Tuesday August 29, 2023
Executive Briefings Business & Management: BRSR
Responsible and Sustainable
What began as an activist movement three decades ago, on the fringes of society and far removed from business, was rising consciousness about saving the planet. Over time, words like sustainability, social responsibility and governance began to take centre stage. It has now become a way of life, nudged along by a younger set of employees who are conscious and feel responsible both for their own actions and those of their employers. In addition, regulatory agencies have begun to dictate policies to ensure the participation of industry in this increasingly significant area.
Business Responsibility and Sustainability Reporting (BRSR) involves disclosure requirements of a company’s non-financial performance, including but not limited to its environmental, social, and governance practices. It is intended to provide stakeholders with more than just numerical scores. In fact, it is the wholesome perspective on a business’s impact towards the environment, society and ethical dimensions. In India, the Securities and Exchange Board (SEBI), in addition to other regulatory bodies such as the Ministry of Corporate Affairs, have provided guidelines to ensure compliance by companies. In so far as SEBI is concerned, the mandate is currently restricted to the top 1000 listed companies to disclose BRSR commitments in their annual reports. These, constitute an important ingredient in the agenda of the Risk Management Committee of a company’s board.
Broadly, there are four important props on which the BRSR mandate typically pivots. These include the environmental impact and the efforts towards reducing energy and water consumption, waste management, emission of harmful gases and the preservation of a diversified ecosystem. Second, social responsibility of business has a wide definition, including actions with respect to labour, diversity and inclusion, and community development. Thirdly, the governance practices provide guidelines on structures, board composition, unethical behaviour, and so on. Finally, ethical business practices require a declaration of business conduct and anti-corruption measures.
The initial perception of these mandates is often that they are burdensome and involve further compliance costs, specifically when policymakers across the spectrum have made life particularly difficult for businesses. Still, evidence is now showing up to suggest that these practices come with a happy flip side. As a start, they improve transparency and help mitigate risks. They invite the participation of a rising class of investors, specifically the younger constituency of professionals who are more conscious about such matters. There have been a number of cases where the stock of a listed firm has been on the receiving end of a bear hammering for slip-ups and carelessness. On the other hand, companies that have followed the path of sustainability, in all earnestness, have received appropriate rewards from investors through higher valuations.
In the final count, there is now evidence to suggest that companies with good practices are able to attract high-quality talent, who tend to prove stickier with lower levels of attrition. SEBI’s regulation intends to integrate sustainable practices not only into business strategies and operations but also into the very genetic structure of the organisation. There are reasons to believe that similar mandates, currently limited to the big corporations, will over the coming years be extended to all businesses. Those that operate in industries determined as ‘polluting’ will be the first to undergo scrutiny.