By Rajib Basu, Value Reporting Foundation Senior Advisor
It has been 4.5 years since the SEBI (The Securities and Exchange Board of India) issued its circular talking about the voluntary adoption of Integrated Reporting, effective fiscal 2017-18, citing as guidance the reporting framework proposed by the IIRC. This reporting was proposed for those top 500 listed companies (by market cap) in India for which Business Responsibility Report (BRR) had been mandated by the regulator. Later, in 2019, the BRR mandate got extended to the top 1000 listed companies (market cap) and by extension the recommendation to voluntarily adopt Integrated Reporting as well.
In May 2021, the mandatory SEBI requirement (BRR) has found a new avatar in the Business Responsibility and Sustainability Report (BRSR) that is mandatory from fiscal year 2022-23. The SEBI in its circular states that BRSR is intended towards having quantitative and standardized disclosures on ESG parameters to enable comparability across companies, sectors and time. Such disclosures will be helpful for investors to make better investment decisions. There is specific allowance made in the circular to reference existing disclosures made under internationally accepted frameworks and standards (GRI, SASB, TCFD or Integrated Reporting) to the BRSR requirements.
Clearly this a great step in the right direction. And this in a way puts the early adopters of Integrated Reporting and SASB in India in a pole position. Let’s understand why.
Undoubtedly the first brush on the ESG disclosure canvas, the BRR was a good start to the journey. However, it has been widely accepted that the mandatory BRR, lacks teeth in so far as quantitative disclosures and its standardization is concerned. It is widely qualitative and focuses more on ESG principles and much lesser on which aspects of ESG are material to the company in context and its industry and how those matter to its investors so far as their view on the long-term enterprise value is concerned.
From the SEBI circular on the new BRSR, it is clear that it will be directionally moving companies to make disclosures that will be helpful for the investor community to make better investment decisions. The interest of investors has been brought onto centerstage along with that of other stakeholders.
This is where the combination of Integrated Reporting and SASB scores highly. After the global merger of IIRC and SASB into the Value Reporting Foundation – there is now a comprehensive set of tools designed to help businesses and investors develop a shared understanding of value and how it is created, preserved, or eroded. The industry-specific standards (SASB Standards) offered by the VRF can be embedded in investment tools and processes. Therefore, these align with the BRSR requirement that is aimed at standardizing disclosures across sectors. It is a matter of great interest to analyse how the nine principles of BRSR reporting (that are aligned to the SDGs and the Indian National Guidelines on Responsible Business conduct) map into the IR framework and how the principle-wise performance disclosures map into the SASB standards.
Nonetheless, given the overall construct of the BRSR and its renewed focus on investors’ interest, those companies that have already adopted the Integrated Reporting Framework with SASB standards and in specific cases the GRI and TCFD are indeed a few steps ahead in meeting the SEBI’s new requirements that are mandatory from the next fiscal. The others have indeed a lot of catching up to do.