Keen to join the global race to turn profit-seeking corporations into Good Samaritans, our regulators have been nudging companies to improve their reportage on ESG (environmental, social and governance) factors in recent years. But the nudge now seems to be turning into a decisive push. The Securities and Exchange Board of India (SEBI) has mandated that the top 1,000 listed companies disclose information on compliance with nine core Business Responsibility and Sustainability Reporting (BRSR) principles from FY24.

Apart from demanding granular information on dozens of indicators, the new rules require companies to get the data validated through an external audit. Top 250 companies are expected to integrate their key suppliers and buyers into their BRS efforts and report their data too. It is accepted that today’s corporations, given their size, need to engage responsibly with stakeholders beyond financial investors. What gets measured gets done, so getting them to report on ESG parameters can foster better practices. But mandating excessively elaborate data compilation and disclosure can prompt companies to take a checkbox approach to the reportage. On this count, the new BRSR requirements do seem like overkill.

To start with, there’s the sheer volume of new non-financial data that companies will now need to compile. For instance, compiling data on the male-female ratio, proportion of contract or disabled employees in the workforce may be a straight-forward affair. But a break-up of the wage bill between rural, semi-urban, urban and metropolitan centres may be much trickier. Hard data on a company’s GHG emissions, water consumption, recycling and regulatory actions can be a good sustainability gauge. But the BRS report also relies on dozens of declarations from the management on subjective metrics such as human rights, sustainable sourcing and responsible conduct, which are bound to be taken with a pinch of salt. The requirement that companies get their BRSR data validated by external auditors to obtain ‘reasonable assurance’ is stringent, as other countries make do with self-certification. If this is not bad enough, the expectation that companies must coax their suppliers and buyers to comply with the same standards and vouch for their data, is downright impractical. It is unreasonable to expect the MSME and unorganised suppliers of a large corporation to mirror its BRS standards.

Even while hurting the ease of doing business, regulators need to introspect on whether there is an audience for such elaborate BRSR disclosures in the Indian context. In the Western world where institutions have whole-heartedly embraced ESG investing, BRSR disclosures may be widely analysed and dissected to be used as an input to activism and investing decisions. But domestic institutions and retail investors have so far shown little inclination to hold companies accountable even for governance infractions that directly impact their financial interests. The market needs to mature a lot more before BRSR disclosures can make a difference to companies’ fund-raising ability or business prospects.