The philosophy of responsible business is based on the principle of business being accountable to all its stakeholders. This was first embedded in the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business (NVGs) released in 2011 and later incorporated in Companies Act, 2013, which envisages wider responsibilities for a Company and its Directors beyond its shareholders to its stakeholders – employees, community, and environment. In keeping with global developments and domestic changes, the NVGs were upgraded and updated as the National Guidelines for Responsible Business Conduct (NGRBC) in 2019.
The Securities and Exchange Board of India has mandated top 500 listed companies by market capitalisation to make disclosures on business responsibility and sustainability indicators contained in the NVGs since 2012 through Business Responsibility Reporting (BRRs). The proposed formats in this report are an update on the existing BRR to incorporate the current global practices in non-financial sustainability reporting based on the NGRBCs.
Ministry of Corporate Affairs (MCA) releases the Report of the Committee on Business Responsibility Reporting on August 11, 2020.
Key recommendations are:
A new reporting framework called the ‘Business Responsibility and Sustainability Report (BRSR)’ has been recommended to better reflect the intent and scope of reporting on non-financial parameters.
The BRSR would be integrated with the MCA 21 portal.
The information captured through BRSR filings should be used to develop a Business Responsibility-Sustainability Index for companies.
The top 1000 listed companies are to undertake this reporting mandatorily.
The reporting requirement may be extended by MCA to unlisted companies above specified thresholds of turnover and/or paid-up capital.
What is Business Responsibility Reporting?
It is a disclosure of adoption of responsible business practices by a listed company to all its stakeholders. Business Responsibility Reporting is applicable to all types of companies including manufacturing, services etc.
Evolution of Business Responsibility Reporting in India:
Corporate Voluntary Guidelines in 2009;
Endorsement of United Nations Guiding Principles on Business & Human Rights by India in 2011;
MCA issued ‘National Voluntary Guidelines on Social, Environmental and Economical Responsibilities of Business’ which encourages reporting on environment, social and governance issues in 2011;
SEBI mandates top 100 listed companies by market capitalization to file Business Responsibility Reports (BRR) based on NVGs in 2012;
National Guidelines on Responsible Business Conduct (NGRBC) released in 2019.
Need of Business Responsibility Reporting
At a time and age when enterprises are increasingly seen as critical components of the social system, they are accountable not merely to their shareholders from a revenue and profitability perspective but also to the larger society which is also its stakeholder.
This is important considering the fact that these companies have accessed funds from the public, have an element of public interest involved, and are obligated to make exhaustive disclosures on a regular basis.