ESG acronym started in 2004 at the “Who Cares Wins” conference hosted by UN Global Compact. In the early 60s and 70s, it was known as CSR, and then Eco-efficiency in the 80s and 90s.
ESG reporting frameworks are the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD).
GRI, with the International Sustainability Standards Board (ISSB), issued the first two IFRS Sustainability Disclosure Standards – (S1 General and S2 Climate-related Disclosures).
More than 70 countries, including the biggest polluters – China, the United States, and the European Union – have set a net-zero target, covering about 76% of global emissions, where most target by 2050 and India by 2070. (8 countries have already achieved the target.)
The Social and governance aspects have increased gender pay equality from 25% in 2020 to 45% in 2022 and have boosted employee perception of inclusion and psychological safety.
Top companies in the world with the highest ESG Performance are Microsoft, Unilever, and Nestle, and in India – Tata Group, Infosys, Wipro, and Mahindra Group.
Triple Bottom Line: ESG factors consider the “triple bottom line” approach, which assesses a company’s performance based on its impact on people, the planet, and profits. It goes beyond just financial metrics.
The benefits of ESG are Financial and risk management, brand reputation, innovation, adaptability to rapidly changing business landscapes, access to capital, attracting and retaining talents, etc.
The market for green bonds and sustainability-linked loans is expanding, providing financing for projects and initiatives with clear ESG objectives. As of January 2023, green bonds have raised $2.5 trillion globally to support green and sustainable projects.
ESG reflects a shift from profit-focused business to holistic sustainability and responsibility.
For India
SEBI introduced a disclosure framework for ESG reporting in India for the top 1000 listed companies in 2021 based on market cap.
SEBI’s guidance document details three disclosures—general, management and process, and “principle wise” (principle-based).
The BRSR framework comprises 140 questions — 98 on essential and 42 on leadership indicators.
BRSR incorporates several KPIs of the international frameworks to bring it on par with global ESG reporting trends, including UN Sustainable development goals.
Few challenges faced by the Companies:
Sudden change in reporting – Form 59 to 140 questions and Quantitative KPIs.
Increase in cross-departmental inputs – require different departments such as HR, EHS, IT, R&D, Purchase, Operations, etc., to manage and consolidate data more effectively.
Increase in stakeholder performance expectations – BRSR is pushing companies to move from ‘doing no harm’ to ‘contributing proactively’ for a change.
The BRSR is divided into two sections: the ‘Essential’ and ‘Leadership’ indicators to help companies understand their position and to help them identify their gaps concerning the industry best practices related to sustainability being followed by leaders in their respective sectors.
Based on the recommendations of the ESG Advisory Committee and pursuant to public consultation, the Board decided to introduce the BRSR Core for assurance by listed entities. The Board further decided to introduce disclosures and assurance for the value chain of listed entities, as per the BRSR Core for 1000 listed companies as per the timelines provided in the circular issued in July 2023.
SEBI has mandated reasonable assurance of BRSR Core in a phased manner, starting with the top 150 companies in FY 2023-24 and going up to 1,000 companies by FY 2026-27.
SRSB has issued Standard on Sustainability Engagement SSAE 3000, “Assurance Engagement on Sustainability Information,” Standard on Assurance Engagement SAE 3410 on “Assurance Engagements on Greenhouse Gas Statements.”
The BRSR Core is a sub-set of the BRSR consists of a set of Key Performance Indicators (KPIs) /metrics under:
Nine ESG attributes.
Nine core principles encompassed in the BRSR have been prepared in line with the National Guidance on Responsible Business Conduct (NGRBC) that encapsulate diverse aspects of business sustainability.
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