Corporate Sustainability Reporting in India – Obligation or Optional?

By Dr Amrita Ganguly and Janki Govani

India, as the world’s fifth-largest economy, faces a critical juncture in its environmental trajectory. With a pledge to achieve Net Zero emissions by 2070, the role of businesses in this endeavour is paramount. Corporate Sustainability Reporting emerges as a crucial tool in holding corporations accountable and fostering tangible progress towards sustainability goals.

In 2021, the Securities and Exchange Board of India (SEBI) took a significant step by revising the Sustainability Reporting framework, encompassing Environment, Social, and Governance (ESG) parameters, through the Business Responsibility and Sustainability Report (BRSR) provision. Currently, the obligation to report under BRSR is imposed solely on the top 1,000 listed companies in India.

In 2023, SEBI introduced new disclosure requirements known as BRSR Core, which are updates to the BRSR regime implemented in 2021. These requirements apply to the top 150 listed companies starting from April 1, 2023. It also mandates to offer “reasonable assurance” on Environmental, Social, and Governance (ESG) metrics. Furthermore, starting from April 2024, supply chain ESG disclosure will be mandatory for the top 250 listed companies, with an option for explanation if compliance is not feasible. However, beyond this elite group, participation in sustainability reporting remains voluntary.

The voluntary nature of reporting for most corporations poses challenges. A significant barrier is the lack of awareness among companies regarding the importance and benefits of sustainability reporting. Moreover, data unavailability further impedes participation, as many companies struggle to collect and analyse the necessary information. Consequently, sustainability reporting is often perceived as a time-intensive endeavour with unclear benefits and a lack of alignment with standardised practices.

The central debate revolves around whether sustainability reporting, featuring core indicators crucial to sustainability, should be mandated for all companies, or be left to their discretion.

Advocates for mandatory reporting argue that it ensures a level playing field, compelling all businesses to be transparent about their environmental and social impacts. Mandated reporting also facilitates the integration of sustainability considerations into corporate strategies, thereby fostering long-term resilience and competitiveness. This would also be the first step towards the net zero journey for any company. Moreover, mandatory reporting can enhance investor confidence by providing standardised metrics for evaluating companies’ sustainability performance.

On the other hand, opponents of mandatory reporting raise concerns about the potential burden it imposes on smaller companies with limited resources. They argue that a one-size-fits-all approach may not be feasible or practical for businesses operating in diverse sectors and contexts. Furthermore, they emphasise the importance of fostering a culture of voluntary commitment to sustainability, driven by intrinsic motivations rather than regulatory mandates.

To meet India’s National Determined Contribution of reducing emission intensity by 45% from 2005 levels by 2030, concerted efforts in emission reduction by all listed companies are necessary. If each listed company were to adopt an individual GHG emission reduction target of 15-20% from 2005 levels by 2030, India could achieve a 40% reduction in GHG emissions by 2030. Therefore, mandating sustainability reporting for all listed entities could facilitate faster achievement of these targets.

A phased approach to mandating sustainability reporting for all listed companies could offer a middle ground, allowing companies adequate time to adapt while gradually increasing the scope of reporting requirements. This approach would balance the need for accountability with the recognition of varying organisational capacities and challenges.

While the BRSR in India signifies progress, there is a need for further deliberation on the merits of mandating such reporting for all companies. Striking the right balance between regulatory obligations and voluntary initiatives is essential to drive meaningful progress towards a sustainable future.

The authors are Executive Director, Risk Advisory, Deloitte India and Consultant, Risk Advisory, Deloitte India.

Disclaimer: The views and opinions expressed in this article are solely those of the original author. These views and opinions do not represent those of The Indian Express Group or its employees.