BRSR reporting: Why CFOs shouldn’t sit on the sidelines?

April 22, 2024

In the evolving landscape of corporate responsibility, the Business Responsibility and Sustainability Reporting (BRSR) framework is emerging as a cornerstone for companies in India, aligning with global disclosure norms. This transition marks a pivotal moment, especially for Chief Financial Officers (CFOs), who are typically at the helm of financial disclosures and strategic funding decisions. Here’s why CFOs should actively engage in BRSR reporting and not just remain passive observers.

Aligning with Global Disclosure Norms

BRSR, as a standard reporting format, offers a structured approach to disclosure that resonates with global sustainability reporting practices. For CFOs, this alignment is crucial. It not only ensures compliance but also elevates the company’s standing on international platforms where investors increasingly demand transparency in sustainability initiatives. This is particularly important in the absence of a dedicated ESG (Environmental, Social, and Governance) reporting framework in India, placing BRSR as the de facto standard for holistic reporting.

Evolving Into Integrated Reporting

For CFOs, BRSR is not just about compliance; it’s an opportunity to lead the transition towards integrated reporting. Integrated reports combine financial data with environmental, social, and governance information, providing a comprehensive view of the company's performance and strategy. This holistic view helps stakeholders understand how sustainability is embedded into the business model, potentially leading to better investment and strategic decisions.

Securing Funding Through Enhanced Credibility

One of the most compelling reasons for CFOs to prioritize BRSR reporting lies in the realm of finance. As global markets shift towards sustainability-linked investments, the ability to secure funding at competitive rates becomes increasingly tied to robust ESG disclosures. Detailed BRSR reports enable CFOs to showcase their company’s commitment to sustainable practices, which not only attracts investors looking for responsible investment options but also enhances the company’s credibility.

Low-Cost Financing and Improved Investment Appeal

CFOs can leverage BRSR to access finance at potentially lower costs. Investors and financiers are more inclined towards entities with strong ESG practices, as these are often seen as lower-risk investments. Banks and funds in India are beginning to recognize this shift; some offer prioritized and discounted capital to companies with superior ESG records. This trend is set to grow as financial institutions align their lending strategies with sustainability goals, recognizing that companies with proactive ESG policies are likely to be more resilient and profitable in the long term.

Banks and Funds Prioritizing ESG

In India, major financial institutions are increasingly integrating ESG factors into their lending and investment decisions. Entities like the State Bank of India, HDFC, and ICICI Bank have begun to offer green loans or bonds that specifically fund projects or companies demonstrating positive environmental impact. These financial products often come with more favourable terms, reflecting the lower perceived risk and the banks’ commitment to supporting sustainable development.

For instance, companies like Havells India and Godrej Consumer Products have shown that significant ESG commitments can lead to inclusion in prestigious indices like the Dow Jones Sustainability Index. This recognition not only boosts their reputation but also aligns them with global sustainability norms, making them attractive to investors focused on sustainable investments (Economic Times).

These enhanced practices and recognitions significantly impact their financial advantages. By adopting stringent ESG criteria, these companies can access funds at more favourable terms, reflecting the growing trend where investors prioritize sustainability along with financial returns (Economic Times). This trend is an example of how ESG-focused strategies are becoming crucial for companies seeking competitive funding and investment opportunities in the global market.

For CFOs, engaging deeply with BRSR reporting is more than a regulatory fulfilment—it’s a strategic imperative. By embracing BRSR, CFOs not only ensure compliance and align with global norms but also steer their companies towards sustainable growth and enhanced financial prospects. As the business world pivots towards sustainability, being proactive with BRSR reporting could very well be a game-changer, securing a competitive edge in the hunt for capital and building a resilient, future-proof business.

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