Indian regulator adopts mandatory sustainability reporting for listed firms

From 2022, the largest 1,000 Indian public companies will be required to disclose a suite of granular sustainability performance metrics relating to strategy, human capital, ESG risks, business conduct, supply chain due diligence and community relations as part of their annual corporate filings.

Specific data points include exposure to biodiversity, water and climate risks, emissions and waste management, salary differentials for women and differently-abled employees at all management levels, details of consumer complaints, expenditure on CSR initiatives and board-level conduct.

The new requirements were formally adopted yesterday by the board of national securities regulator the Securities and Exchange Board of India (SEBI) as part of its updated Business Responsibility and Sustainability Report (BRSR) framework. 

Currently, the top 1,000 listed Indian companies are already required to make sustainability disclosures based on high-level guidelines issued in 2011.

Under its long-term plans for the BRSR, SEBI said that information captured through the filings will be used to develop a Business Responsibility-Sustainability Index identifying responsible and sustainably-run businesses. It said that the index could be used by investors as well as central and state governments when awarding public contracts, and by financial institutions to assess potential clients.

SEBI has published two reporting templates under the BRSR; a ‘comprehensive’ version will be used by large, listed companies for mandatory reporting, while a slimmed-down ‘lite’ version has been developed for voluntary reporting by smaller or unlisted companies who may be unfamiliar with preparing sustainability disclosures. Reporting companies can opt-in to provide additional disclosures under so-called ‘Leadership Indicators’.

The regulator is encouraging companies to use either template for voluntary reporting in the current fiscal year, before the BRSR comes into force in 2022.

According to SEBI, companies that already produce sustainability reports aligned to international reporting frameworks – such as those from the Global Reporting Initiative, Sustainability Accounting Standards Board or the Task force on Climate-related Financial Disclosures – will be allowed to cross-reference these reports in their BRSR disclosures.

Compared to SEBI’s 2011 guidelines, the BRSR integrates elements of the UN’s Sustainable Development Goals and its Guiding Principles on Business & Human Rights.

SEBI first proposed the BRSR in August last year, in collaboration with the government and industry stakeholders. It has since conducted a market-wide consultation and industry engagements and meetings, at which Chairman Ajay Tyagi described the plans as key to “greater transparency through disclosure of material ESG-related information that will allow market participants to identify and assess sustainability related risks and opportunities”.

This has been echoed by Manish Jain, the Co-founder of ESG consultancy Envint, who said to RI: “The BRSR will be applicable to more than 99% of the market cap of Indian listed space, and hence usher in market-wide sustainability disclosures aligned with global reporting frameworks. This enhanced transparency will lead to better decisions on ESG related risks & opportunities and channelize investments towards responsible businesses.”

According to Jain, only around 20% of top 500 listed companies in India currently publish sustainability reports.

Aside from sustainability reporting, SEBI has also introduced new listing requirements for the largest 1,000 public companies to establish board-level Risk Management Committees. The committees will be expected to formulate a detailed risk management policy that covers both internal and external risks, including “financial, operational, sectoral, sustainability (specifically, environmental, social and governance related risks and impact), information and cyber security risks”, according to SEBI.