With growing threat of Climate change on the planet, Sustainability has sneaked in every aspect of Human lives as a strong imperative.
We begin with jeopardizing well-being of our planet in the name of development. Then we came to realize how they can work in tandem to achieve greater good of every soul within.
It was not too far that we could dare to impregnate our financial assets with Sustainability using Climate Finance, Green Finance etc. Now SEBI has pioneered in introducing Green-care in Money market-the next big thing.
With the advent of Paris Agreement on climate change and UN sustainable development goals, a global transition to better and sustainable economies has gained momentum along with better adaptation-mitigation measures for Climate risks.
It has brought in Business Responsibility and Sustainability Report (BRSR) that hopes to replace the existing Business Responsibility Report (BRR) in India.
This sort of filing the BRR composed of ESG(Environmental, Social and Governance) disclosures first saw the light in 2012, with further advancements thereafter.
The new report seems to engage environmental know-how to the social and governance perspectives, to be made applicable on the top 1,000 listed entities(the ones who have their shares being traded in Official Stock Exchanges) by market capitalization, thereby increasing greater transparency and better assessment of Sustainability related risks by market entities.
Market capitalization denotes a Company’s worth as determined by the stock market, calculated as the total market value of all outstanding shares. One can simply multiply the value of one share to the number of shares a Firm holds.
Business Responsibility Reports (BRR) shall be filed under the ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business‘ (NVGs).
This also involves disclosing the infamous ESG (environmental, social and governance) risks and opportunities, in order to mitigate or adapt to the climate-impaired financial risks of the same.
The report even contains the Sustainability related goals and targets to be undertaken to strengthen the markets and eliminate possible vulnerabilities. Even the achieved targets need to be identified in the report.
Pandemic has also exposed the ground-realities and increased the relevance of ESG considerations to investors resulting in increased awareness and a considerable tilt towards sustainable investing with more incoming ESG-themed mutual funds and growth in assets of such schemes in India.
“Access to relevant and comparable information, will enable investors to identify and assess sustainability-related risks and opportunities of companies and make better investment decisions,” SEBI said.
Different aspects to the risks are clearly enunciated in the report:
Environment related disclosures: such as resource usage (energy and water), air pollutant emissions, green-house (GHG) emissions, circular economy transition, waste generation and management practices, bio-diversity.
Social disclosure: gender and social diversity disclosures by Companies inclusive of differently abled employees and workers, turnover rates, median wages, welfare benefits to permanent and contractual employees / workers, occupational health and safety, trainings.
Community level disclosure: includes Social Impact Assessments (SIA), Rehabilitation and Resettlement, Corporate Social Responsibility etc.
For the ease of applicability to Companies during these bleak times, the reporting needs to be on voluntary basis for financial year 2021-22 and on a mandatory basis from 2022-23. However, they are totally encouraged to be early adopters of BRSR.
SEBI itself had been one of the early adopters across the globe, of sustainability reporting for listed entities in respective countries.
Additionally, companies may be able to demonstrate their sustainability objectives better, their position and performance culminating into the long-term value creation according to SEBI. This effort for greater transparency will help in attracting more capital and investment.
Those listed entities already undertaking disclosures based on internationally accepted reporting frameworks can cross-refer the ones in new report.
These changes were introduced after feedbacks received from public consultation and extensive discussions with all the stakeholders including corporates, SEBI, FIIs etc.
The new Customer as well as Companies are well aware, that if Sustainability affects them, it tends to affect Markets. The new class relate more to slogans like “Green is the new black”.
A recent Accenture survey has found that two out of three consumers are making more choices based on sustainability, with a clear intention to continue doing so, and would like to see government legislation promote “conscious consumption” all along.
With ever-growing global challenges related to climate change, environmental risks, growing inequality, etc. the onus lies on the business leaders to reimagine and re-invigorate the role of businesses in the society today.
They cannot emerge as mere money-making units, rather be a participant to the Environment from where the basics get sourced or the society that holds it.