BRIEF HISTORY OF BRR IN INDIA:
Companies play an integral part in the progress of the Society and this has been tested by time. Companies are not only responsible towards well being of its employees and to the extent of paying dividends to its investors but they also extend their responsibility towards betterment of stakeholders at large. Their impact on society and environment is as deep as its financial and operational performance.
In the year 2011, Ministry of Corporate Affairs had first proposed the concept of ‘National Voluntary Guidelines’ on social, environmental and economic responsibilities of the companies incorporated in India. These guidelines comprised of reporting framework that companies have to follow for a structured business responsibility reporting. The reporting framework under these guidelines are designed on the ‘Apply-or-Explain’ principle. The suggested framework takes in account the requirements of the business entities that are already reporting in other recognized framework as well as those which yet do not have the capacity to undertake full reporting.
These guidelines are laid down to be applied by all the businesses irrespective of size, sector, or location and therefore touch on the fundamental aspects – the ‘spirit’ of an enterprise. Below are the nine core principles acknowledged highlighted in the Guidelines-
1) Businesses should conduct and govern themselves with ethics, transparency and accountability;
2) Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle;
3) Businesses should promote the well- being of all the employees;
4) Businesses should respect the interests of and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized;
5) Businesses should respect and promote human right;
6) Businesses should respect, protect and make efforts to restore the environment;
7) Businesses when engaged in influencing public and regulatory policy, should do so in a responsible manner;
8) Businesses should support inclusive growth and equitable development; and
9) Businesses should engage with and provide value to their customers and consumers in a responsible manner.
Stock Exchange Board of India (SEBI) had introduced BRR requirement in the year 2012 and later rescinded the same. Over a period of years, SEBI has provided for Business Responsibility Reporting through the Regulation 34 (2) (f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Regulations) by initially mandating this requirement for top 500 Listed entities in India to make BRR as a part of their Annual Report. In addition to this requirement, SEBI provided that the Listed entities which have listed their specified securities on SME Exchange, may on voluntary basis include BRR in their Annual Reports.
Further, the mandate to publish BRR with Annual Report for top 1000 Listed companies was implemented through SEBI (Listing Obligations and Disclosure Requirements) (Fifth amendment) Regulations, 2019, with effect from 26 December, 2019.
Note: Top 1000 entities is based on market capitalisation calculated as on 31st March every financial year.
BUSINESS RESPONSIBILITY POLICY (POLICY):
Every listed entity to which these Regulations are applicable must formulate a Business Responsibility Policy which has to be approved and adopted by the Board members of the company.
The said policy may list down all the objectives of the Policy, principles and strategies that the company needs to follow in order to meet with the Regulation and implementation of Business Responsibility Reporting requirements.
The Board may also authorise any company personnel to oversee the implementation of the Policy. The Board may also review the policy from time to time and revise its strategies in order to best fit to completely in compliant with the Regulations.
The companies which have formulated this Policy and the same has been approved by the Board members, may publish it on their website, if any. This will indeed help the stakeholders understand the strategies, policies, framework and reporting structure adopted by the company.
SEBI has laid down principles for Listed entities to assess compliance with environmental, social and governance norms along with a specified format to disclose their environmental, social and governance practices to its shareholders. This format was suggestive in nature and companies may disclose any additional information under this report if it deems fit. However, the specified format provides a large range of disclosure areas comprising inter- alia of the following –
1. Corporate information of the company including details of its subsidiaries;
2. Financial data;
3. Details of Directors responsible for Business Responsibility;
4. Corporate Social Responsibility budget and spends;
5. Principle wise BR Policies (as per NGV’s); and
6. Measures or strategies planned by the company to preserve environment,
7. Employee details (permanent/ contract basis/ women employees/ employees with disabilities)
EXCEPTION TO REPORTING FORMAT:
SEBI had exempted those listed entities which have been submitting sustainability reports to overseas regulatory agencies/stakeholders based on internationally accepted reporting framework from preparing a separate report for the purpose of meeting the reporting requirements mentioned in the Regulations and to furnish the same report to its stakeholders along with the details of the framework under which their BR Report has been prepared and a mapping of the principles contained in these Regulations to the disclosures made in their sustainability reports.
Although companies publish BRR as mandated by SEBI, it is also important to understand that this is only a small step towards integrated reporting system. Some countries have already made integrated reporting practice mandatory. SEBI in its circular SEBI/HO/CFD/CMD/CIR/ P/2017/10 dated 6th February, 2017 had advised top 500 companies (which are required to prepare BRR) to voluntarily adopt integrated reporting framework. The purpose of following these reporting frameworks is provide best opportunity to the stakeholders, to make a well- informed decision, who seek both financial and non-financial information from the companies. Hence, companies must strive to prepare a detailed, accurate and transparent report for its stakeholders not only in letter but also in spirit as a part of good Corporate Governance.
Disclaimer: The views mentioned in this article belong to the author alone and do not represent the opinions of the institutions affiliated with the author. The facts mentioned in this article hold best at the time of publishing the article. However, any error is regretted and the readers are requested to be vigilant before using this article in parts or entirety.