Committee on Business Responsibility Reporting
Union Ministry of Corporate Affairs (MCA) has released the ‘Report of the Committee on Business Responsibility Reporting (BRR)’.
What is ‘Business Responsibility Reporting’?
- As a first step towards mainstreaming the concept of business responsibility, the ‘Voluntary Guidelines on Corporate Social Responsibility’ were issued in 2009. These guidelines were subsequently revised as ‘National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, 2011 (NVGS)’.
- The Securities and Exchange Board of India (SEBI) through its ‘Listing Regulations’ in 2012 mandated the top 100 listed entities by market capitalisation to file Business Responsibility Reports (BRRs) from an environmental, social and governance perspective.
- These BRRs enabled 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.
- This was extended to top 500 companies in FY 2015-16 and further extended to top 1000 companies in December, 2019.
- Taking into account the national and international developments in the arena of business and human rights since 2011, the NVGs have been updated and released as NGRBC (National Guidelines on Responsible Business Conduct) in March 2019 to reveal alignments with the United Nations Guiding Principles on Business and Human Rights (UNGPs), UN Sustainable Development Goals (SDGs), Paris Agreement on Climate change etc.
- In furtherance to updation and formulation of the NGRBCs, the Ministry of Corporate Affairs had constituted a ‘Committee on Business Responsibility Reporting’ to develop new BRR formats for listed and unlisted companies.
- The Committee comprised of representatives from MCA, SEBI, three professional institutes, and two eminent professionals who had worked on developing the NGRBCs.
- In its Report, the Committee recommended a new reporting framework called as the ‘Business Responsibility and Sustainability Report (BRSR)’ to better reflect the intent and scope of reporting on non-financial parameters.
- The Committee recommended two formats for disclosures: one ‘comprehensive format’ and the second a ‘Lite version’.
- The Committee further recommended that the implementation of the reporting requirements should be done in a gradual and phased manner.
- The Committee also recommended that the BRSR be integrated with the MCA21 portal. As a long-term measure, the Committee envisions that the information captured through BRSR filings be used to develop a Business Responsibility-Sustainability Index for companies.
What is ‘Corporate Social Responsibility’?
- The term “Corporate Social Responsibility” in general can be referred to as corporate initiative to assess and take responsibility for the company’s effects on the environment and impact on social welfare.
- In India, the concept of CSR is governed by clause 135 of the Companies Act, 2013.
- India is the first country in the world to mandate CSR spending along with a framework to identify potential CSR activities.
- The CSR provisions within the Act is applicable to companies with an annual turnover of 1,000 crore and more, or a net worth of Rs. 500 crore and more, or a net profit of Rs. 5 crore and more.
- The Act requires companies to setup a CSR committee which shall recommend a Corporate Social Responsibility Policy to the Board of Directors and also monitor the same from time to time.
- The Act encourages companies to spend 2% of their average net profit in the previous three years on CSR activities.