BRSR: Applicability and Consequences of Non-Compliance
Khusbu Agrawal
Khusbu Agrawal (the “Valuer”) is a Fellow Member of the Institute of Company Secretaries of India (ÏCSI) having membership No. F11833. The Valuer is registered with the Insolvency and Bankruptcy Board of India (Registration No. IBBI/RV/03/2021/14393) to undertake the Valuation of Securities and Financial Assets of the Companies. She has more than 8 years of experience in Corporate law, merger & acquisitions. She has also done LLB, Master’s in Commerce and Master’s in journalism & Mass Communication. Further, Ms. Khusbu Agrawal has done post qualification course i.e. Certificate Course on Intellectual Property Rights conducted by ICSI. She is a qualified Independent Director and Social Auditor.
Introduction
Business Responsibility and Sustainability Reporting (BRSR) is a framework introduced by the Securities and Exchange Board of India (SEBI) to enhance transparency in corporate sustainability disclosures. It replaces the earlier Business Responsibility Report (BRR) and aligns with global Environmental, Social, and Governance (ESG) reporting standards. The objective of BRSR is to provide stakeholders—including investors, regulators, and consumers—with a clear view of a company’s sustainability efforts and responsible business conduct.
Applicability of BRSR
SEBI has mandated BRSR compliance for the following categories:
- Top 1,000 Listed Companies: The top 1,000 listed companies (by market capitalization) on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) must submit BRSR reports beginning with the financial year 2022-23.
- Voluntary Adoption: Other entities, including unlisted companies, small and medium enterprises (SMEs), and private firms, are encouraged to adopt BRSR voluntarily to enhance their ESG credibility.
- Foreign and Multinational Entities: Foreign companies listed on Indian stock exchanges and multinational corporations operating in India are expected to comply with BRSR norms.
- Public Sector Undertakings (PSUs): Listed government-owned companies must follow BRSR reporting requirements to align with sustainability goals.
Adopting BRSR enables businesses to integrate ESG factors into decision-making, thereby enhancing accountability and stakeholder trust.
Structure of BRSR
The BRSR framework consists of three main sections:
- General Disclosures: Information regarding the company’s profile, business activities, and corporate governance structures.
- Management and Process Disclosures: Details on sustainability policies, risk management practices, and stakeholder engagement strategies.
- Principle-wise Performance Disclosures: Based on the Nine Principles of the National Guidelines on Responsible Business Conduct (NGRBC), covering areas such as environmental sustainability, human rights, ethics, and transparency.
Key Disclosures Under BRSR
BRSR reporting focuses on the following ESG parameters:
- Environmental Factors: Carbon footprint, energy consumption, water management, biodiversity impact, and waste management.
- Social Factors: Workforce diversity, employee welfare, labor rights, health and safety measures, and corporate social responsibility (CSR) initiatives.
- Governance Factors: Board composition, anti-corruption policies, business ethics, and transparency in financial disclosures.
Such disclosures not only promote corporate accountability for sustainability performance but also help investors make informed decisions.
Potential Consequences of Non-Compliance
While there are currently no specific monetary penalties prescribed for non-compliance with the BRSR framework, companies are still expected to adhere to SEBI’s disclosure regulations under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Non-compliance may lead to several indirect but significant consequences:
- Reputational Damage: Companies that fail to comply with BRSR requirements may face negative perceptions from stakeholders, including customers, regulators, and business partners. This can result in a damaged public image and the erosion of brand trust.
- Investor Scrutiny: Investors are increasingly incorporating ESG factors into their decision-making processes. Companies that do not comply with BRSR may be subject to greater scrutiny from institutional and retail investors, which could affect funding opportunities and shareholder confidence.
- Difficulty in Attracting Talent: A growing number of professionals prefer to work with organizations that demonstrate a commitment to sustainability. Lack of transparency or poor ESG practices may deter skilled employees, affecting recruitment and retention.
- Lower ESG Ratings: Non-compliance with BRSR disclosures can lead to lower scores in ESG assessments conducted by rating agencies, impacting a company’s visibility and standing in the global investment community.
- Increased Regulatory Attention: Although SEBI does not currently impose direct fines for BRSR non-compliance, failure to fulfill disclosure requirements may still trigger regulatory reviews, inspections, or demands for clarification, which could impact a company’s operations.
- Public and Media Criticism: Companies that do not report under BRSR may face scrutiny from media outlets and civil society organizations, leading to negative publicity and stakeholder activism.
Conclusion
The BRSR framework is a crucial step toward fostering responsible business practices and aligning Indian companies with global ESG standards. Compliance with BRSR not only ensures transparency but also strengthens investor confidence and corporate reputation. While SEBI has not outlined specific monetary penalties for BRSR non-compliance, the indirect consequences can be significant and far-reaching. These include reputational damage, investor scrutiny, and difficulty in attracting talent, all of which can affect a company’s long-term performance and sustainability.
Therefore, companies should recognize that BRSR compliance is not merely a regulatory obligation but also a strategic opportunity to demonstrate leadership in sustainability. As India moves towards a more sustainable economic framework, proactive adoption of BRSR will be a key factor in shaping resilient, future-ready businesses.
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