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Silloo Jangalwala: Hello, this is Silloo welcoming you to this episode of the EY ESG Podcast. Every fortnight, we look at the most important areas that India Inc. would deal with as they curate their sustainability journey through the Environment, Social and Governance (ESG) rules and norms.  The most important among these is the Business Responsibility and Sustainability Reporting (BRSR) framework.

SEBI launched BRSR in May 2021 to replace the Business Responsibility Reporting (BRR) framework, and to address the need to extend and enhance ESG disclosures in India. The guidelines apply to the top 1,000 listed entities as of now. Reporting was voluntary for FY 2021–22 but is mandatory for the current year, FY 2022–23.

To better understand the implications of BRSR, I have with me Chaitanya Kalia, Partner and National Leader of the Climate Change and Sustainability Services at EY India. Chaitanya is a climate change expert, an advisor on non-financial reporting and also an ornithologist. Welcome to the podcast, Chaitanya, and thanks for joining us today.

Chaitanya: Thanks, Silloo, and very glad that you have picked this topic as it is very relevant and extremely important for all large organizations. At the same time, it is very relevant for investors as well.

Silloo: Let us start with the most basic question. What is included in the BRSR guidelines and how are they different from the corporate social responsibility reports?

Chaitanya: Simply put, BRSR norms aim at disclosing organizations’ non-financial performance. Non-financial performance is a very large subject, as you can imagine. It includes the CSR aspects and even the BRR aspects, which were mandatory for all earlier. Although the regulations related to CSR remain as it is, BBR is getting replaced. Simply put, I would say that BRSR is all about disclosing the organization’s non-financial performance.

Silloo: How do the BRSR norms compare with similar reporting norms that have been mandated in other countries, especially developed countries?

Chaitanya: BRSR, as they are defined now, has used several of the established global frameworks. Those who have drafted BRSR framework norms have looked at several frameworks, rendering us an all-encompassing and extremely detailed framework. So, whatever is happening in other parts of the world is also getting covered for us in India. But there is a key difference too, especially if I compare (BRSR) to some of the developed countries.

The US, for example, is following sector specific disclosure norms. So, the set of disclosures required from the manufacturing sector would be different from, say, the services sector or the IT sector. However, the BRSR is a one-size-fits-all. So, one kind of disclosure norms applies to everyone now. There are both positive views and counter views on that.

From what I understand, BRSR is going to be part of the annual report. Now, an annual report, as you know, does not distinguish between sectors. The annual report for an IT company and for a manufacturing company are defined in the same manner. Similarly, BRSR norms for all the sectors in India are defined in the same manner, though there are some small differences.

Overall, I would say BRSR is very detailed and any investor or just about anyone who wants information on the norms should be able to do so.

Silloo: If you have to create a checklist for an Indian company that is preparing to meet the ESG reporting norms, what would the items be in order of priority?

Chaitanya: I would start with looking at own operations. Companies can find most of the questions related to BRSR by looking at their own operations and how that impacts the environment, its social aspect and how the governance has been looked at.

Second, I would look at is on the upstream or the supply side, i.e., the supply chain — how robust is the supply chain in terms of disclosing ESG norms.

And third, I would look at the downstream, which has an impact on customers.

Silloo: How do investors and other stakeholders benefit from BRSR?

Chaitanya: The way BRSR is getting defined, it is going to be part of the annual report. Therefore, many investors will refer to it. Apart from that, rating agencies are also looking at both financial and non-financial information, separately and sometimes together as well. So, that is how investors will benefit; they will have more information to take a view on how companies are performing. They will be able to take a more informed decision.

Silloo: How well do you think these top 1,000 companies are prepared for the BRSR reporting norms? I understand that SEBI has actually been talking of the BRSR norms for a decade now…

Chaitanya: I believe — no, not only believe, but I also know (because I work with several of them) — most companies are well prepared. They are doing the right things. Now, it is only about using the framework and disclosing (accordingly). I am not saying that all (companies) will be 100% aligned, but as a philosophy, as a right way of doing things, most are not going to face significant challenges. But at the same time, there are areas that are beyond their own operational boundaries, such as those for customers, suppliers and the supply chain. Some more work would be required (in those areas). Otherwise, most companies I believe are well prepared to give more information to stakeholders like large investors, customers, etc. Overall, they would be able to capitalize on this opportunity.

Silloo: Thank you, Chaitanya, for giving us an overview of BRSR.

Chaitanya: Thank you, Silloo. I also enjoyed answering your questions.

Silloo: With this we come to the end of this episode. Visit our website www.ey.com/in to know more about BRSR guidelines, access our ESG Compass, and leave us comments on other such topics on ESG that you would like us to deep dive into.

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