may also help maintain clarity. Furthermore, consistent use of standardized reporting formats, like annual data instead of monthly figures, is essential to ensure the data remains uniform and comparable across different companies.