The Securities and Exchange Board of India (SEBI) issued a circular on December 20, 2024, to standardize and streamline the implementation of Business Responsibility and Sustainability Report (BRSR) Core disclosures. These standards, developed by the Industry Standards Forum (ISF) in collaboration with ASSOCHAM, CII, and FICCI, aim to facilitate ease of compliance with Regulation 34(2)(f) of the SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015.

The BRSR Core standards are now mandatory for listed entities from FY 2024-25 onwards, ensuring uniformity in sustainability reporting and encouraging transparency in addressing ESG (Environmental, Social, and Governance) considerations. These standards provide clear guidelines for calculating and reporting various sustainability metrics such as GHG emissions, water and energy consumption, waste management, employee well-being, etc.

The circular underscores the importance of adopting these standards to enhance India’s sustainability and corporate governance landscape and align it with global ESG reporting practices. All listed entities are required to adhere to these standards to meet SEBI’s disclosure requirements.

Aspects covered:

The reporting standards are categorized into Part A (General Requirements) and Part B (Attribute-wise Requirements), addressing both foundational principles and specific performance metrics.

Part A: General Requirements

This section outlines the fundamental reporting principles for companies:

1. Intensity-Based Calculations:
   • The intensity-based approach requires entities to disclose their performance metrics, such as GHG emissions, water consumption, energy usage, and waste generation, in relation to their scale of operations. This involves calculating and reporting intensity ratios for these parameters, adjusted for purchasing power parity (PPP) and other output-based metrics. These adjustments ensure that the reported figures are contextualized and comparable across industries and regions, offering a more standardized view of resource efficiency.

1. • Additionally, the framework provides detailed guidance on output-based intensity calculations, tailoring the requirements to the unique characteristics of manufacturing and service sectors. This includes defining specific benchmarks for measuring outputs, whether through production volumes or operational inputs, to create a robust mechanism for performance evaluation.
     2. Spend-Based Approach:
     • In cases where direct measurements of environmental metrics are unavailable, the framework allows for a spend-based estimation method. This approach provides entities with an alternative mechanism to estimate their environmental footprint, ensuring that gaps in data availability do not hinder comprehensive reporting. However, the endeavour should be to transition from spend based approach to direct measurement approach at the earliest.

Part B: Attribute-Wise Requirements

This section elaborates and clarifies on the reporting of specific sustainability and governance parameters. Key attributes include:

1. Greenhouse Gas Footprint

• Reporting entities must disclose total Scope 1 and Scope 2 emissions in tCO2e, ensuring the source of the emission factor is referenced.
• Accepted sources include National Accreditation Board for Testing and Calibration Laboratories (NABL) Accredited Labs, Intergovernmental Panel on Climate Change (IPCC), International Energy Agency (IEA), Department for Environment, Food and Rural Affairs (Defra) UK, US Environmental Protection Agency (EPA), or country-specific factors.
• For Scope 2 grid power emissions in India, they should refer to Central Electricity Authority (CEA)-published grid emission factors.
• Spend-based methodology may be used initially if measurable data is unavailable but should transition to quantitative measurement over time.

2. Water Footprint

• If direct measurement of consumption is not available then estimate using guidelines by Central Ground Water Authority (CGWA).
• For facilities with larger-level data, estimate consumption at the sub-unit level based on area ratios.
• For international facilities, use region-specific consumption rates.

3. Energy Footprint

• Account the consumption based on power components delivered via local power connections, for example, consumption from wheeled renewable/non-renewable power, green tariff power, or grid power.
• Report these components under renewable or non-renewable categories for accuracy in Scope 2 emissions calculation.

4. Employee Well-being and Safety

• This KPI includes costs related to health/accident insurance, maternity/paternity benefits, daycare, and health & safety measures (e.g., mental health initiatives).
• Costs should be based on expenditure included in audited trial balance and it shall exclude employee-borne insurance costs.
• Report the direct benefits, actual salaries during the maternity/paternity leave, and safety-related expenses (e.g., health checkups, fitness programmes, provision of doctors, counsellors, etc.).
• For calculation, “Revenue” refers to “Total Revenue from Operations” as per the audited P&L statement, excluding “Other Income”. For Banking, Financial Services, and Insurance (BFSI) sectors, it includes “Interest Earned” and “Other Income” excluding profit/loss on the sale of buildings and assets.
• The term “High Consequence Injuries/Ill Health” in the BRSR guidance note is equivalent to “Number of Permanent Disabilities” and should be reported accordingly.

5. Gender Diversity

• Wages include salaries, bonuses, and other compensations (excluding retirement benefits, Employee Stock Ownership Plan (ESOP), etc.).
• Shall apportion the bonus accrued but not paid proportionately between genders.
• Clarified the denominator use against calculation of complaints received on Prevention of Sexual Harassment (POSH) % and defined the term complaints on POSH upheld.

6. Inclusive Development

• Input material encompasses all types of procurement such as raw materials, spares, services, and capex procurement items.
• For services, this includes all procured third-party services.
• Total purchases will include everything from raw materials to services and spares.
• Sourcing of input material to only include direct sourcing from MSMEs, indirect sourcing via intermediaries should not be considered.
• For reporting wages on the basis of job location, the actual location of the job (i.e., where the work is being carried out) should be considered, rather than the location where the employee is based.
• The total wages here includes the salary and any additional wages paid to employees, irrespective of whether they are permanent or contractual, excluding retirement benefits, ESOPs, and staff welfare expenses.

7. Fairness in Customer and Supplier Engagement

• Report cyber incidents per Indian Computer Emergency Response Team (CERT-In) guidelines.
• Include percentage of reported incidents involving personally identifiable information as reported to CERT-In against the total reported.

8. Openness of Business

• Defined trading houses, dealer or distributors along with Sales for BFSI sector that includes reporting under the sub-parameters shall be total revenue for the sub-parameter as a % to the total revenue
• For the BFSI sector, relevant items under the ‘Other Liabilities’ schedule, as reported in their financial statements, should be included in the calculation of accounts payable
• Clarified that investments with related parties’ means investment in related parties.
• Loans and Advances and Investments should be taken as per relevant schedules in the audited Balance sheet.

Additional Takeaways

• Data Transparency: Companies must disclose sources for conversion rates, emission factors, and spend-based methodologies.
• Alignment with International Standards: References to methodologies from organizations like IPCC, IEA, and EPA.
• Phase-Out of Spend-Based Methods: Transitioning to measurable data is encouraged to improve reporting quality.