Business Responsibility and Sustainability Reporting (BRSR) is an essential framework that helps companies showcase their commitment to environmental, social, and governance (ESG) principles. Recently, a SEBI committee proposed some significant changes to the BRSR framework, aiming to enhance its effectiveness and relevance in the corporate world.
One of the key suggestions put forth by the committee is the inclusion of ESG disclosures for the value chain. This means that the top 250 listed entities will need to disclose their ESG practices and policies concerning their supply chain partners. This disclosure will be mandatory for these entities starting from the financial year 2025, with a comply-or-explain basis.
The committee also recommended refining the definition of ‘value chain’ to include only significant partners. Specifically, value chain partners will now be defined as those upstream and downstream partners of a listed entity, individually comprising 2 per cent or more of the entity’s purchases or sales by value. This targeted approach aims to focus on key partners that have a substantial impact on the company’s operations and sustainability practices.
For the initial year of reporting ESG disclosures for the value chain in FY25, reporting previous year numbers will be voluntary. This transition period will allow companies to adjust to the new reporting requirements gradually.
In response to the Ministry of Environment, Forest and Climate Change notification dated February 22, the committee also introduced Green Credits as an additional leadership indicator under the BRSR framework. Green Credits generated by the company and its value chain partners will now be included in the reporting to emphasize the significance of environmental sustainability.
Furthermore, the committee proposed a change in terminology within the BRSR framework. The term ‘assurance’ will be replaced with ‘assessment or assurance’ to provide flexibility to listed entities. Companies can choose to undertake either self-assessment, which is cost-effective and less burdensome, or opt for external assurance when required by investors or clients.
In line with SEBI’s efforts to promote sustainability reporting, the top 1,000 listed companies have been mandated to file BRSR as part of their annual reports from the financial year 2022-23 onwards. The introduction of the BRSR Core framework in 2023 further reinforced the importance of assurance and ESG disclosures, specifically focusing on the value chain.
The BRSR Core framework is a subset of the main SEBI BRSR format and includes several key performance indicators under nine ESG attributes. This targeted approach allows companies to showcase their sustainability efforts effectively while providing stakeholders with meaningful insights into their environmental and social impact.