In a bid to make businesses in India pay attention to the larger good of the society, a committee set up by the ministry of corporate affairs (MCA) has proposed a new regime for them to report how sustainable and responsible they are.
The reporting requirement, which will be introduced in a gradual and phased manner, aims at forcing businesses to go beyond meeting the objectives of shareholders and contribute to the society. The move is also expected to give startup investors a chance to assess the company in terms of the value it adds to society.
In the long term, the committee envisions the information captured through the Business Responsibility and Sustainability Report (BRSR) filings to be used to develop a business responsibility sustainability index for companies.
The committee has recommended two formats for disclosures, ‘comprehensive format’ and a ‘lite version’ and integration of BRSR with the MCA21 website. “The fact that Indian companies are aspiring to have a global foothold and thus they cannot ignore the emerging trend of Corporate Governance i.e. Responsible Business,” said Rajesh Verma, Secretary, MCA.
He also urged professional institutes and business associations to carry out the advocacy campaign for BRSR and capacity building of their respective members, according to a government statement.
MCA’s Ongoing Efforts To Encourage Corporate Social Responsibility
The proposal is an extension of various initiatives taken by MCA to date. The first step towards mainstreaming the concept of business responsibility was taken through the introduction of Voluntary Guidelines on Corporate Social Responsibility in 2009, which was later revised as National Voluntary Guidelines (NVG) on Social, Environmental and Economic Responsibilities of Business in 2011.
Later in 2012, the Securities and Exchange Board of India (SEBI) mandated the top 100 listed entities by market capitalisation to file BRRs from an environmental, social and governance perspective through its ‘Listing Regulations’. These BRRs enabled the business to demonstrate the adoption of the NVG principles and the attendant core elements with the intent of engaging businesses more meaningfully with their stakeholders going beyond regulatory financial compliance, according to a press statement. This was extended to top 500 companies in FY 2015-16 and further extended to top 1000 companies in December 2019.
“Due to the trends of environmental, social and governance investing, the demand for non-financial reporting is growing and the proposed business responsibility framework will set the stage for sustainable investing,” said Amarjeet Singh, executive director, Sebi in the statement.