• Tue. Jun 18th, 2024

SEBI prods companies to report on their ‘green’ performance; CSE says the move commendable, but needs more teeth

ByNE India Broadcast

May 25, 2024 #CSE

Indian companies, nudged by the Securities and Exchange Board of India (SEBI), have started reporting on their environmental and sustainability performance, but their submissions lack details and relevant information – finds a survey and assessment done by Centre for Science and Environment (CSE).

In May 2021, SEBI, in a welcome move, had launched an initiative called ‘Business Responsibility and Sustainability Reporting (BRSR)’. Under it, the Board wanted the top 1,000 listed companies in India – identified based on their worth in the stock market — to disclose their non-financial data from 2021 to 2023, including data on “environmental stewardship”. SEBI’s BRSR framework asks for this data for two financial years: the current and the previous.

CSE has reviewed 28 reports submitted by 14 of these top companies. Its assessment, titled ‘Strengthening Environmental Reporting under BRSR (Business Responsibility and Sustainability Reporting)’, is largely focused on data provided by the companies pertaining to their actions and records on environmental stewardship. Says Nivit Yadav, programme director, industrial pollution, CSE: “We have reviewed the reports for two consecutive years — 2021-22 and 2022-23 — and also analysed the data for three consecutive years: 2020-21 to 2022-23. The primary aim behind our assessment has been to find out how the format can be strengthened to get quality data out in the public domain, which can then be used by policymakers and investors for more informed decision-making.”

Shobhit Srivastava, deputy programme manager, industrial pollution, CSE adds: “The criteria for selection of the 14 companies was to have as much diversity as possible in terms of the sector. The selection is random as well, and is based on the availability of reports.”

The problem lies, says CSE, in the way the BRSR format and questionnaire has been designed, and the kind of questions that have been asked of the companies — it leaves room for submission of information which is incomplete, thus defeating the purpose behind the entire exercise: that of creating a reporting structure for Indian companies that would help investors make rational decisions.

What ails the existing reporting guidelines?

Consolidated company data vs unit-specific data: “Consolidated company data is not always useful,” says Srivastava. An average value which takes into account both good and bad units cannot represent the sustainability of a company, says the CSE assessment. Instead, sustainability can be judged effectively if poor or average performing units are identified and a roadmap is prepared for them to improve their performance on various indicators.

Data without the rationale behind it: The current BRSR format makes it difficult to understand the reasons behind increase or decrease in values and numbers of the parameters.

Companies tweaking the questionnaire: Companies have often provided data selectively, as per their understanding, and added or deleted rows of information as per their convenience. It should not be left to them to decide how they wish to present the data.

Some important indicators categorised as ‘voluntary’, not ‘mandatory: Some key indicators such as water withdrawal, consumption and discharge have been placed under ‘Leadership Indicators’, where companies can share information voluntarily. These can be moved to the ‘Essential Indicators’ category, which lists mandatory data points that need to be provided mandatorily.

Says Yadav: “The BRSR questionnaire has some problems. For example the format does not seek information on the type of fuels used by a company, or the sources of renewable and non-renewable energy, or how is the undischarged treated water being used. In the case of hazardous and non-hazardous wastes generated by a company, information on waste-wise management and disposal is critical – but the questionnaire does not ask for it.”

What CSE recommends

Opt for a sector-specific approach: The existing disclosure format conceived by SEBI is generic in nature and does not contain sector-specific guidelines. CSE’s assessment indicates that a sector-specific approach – similar to ones followed by international frameworks — might be more useful for analysis and comparison while reporting. Since BRSR is aimed at helping investors finance environmentally responsible companies, a sector-specific format would help them gain an easy, holistic and comprehensive understanding when they prepare to invest in a specific sector.

Update the BRSR guidance document: The BRSR questionnaire and format were reviewed in July 2023, but the guidance document has not been updated alongside. There are certain parameters in which the document has not given sufficient clarifications on the information to be provided. A case in point is that of questions that have been asked on air emissions – the guidance document does not offer any directions on how companies should report the data in the format provided.

Include table formats (as suggested by CSE) to enable data capture: Companies have often provided data as per their understanding, and added or deleted rows as per their convenience. It should not be left to companies to decide how they wish to present the data. A proper format with specific tables will help in extracting the required information. For this purpose, SEBI can publish the BRSR questionnaire as a protected spreadsheet with the provision of including the responses from industries, but with no option of editing the format.

Non-hazardous and hazardous wastes should be accounted for separately: Though SEBI has asked for data on generation of different types of waste, when it comes to management and disposal mechanisms, the only information that has been asked for is whether waste is recycled, reused or disposed of. SEBI should also seek information on waste generation and disposal in the top three waste streams under both hazardous and non-hazardous categories. There should be a separate section as well on plastic waste, e-waste, biomedical waste and other types of waste that do not result from manufacturing operations.

Mandate specific energy and water consumption data: The BRSR format carries an optional parameter on energy and water intensity – it is up to the company to report on it. CSE recommends that companies should be asked to give specific energy consumption (SEC) data in kilowatt (kw) or megawatt (mw)/tonne of the product; and specific water consumption (SWC) figures in cubic metre (m3)/tonne of the product. This data will clearly reflect the overall energy and water efficiency of the manufacturing process of a company.

To make things easier for SEBI, says Srivastava, the CSE assessment has provided table formats and templates for different parameters to facilitate more clarity on the data that must be provided by the companies.

Yadav points out: “The BRSR framework is the first attempt by any regulatory authority or agency in India to mandate the sharing of such detailed environmental performance and compliance data in the public domain – sharing of such data in a transparent manner should be one of the key drivers in decision-making by investors in today’s era of climate change where resource availability is becoming a serious issue.”

“However, we see a lot of scope for improvement in the BRSR framework – our aim is to help strengthen it for ensuring better quality reporting by the companies. SEBI conducts periodic reviews of the BRSR format and guidance note. Whenever SEBI reviews it next, we are hoping it will consider CSE’s recommendations which can help collect more meaningful information and data from the companies, which can be beneficial for investors during decision-making,” Yadav adds.

(A CSE Briefing)

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