Key takeaways from BRSR reports filed for FY 2023-24

Introduction

FY 2023-24 was a significant year for sustainable reporting in India. It was the second year of mandatory adoption of BRSR (Business Responsibility and Sustainability Reporting) framework by the top 1000 entities (by market capitalization) listed on the Indian Stock Exchanges. By this time, entities had more time to adapt to this new regulation and build internal processes for data collection. Therefore, it can be expected that the reported numbers in FY 2023-24 would be more credible compared to FY 2022-23. It is also the year when assurance was made mandatory for the top 150 entities (by market capitalization). In view of this, an analysis of the BRSR reporting now would provide a valuable insight into the current state-of -affairs of the top entities in India with respect to their ESG performance.

BRSR structure in Brief

BRSR Reporting is an evolved form of the erstwhile BRR Reporting framework for non-financial reporting. The BRSR framework consists of 3 sections. Section A has general disclosures about the company. Section B consists of disclosures on governance structure of the entity and its commitment in adopting the responsible business conduct guidelines. Section C has detailed disclosures on the various indicators in relation to the 9 principles of responsible business conduct. There are 68 essential indicators and 40 voluntary leadership indicators.

Objective

This research was an academic pursuit on analyzing the BRSR reports filed till 09th of September 2024. The objective of the research was to highlight some of the aspects of social, environmental and governance areas in the largest entities in India.

Research Methodology

This research was done on the BRSR XBRL reports uploaded by the entities on the NSE website. A total of 1080 reports were analyzed for their performance on select 7 metrics. The entities were categorized into 9 industries for contextual relevance in some material sustainability issues.  Wherever necessary, the values were categorized into buckets for reporting ease. Industry-wise comparison was done for certain metrics. The industry wise number of entities is as follows (See Annexure A for more details):

Industry wise number of entities

Takeaway 1: Entities are proactively gearing up for sustainability reporting compliance

While BRSR reporting is mandatory for top 1000 entities, a total of 1080 reports were filed with the exchange as on 09th September 2024. Also, 193 entities (18%) obtained some kind of external assurance on their disclosures (reasonable assurance mandatory for top 150 entities only). This indicates that many entities have started sustainability reporting compliance voluntarily even before they fall in its scope. The reasons could be the thrust from the investors and the prospects of evaluation by ESG rating agencies.

Pie chart showing Assurance obtained for BRSR Reports

Takeaway 2: Women representation as Key Managerial Personnel is insignificant in most entities

Key Managerial Personnel play a very significant role in the conduct of affairs of the business and determining the quality of its governance. As per the Companies Act, Key Managerial Personnel can be the CEO, CFO, Whole time director, Company Secretary or any other officer not more than one level below the Directors.  Looking at the representation of women in KMPs of these entities reveal that 60% of the entities do not have any women in their KMP team. Unlike directorship role, where women from academia or industry can be inducted as an independent director, for becoming a KMP, women have to rise up the ranks in the organizational hierarchy. It will be interesting to see if this metric changes positively in forthcoming years. 

Heat map showing women participation in KMPs

Takeaway 3:  Climate Change and Environment is the topmost material topic identified as risks by the entities

In Section A of the BRSR framework, entities were asked to identify material sustainability topics which they consider as a risk or an opportunity to their business. On compilation of the various risk identified by the entities and categorising them under 11 material topics, Climate Change and Environment emerged as the most mentioned material topic (21% mentions). This was followed by Employee Well-being (18% mentions) and Governance (14% mentions) (See Annexure B for details). This is an indicator that most entities have started to discuss climate change as a physical risk to their business.

Percentage of mentions of material issues

Takeaway 4:  BFSI and ITES Sector has the greatest number of cases of bribery / corruption on which legal actions were taken

Under Principle 1 of Section C of the framework, business need to report the number of cases where a disciplinary action was taken by any law enforcement agency for the charges of bribery/ corruption. An analysis of this data revealed that BFSI and ITES Sector had the greatest number of such cases of disciplinary actions (33%). It was followed by Food and Retail and Transport Services (22%). Again, it may be noted that more than 90% of such actions were under the employee’s category. The below chart indicates that Corruption/bribery remains a pertinent issue in almost all industries.

Breakup of legal actions against cases of bribery or corruption

Takeaway 5:  BFSI and ITES Sector has the greatest number of sexual harassment complaints filed

Under Principle 5 of Section C of the framework, entities need to report the number of cases of sexual harassment registered and resolved. The analysis highlights that more than 56% of the total complaints of sexual harassment were registered in entities of BFSI/ITES sector in FY 2023-24. This indicates that the sector is most prone to sexual harassment. However, it also confirms that entities in this sector have a robust complaint registering mechanism in place where the victims can lodge a complaint without being intimidated. Another notable aspect is that there has been an overall increase of 31% in the number of cases lodged against the previous year, showing increase in trust in the grievance redressal mechanism.

Breakup of sexual harassment complaints

Takeaway 6: Business are rapidly transitioning into sustainable sourcing

Under Principle 2 of Section C of the framework, entities need to report whether they have implemented procedures for sourcing their inputs sustainably. 72% of the entities have reported to have in place procedures to source their inputs sustainably.  As per reported figures, 58% of them have started sourcing at least some inputs sustainably. It may be noted that balancing the procurement priorities and ensuring sustainable sourcing is an uphill task. This is an a very encouraging trend and is expected to grow further in the forthcoming years.

Percentage of inputs sourced sustainably

Takeaway 7: Expenditure on employee wellbeing measures as a percentage of revenue vary widely across entities

Under Principle 3 of Section C of the framework, entities need to report the expenditure on employee wellbeing measures as a percentage of revenue. Interestingly, this figure varies from less than 1% (in 69% cases) to more than 20% (0.37% cases). Companies did not have any guidance on what expenditures need to be included/excluded for consideration. This may be the reason for such a broad variation.  In Jan 2025, industry bodies association has come out with detailed guidance on this metric.

Employee welfare expenditure as a percentage of revenue

Conclusion

The filing of BRSR Reports for FY 2023-24 have been continuing till Feb 2025. Since the sustainability reporting is still in nascent stages, it would be unfair to pass any comment on the quality of reporting at present. FY 2023-24 should have been a reality check for entities with respect to data and policy gaps. However, the overall trend with respect to BRSR reporting is indeed encouraging.

Annexures