Business Responsibility and Sustainability Reporting (BRSR) is a vital framework for promoting transparency and sustainability across companies. Value Chain BRSR disclosures, beginning from FY 2025 are set to increase the ambit of BRSR to a far wider set of entities.
Investors today increasingly prioritize both financial and sustainability metrics in decision-making and reporting. India’s response to the global evolution of sustainability reporting frameworks is the Business Responsibility and Sustainability Reporting (BRSR) Framework. Introduced by SEBI in 2021, the BRSR mandates standardized ESG disclosures for the top 1,000 listed companies by market capitalization.
The BRSR framework is based on 9 principles of National Guidelines of Responsible Business Conduct (NGRBC). A BRSR report has three sections:
- Section A: General Disclosures – Includes company details, operations, employees, CSR, and compliance, etc.
- Section B: Management and Process Disclosures – Focuses on policies, governance, and oversight, etc.
- Section C: Principle-wise Performance Disclosures – Requires reporting on KPIs based on NGRBC’s nine principles.
The BRSR Core for the value chain companies is a subset of the BRSR, consisting of a set of Key Performance Indicators (KPIs) / metrics under 9 ESG attributes. A company’s value chain encompasses the entire lifecycle of its products or services, from the sourcing of raw materials to the distribution and end-of-life management of its offerings. The value chain is integral in BRSR reporting because it provides a full view of a company’s environmental and social impacts at every stage—from sourcing materials (upstream) to delivering products (downstream).
Starting FY 2025, under BRSR regulations, the top 250 listed companies will need to disclose details of their value chains, adopting a ‘comply or explain’ approach. Importantly, any upstream or downstream partner that contributes 2% or more to the company’s purchases or sales by value must be identified individually. Together, these key partners should represent at least 75% of the company’s total purchases or sales.
Based on our experience, the challenges faced by companies in value chain monitoring include:
- Lack of ESG Data Processes: Many value chain companies struggle with implementing structured ESG data collection and monitoring processes, leading to inconsistent tracking and reporting.
- Data Accuracy and Representation: Inadequate data accuracy and incomplete representation leading to misleading ESG insights and erroneous effective decision-making.
- Information Sharing Hesitancy: Smaller suppliers and distributors may struggle to understand the importance of data collection and can be reluctant to share comprehensive ESG-related information, making communication and data gathering challenging.
- Lack of Dedicated ESG Teams: Absence of specialized ESG teams or support resources often limit effective ESG disclosures.
Improper Application of BRSR Guidelines: Misapplication of BRSR guidelines can lead to incomplete or non-compliant ESG disclosures, affecting transparency and accountability.
Companies can navigate these challenges by engaging with their value chain in the following ways:
- Communicating objectives of BRSR for Value Chain: Communicating the BRSR objectives and securing buy-in from the leadership of value chain companies.
- Focused Supplier ESG Training Programs: Implementing targeted training programs for suppliers to foster a deeper understanding of ESG principles and encourage compliance with sustainability standards.
- ESG Data Collection Tools, Templates, Readme Docs: Providing comprehensive data collection tools, standardized templates, and user-friendly readme documents to streamline the reporting process and ensure consistency in ESG data.
- Automated Data Collection and Validation Processes: Leveraging automated systems for data collection and validation to enhance efficiency, reduce errors, and ensure timely and accurate ESG reporting.
An efficient value chain is the backbone of a successful company. BRSR KPIs for the value chain enable companies to achieve sustainability goals beyond their boundaries while steadily enhancing their reputation. A BRSR-aligned value chain fosters trust, resilience, and long-term growth.