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We have always come across investors who are concerned about profits and dividends, but new age investors expect something more from the corporates i.e., they want to know the source of the profits as well. Hence, we are witnessing a sharp rise in ESG space, globally. ESG stands for Environmental, Social, and Governance. ESG investing is also known as “socially responsible investing,” “impact investing,” and “sustainable investing”. ESG refers to those parameters which are used to monitor responsible business conduct with an aim to ensure that businesses ultimately benefit all the stakeholders and not just the shareholders.

‘E’ stands for environment and broadly covers an organisation’s carbon footprint policy, waste management, energy conservation, water consumption policies etc.,

‘S’ stands for the social impact of an organisation on the community through its agendas for its customers, employees, suppliers etc. Gender diversity, safety at workplace etc., are some of the other important factors to judge social impact of an organisation; and

‘G’ stands for governance policies of the corporates which includes board composition, audit practices, disclosure compliances, bribery and corruption, executive compensation etc.


In India, sustainable reporting framework has evolved over time. However, it is still at a very nascent stage as India has still not consolidated laws relating to ESG reporting. Numerous legislations impose certain obligations and disclosure requirements related to ESG matters. These regulations are spread across various legislative frameworks such as the Factories Act, 1948, the Environment Protection Act, 1986, the Water (Prevention and Control of Pollution) Act, 1974, the Prevention of Money Laundering Act, 2002, the Prevention of Corruption Act, 1988, the Companies Act, 2013, MCA’s National Guidelines on Responsible Business Conduct and the SEBI regulations prescribing the compliance and disclosure requirements for the ESG matters.

After observing global standards and practices related to ESG such as sustainability standards published by Global Reporting Initiative (“GRI”) which requires detailed disclosures, SEBI took a step forward and came up with Business Responsibility Report (“BRR”) for top 100 listed companies in 2012. BRR was based on nine sustainability principles provided under MCA Voluntary ESG Guidelines, 2011. BRR format collected ESG data in the form of Yes/ No questionnaire. Hence, BRR was criticised for its weak design as it provided very little and meaningful ESG data. In order to become compliant with the global standards and improve disclosure quality, SEBI vide a circular dated May 10, 2021, introduced ‘Business Responsibility and Sustainability Report’ (“BRSR”) for top 1000 listed companies through amendment in SEBI (Listing and Disclosure Requirements), 2015.

From financial year 2022-23, top 1000 listed companies are mandatorily required to prepare


Business Responsibility and Sustainability Report which demands detailed ESG disclosures.

Some of the key disclosures required under the BRSR Framework are given under the tablebelow:

Sr. No. Kind of Disclosure Key Disclosure Other Disclosure
1 General An overview of the entity’s material ESG risks and opportunities, approach to mitigate or adapt to the risks along-with financial implications of the same. Specific ESG commitments and performance.External assessment/ evaluation of ESG policies.
2 Environment Essential Indicators:
a. Resource usage: Energy consumption, water withdrawal and consumption
b. Air emissions: Scope 1, Scope 2 Green-House gases (“GHG”) and air pollutant emissions
c. Waste management: Quantum of hazardous and non-hazardous waste generated, re-used and recycled alongwith waste management practices
d. Compliance with Extended Producer Responsibility (“EPR”) plan submitted to Pollution Control Boards and Performance-Achieve-Trade (“PAT”) Scheme of the Bureau of Energy Efficiency.
Leadership Indicators: a. Energy consumption mix through renewable & non-renewable sources, water discharge;
b. Water consumption in areas of water stress;
c. Scope 3 GHG emissions;
d. Reclaimed products (as % of products sold);
e. Impact on biodiversity.
Business continuity and disaster management plan(s).
3 Social a. Employees / workers related: Disclosures on gender and social diversity including measures for differently abled employees and workers, turnover rates, median wages, welfare benefits to permanent and contractual employees / workers, occupational health and safety, trainings etc.
b. Community related: disclosures on Social Impact Assessments (“SIA”), Rehabilitation and Resettlement, Corporate Social Responsibility etc.
c. Consumer related: disclosures on product labelling, product recall, consumer complaints in respect of data privacy, cyber security etc.
Framework/ policy on cyber security and data privacy risks
4 Governance a. Role of the Board in sustainability: Statement from thedirector responsible for the report, to highlight sustainabilityrelated challenges, targets and performance.
b. Conduct related: Disclosures on fines/penalties / actiontaken by regulatory authorities or judicial institutions or anylaw enforcement agency on any of the principles.
Anti-corruption/ bribery policies.

Since, BRSR is not an industry specific reporting framework, SEBI has allowed the reporting entity to identify non-applicable parameters and provide a reason for its non-relevance (for example, certain environment related disclosures may not apply to a service industry and so on).


Although India has taken a step towards sustainability and the proliferation of international disclosure standards, there are varying caveats and limitations to be taken into consideration.


1. Challenges in data collection:

Performance is demonstrated by establishing a robust data collection process. Hence, the companies face these major issues while collecting ESG data:

a. Not knowing what needs to be collected;
b. Not knowing who needs to be involved in the process;
c. Not knowing where the data is in the business.

2. Maintaining the quality of report:

Now the companies cannot afford to stick to a tick box approach. Investor satisfaction would require detailed disclosure along with follow-up actions from the respective entities. To maintain the investor trust, entities may also have to get external assessment or evaluation done. External assurance can help maintain investors’ expectations, especially of foreign investors.

3. Multiple disclosure frameworks:

As there are various frameworks available, companies often tend to choose framework which is apt to their particular business. This could lead to less meaningful and comparable ESG data. In such a scenario, gaining investor confidence becomes difficult.

To tackle these challenges posed by current ESG regime, efforts are being made to adopt a single global framework to regulate ESG data, in India. However, maintaining a global standard such as GRI or IFRS (International Financial Reporting Standards) would not be easy for companies operating in a developing economy like India.


1. Manipulated ESG ratings:

Investors who cannot afford proprietary ESG diligence, rely heavily on ESG ratings provided by the ESG rating agencies. However, the rating methodologies used by these agencies has been a topic of debate. More transparent methodologies to provide accurate ESG ratings is the need of the hour.

SEBI on January 24, 2022, released a consultation paper seeking views on proposal to provide for an accreditation framework for ESG rating providers in India. It is hoped that this step by SEBI will help bring in more transparency in the rating methodologies and protect the interest of the investors.

2. Comparability of ESG disclosures:

The availability of numerous frameworks leads to a lack of comparable ESG data in the capital markets. This reduces the usefulness of the ESG information for better capital allocation decisions by the investors. Hence, a common global standard is recommended to achieve reliable and comparable ESG data.


For now, ESG reporting remains a priority for large-listed companies only, but smaller companies, particularly those seeking private investments from VC or PE funds, should also deliberate upon their ESG risks and opportunities. Looking at the fast growth of ESG considerations, it is anticipated that it would soon find its way into credit assessments by banks and other private lenders. It is expected that the BRSR framework will be a milestone in achieving reliable and meaningful ESG data.

Companies should invest to build a mechanism to capture relevant data related to ESG matters, select suitable framework for reporting, and most importantly strengthen the level of assurance on such reporting. Also, it is advisable for the companies to create business specific ESG goals and plans while continuously analysing the risks, challenges and opportunities offered by the ESG regime in India.

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