What is the News?
Securities and Exchange Board of India(SEBI) has issued a circular notifying new disclosure norms on sustainability-related reporting for the top 1,000 listed companies. The new reporting will be called the Business Responsibility and Sustainability Report (BRSR). It will replace the existing Business Responsibility Report (BRR).
- In 2012, SEBI had introduced non-financial reporting in the form of a Business Responsibility Report(BRR).
- The BRR report was a disclosure of the responsible business practices by a listed company to all its stakeholders.
- The report initially covered the top 100 listed companies. It was later extended to the top 1000 listed companies from the financial year 2019-20.
About Business Responsibility and Sustainability Report(BRSR):
- BRSR is a notable departure from the existing business responsibility report. It is a significant step towards bringing sustainability reporting at par with financial reporting.
- Sustainable Reporting is the disclosure and communication of environmental, social, and governance(ESG) goals. It also includes the company’s progress towards ESG goals.
- Objective: The BRSR report will encourage businesses to go beyond regulatory financial compliance. It will make businesses to report on their social and environmental impacts.
- As part of the annual BRSR report, companies will need to provide
- An overview of their ESG
- The risks and opportunities associated with the ESG
- Approach to mitigate or adapt to the risks along with financial implications.
- Applicability: BRSR will be applicable to the top 1000 listed entities (by market capitalization). The report will be a voluntary one for FY 2021 – 22 and a mandatory one from FY 2022 – 23.
- Listed Entity: It is a company whose shares are traded on an official stock exchange.
- Market Capitalization: It refers to the total market value of a company’s outstanding shares of stock. One can calculate it by multiplying the total number of a company’s outstanding shares by the current market price of one share.
What Are Environmental, Social, and Governance(ESG) Criteria?
- Firstly, Environmental, social, and governance(ESG) criteria are a set of standards for a company’s operations. The standards will help socially conscious investors to screen potential investments.
- Secondly, Environmental criteria consider how a company performs as a steward of nature.
- Thirdly, Social criteria examine how it manages relationships with its employees, suppliers, customers and the communities where it operates.
- Fourthly, Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights.
Source: The Hindu