🌱 F&A Process Guide

CSR & ESG Financial Reporting — Complete Guide

ESG (Environmental, Social, Governance) reporting is no longer optional — it’s the new language of capital markets, regulators, and customers. Finance professionals who master ESG disclosures will be indispensable in the decade ahead.

▶ Start: ESG Framework Overview

🔷 BRSR Reporting Guide (India)

The Business Responsibility and Sustainability Report (BRSR) is mandatory for India’s top 1,000 listed companies (by market cap) from FY 2022-23 onwards. It is India’s equivalent of global ESG reporting frameworks.

• 📋 Section A: General disclosures — company profile, products/services, employees, supply chain overview
• 📋 Section B: Management and process disclosures — policies, governance structure, ESG committee
• 📋 Section C: Principle-wise disclosures — 9 National Guidelines on Responsible Business Conduct (NGRBC) principles
• BRSR Core: 49 key performance indicators (KPIs) with assurance — introduced for top 150 companies from FY 2023-24
• Frameworks to align with: GRI (Global Reporting Initiative), TCFD (Task Force on Climate-related Financial Disclosures), SASB

🔷 Carbon Accounting Basics

Carbon accounting measures a company’s greenhouse gas (GHG) emissions in CO₂ equivalent (tCO₂e). The GHG Protocol defines three scopes:

• 🟢 Scope 1 — Direct Emissions: From sources owned or controlled by the company (factory boilers, company vehicles, on-site power generation)
• 🔵 Scope 2 — Indirect (Energy): Emissions from purchased electricity, heat, or steam — use location-based or market-based method
• 🔴 Scope 3 — Value Chain: All other indirect emissions — business travel, employee commuting, supply chain, use of products, end-of-life disposal (hardest to measure, often 70–90% of total footprint)
• Carbon Offsetting: Purchase verified carbon credits to offset unavoidable emissions — Verra VCS, Gold Standard
• Net Zero Target: Reduce emissions as much as possible + offset residuals — Science Based Targets initiative (SBTi) validates targets

🔷 Sustainability KPIs for Finance

• Carbon Intensity: tCO₂e per ₹ crore of revenue — track year-on-year reduction
• Energy Intensity: GJ per unit of output — measures energy efficiency
• Renewable Energy %: % of total energy from renewable sources (solar, wind, hydro)
• Water Intensity: Kilolitres per unit of production
• LTIFR (Lost Time Injury Frequency Rate): Safety KPI = (injuries × 1,000,000) ÷ hours worked
• Gender Pay Ratio: Median female salary ÷ median male salary — must be disclosed in BRSR
• ESG-linked Remuneration: % of executive compensation tied to ESG targets — increasingly required by investors

🔷 CSR Spend Planning & Reporting (India)

• Who Must Spend: Companies with Net Profit >₹5 Cr OR Turnover >₹1,000 Cr OR Net Worth >₹500 Cr must spend 2% of average 3-year net profit on CSR
• Eligible Activities: Education, healthcare, poverty alleviation, environment, disaster relief, rural development, promotion of sports, etc. (Schedule VII)
• Ineligible: Political contributions, activities outside India, activities benefiting employees or their families
• Unspent Amount: Transfer to separate account within 30 days of year-end; utilise within 3 years or transfer to PM CARES Fund
• CSR Report: Annex to Board’s Report — impact assessment mandatory if CSR spend >₹1 Cr on a project
• CSR Committee: Board-level CSR Committee required — at least 3 directors including 1 independent

✅ End: ESG Audit & Assurance

• Why Assure ESG Data? Investors and regulators require independent verification — unassured ESG data is increasingly distrusted
• Levels: Limited Assurance (negative conclusion — “nothing came to our attention”) vs Reasonable Assurance (positive conclusion — audit-equivalent rigour)
• BRSR Core: Requires limited assurance by an independent third party for top 150 listed companies
• Standards: ISAE 3000 (general assurance), AA1000AS (stakeholder accountability), PCAOB for US-listed companies
• Data Quality: Before assurance, ensure data collection processes are documented, consistently applied, and traceable to source records
• Big 4 vs Specialist Firms: Big 4 (Deloitte, EY, KPMG, PwC) for listed company assurance; specialist ESG firms (Bureau Veritas, SGS) for operational data verification