The Securities and Exchange Board of India (SEBI) has taken a stride towards making non-financial disclosures more comprehensive and improving their credibility by recently introducing the ‘Framework for assurance and ESG disclosures for value chain1. The new framework outlines the Business Responsibility and Sustainability Reporting (BRSR) Core requirements that mandate assurance and value chain disclosures for listed companies in a phase-wise manner. This measure will strengthen the adoption of sustainability practices across the value chains, enhance the reporting ecosystem in India, and provide better insights about an organization’s performance in their Environmental, Social and Governance (ESG) parameters.
The BRSR Core is a subset of existing BRSR framework, which is a mandatory non-financial reporting requirement in India for the top 1000 listed entities by market capitalization. The Core framework provides more quantifiable and outcome-oriented metrics that are relevant to both service and manufacturing sector companies, and allows better comparability across companies, irrespective of their size and geographical presence2. To maintain global comparability, the intensity ratios based on revenue adjusted for purchasing power parity are included in the framework.
Under BRSR Core, there are Key Performance Indicators (KPIs) listed under nine ESG attributes for which listed entities need to obtain reasonable assurance. These attributes are related to the following nine categories3:
Mandatory reasonable assurance requirements shall be applicable for top 150 listed entities (by market capitalization) in FY 2023-24, which will eventually extend to top 1000 listed entities (by market capitalization) in FY 2026-27. In addition, listed entities shall make value chain disclosures as per BRSR Core requirements in their annual report. As per SEBI’s circular, the value chain shall encompass the top upstream and downstream partners of a listed entity, cumulatively comprising 75% of its purchases/sales (by value) respectively (Source: SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122, dated 12 July 2023).
The value chain disclosures as per the BRSR Core, shall be applicable to the top 250 listed entities (by market capitalization) from FY 2024-25 onwards, on a comply-or-explain basis. Based on a similar principle, these entities are required to obtain limited assurance from FY 2025-26 onwards.
Introducing ESG disclosures into the value chain will provide a better overview of company’s overall performance on ESG parameters, and will extend the scope of responsible business practices from its boundaries to the value chain. The BRSR framework also aims to enhance transparency and mitigate greenwashing, by addressing potential ESG risks in companies' value chains, which may arise from outsourcing activities.
The challenges with BRSR Core requirements
Although the updated BRSR framework is now more comprehensive, standardized, and aims to increase credibility of non-financial disclosures, there are also certain challenges in this approach that companies may be currently navigating:
- Lack of data management systems could make reasonable assurance a difficult activity
- Many organizations may not have complete visibility or influence over their value chain partners, which may function as a barrier when it comes to data collection
- There could be many micro and small enterprises within the value chains of listed entities, and therefore challenging for such entities to track and report data on Core parameters
- Potential issues in terms of data quality recorded internally, or received from value chain partners
- If an organization is not yet mature in its ESG reporting, these changes may be perceived as a compliance challenge.
Data management – A lever for comprehensive reporting
Considering the many complexities in terms of business operations, and sheer volume of data required for ESG disclosures across various frameworks, organizations need to have a robust data management system in place. The system should have capabilities to simplify and centralize analysis, management, and reporting of ESG data.
To maintain high data quality within ESG reporting, organisations can follow the three C’s approach4:
- Collection: Having a digitized and centralized platform to streamline data collection in accordance with the reporting framework, can help to overcome the challenge of collecting data from multiple sources, and standardize data storage over time. Digital data management platforms such as Schneider Electric’s Resource Advisor platform help in establishing strong data governance, and provide oversight into data collection processes and controls.
- Consistency: Utilizing the automation features to develop complete data sets and consistently track data for sites and sources can free up resources for other activities, and ensure consistent data reporting.
- Confidence: It is also essential to have strong data controls in place to ensure accurate information disclosure and reporting methods. Additionally, conducting capacity building training and running quality controls will reinforce confidence in data collection, and help to proactively identify any outliers that could signal data errors.
By following the three C’s of data quality – collection, consistency, and confidence – organizations can ensure that their ESG data is accurate and comprehensive. Moreover, by using digital data management platforms, organizations can leverage data analytics and visualization tool to transform their data into actionable insights and strategies for long-term value creation.
The introduction of BRSR Core framework is a transitional step towards diversifying the disclosure requirements and ensuring sustainability across the value chain in India. These requirements will build credibility and facilitate informed decision-making, as companies navigate their ongoing reporting processes. While certain challenges may remain ahead related to data availability, quality, and maturity of value chain partners – there are also clear solutions to help address these challenges -- using smart, digital data management platforms. By utilizing flexible ESG data management and technology, organizations can simplify the reporting process and create trust among stakeholders, as well as additional transparency into ESG Performance.
Start a conversation with our regional team on BRSR today.
For more information on how Schneider Electric serves as a digital and trusted partner to organizations with their ESG reporting and sustainability journeys, visit our Sustainability Reporting Toolbox.
Alok Sharma: Deputy General Manager Sustainability
Rebecca Verghese: Senior Manager Sustainability