SEBI’s “Business Responsibility and Sustainability Report” norms mandate ESG overview

Contents

• 1
• 2 What is the News?
• 3 About Business Responsibility and Sustainability Report(BRSR):
• 4 What Are Environmental, Social, and Governance(ESG) Criteria?

What is the News?

Securities and Exchange Board of India(SEBI) has issued a circular notifying new disclosure norms on sustainability-related reporting for the top 1,000 listed companies. The new reporting will be called the Business Responsibility and Sustainability Report (BRSR). It will replace the existing Business Responsibility Report (BRR).

Background:

• In 2012, SEBI had introduced non-financial reporting in the form of a Business Responsibility Report(BRR).
• The BRR report was a disclosure of the responsible business practices by a listed company to all its stakeholders.
• The report initially covered the top 100 listed companies. It was later extended to the top 1000 listed companies from the financial year 2019-20.

About Business Responsibility and Sustainability Report(BRSR):

• BRSR is a notable departure from the existing business responsibility report. It is a significant step towards bringing sustainability reporting at par with financial reporting.
  • Sustainable Reporting is the disclosure and communication of environmental, social, and governance(ESG) goals. It also includes the company’s progress towards ESG goals.
• Objective: The BRSR report will encourage businesses to go beyond regulatory financial compliance. It will make businesses to report on their social and environmental impacts.
• As part of the annual BRSR report, companies will need to provide
  • An overview of their ESG
  • The risks and opportunities associated with the ESG
  • Approach to mitigate or adapt to the risks along with financial implications.
• Applicability: BRSR will be applicable to the top 1000 listed entities (by market capitalization). The report will be a voluntary one for FY 2021 – 22 and a mandatory one from FY 2022 – 23.
  • Listed Entity: It is a company whose shares are traded on an official stock exchange.
  • Market Capitalization: It refers to the total market value of a company’s outstanding shares of stock. One can calculate it by multiplying the total number of a company’s outstanding shares by the current market price of one share.

What Are Environmental, Social, and Governance(ESG) Criteria?

• Firstly, Environmental, social, and governance(ESG) criteria are a set of standards for a company’s operations. The standards will help socially conscious investors to screen potential investments.
• Secondly, Environmental criteria consider how a company performs as a steward of nature.
• Thirdly, Social criteria examine how it manages relationships with its employees, suppliers, customers and the communities where it operates.
• Fourthly, Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.

Source: The Hindu