Are corporates using the BRSR loopholes rope to climb up?

Are corporates using the BRSR loopholes as a means of ascent?

Recent surveys and reports have brought to light not just the lapses in the questionnaire format developed by the market regulator, but also how the corporate sector has leveraged the BRSR loopholes for its benefit.

WriteCanvas has highlighted how certain companies have utilized experts to help them navigate the different regulatory requirements and mandates mostly by tick-boxing.

The reasons these companies have been able to get away with greenwashing are that there are no metrics to measure a corporate’s sustainability/ESG claims and the callous attitude of the watchdogs to conveniently look the other way.

This gives the corporate not just the wings to skirt the most pressing issues, but also ignore the red flags if any are raised. For example, in a recent circular, the National Stock Exchange has provided specific examples of how large corporates are providing insufficient details, or misrepresenting the facts by placing them under different subject heads.

Another survey by the CSE which studied 28 random reports of 14 listed companies remarked that the companies did not provide the details in most instances.

The BRSR framework in India is the first to mandate the sharing of detailed environmental performance and compliance data in the public domain.

External experts and internal auditors are supposed to keep a vigil over the information and content right from the concept till the stage when the last signatory signs it.

Identifying the problem:

Sadly, a majority of them cannot pull the plug when needed. I am certain that almost all of them can identify the BRSR loopholes and also have the solutions or refer to solutions experts.

CSE Program Director, Industrial Pollution, Nivit Yadav, believes transparency should drive investor decision-making. However, there’s room for improvement, and SEBI reviews guidance notes and BRSR format regularly.

But in a hazy world where the head honchos are busy signing M&A agreements and expanding operations with an eye on the stock market, the BRSR report is just one fly in their tea cup, possibly an irritant that needs to be tick-boxed and filed away.

The fact that some of these regulations mandate a board member to be a part of the sustainability/ESG committee can make a difference, is fast gathering dust.

The CSO, CRO significance:

I am by no means saying that the BRSR reports are fudged or the information is false. I am reiterating the points that the watchdog as well as the critics have argued–the corporates are answering all the questions, filling all the boxes, supplementing all the links, and providing internal and external audit reports. And yet, there is not a single organization globally that can claim to have met one regulatory obligation without leveraging a loophole.

As per a Havard Business Review article, the rise in corporate appointing of a chief sustainability officer (CSO) is largely due to the increasing popularity of the term, but there is still a lack of clarity about CSO’s tasks and responsibilities, leading to fragmented ownership, internal competition, and inefficiency. This confusion is partly due to the lack of history and benchmarks for the CSO role.

Secondly, traditional risk management methods are insufficient for complex risks, Companies also require a holistic approach with a Chief Risk Officer to oversee risk profile and board liaison.

The time is ripe to face the truth. The truth is that the corporate has not been able to fulfill all the obligations as demanded by the BRSR mandate. That acceptance is the first step in the right direction. This alone will require the team to look for and identify any gaps or weaknesses and then devise plans of action to close those gaps.

Our take:

Let BRSR be your friend in your sustainability journey. Let it not be the four-letter word for you to fear, and comply with the fear.

Use the pathways created by SEBI as your guideline. Instead of making it an ego hustle, pinpoint the loopholes in the questionnaires/format to the regulator when it releases consultation papers.

In all honesty, corporates are investing money, time, resources, and effort to become sustainable. The reasons can be many: regulatory, corporate policy, government action, geographic expansion, or a sincere effort to be a sustainable business.

Overall, the NSE circular and the CEI survey have come as eye-openers for all the stakeholders. This is not just a compelling pull-and-push theory or story, but a collective effort for a sustainable business, a greener planet, and able governance!