How companies are tweaking ESG disclosures selectively

As part of its Business Responsibility and Sustainability Report (BRSR), Tata Power added a new parameter of freshwater consumption in the table while reporting on water withdrawal by source while GlaxoSmithKline Pharmaceuticals reported only the total volume of water withdrawal from different sources and deleted the row asking total water consumption.

An analysis of BRSR reports of 14 different companies (randomly picked) from 2020-21, 2021-22 and 2033-23 by the Centre for Science Environment (CSE) found that companies have often provided data selectively, as per their understanding, and added or deleted rows of information as per their convenience.

In the case of Tata Power, instead of providing information on total water consumption which the BRSR format asks for, it has introduced a new parameter called total freshwater consumption.

“The volume of freshwater consumed forms only a small part of total water consumption; therefore, the water intensity calculated by the company (litre/rupee) is incorrect,” noted the report.

What does it mean?

The BRSR disclosures by companies may not provide a clear picture of the ESG and they are not at fault completely.
There is some ambiguity in the BRSR reporting framework that needs a tweak by the Securities and Exchange Board of India (SEBI), found the CSE report that focused on data provided by companies about Principle 6 – Environmental Stewardship.

A review of the disclosure format shows that while it is easy to compare financial data or governance structures across different companies, comparison of environmental data throws up practical problems.

Calling for a sector-specific approach in the BRSR framework, the report pointed: “A company may have different sectors having different pollution loads; another may have some air polluting units or a few units which pollute water sources, or both; a company also may have units sourcing energy from dirty fuels as well as those sourcing energy from renewables. In such scenarios, comparison between companies is futile; comparisons can be made only among companies from the same sector.”

The BRSR framework should allow industries with different business activities to report according to their businesses. This will facilitate comparison and will help bring clarity to the environmental stewardship of a company as a whole.

Report Findings

Consolidated company data is not always useful. An average value that takes into account both good and bad units does not represent the sustainability of a company, says the CSE assessment.

“Instead, sustainability can be judged if poor or average performing units are identified and a roadmap is prepared for them to improve their performance on various indicators. In the existing format, SEBI has not focused on unit-wise information from companies, except in case of unit-wise data related to water withdrawal, consumption and discharge,” it noted.

According to the assessment, the current BRSR format makes it difficult to understand the reasons behind the increase or decrease in values of the parameters.

“Take the case of JSW Energy, the information shows that its sourcing of energy from non-renewables has dipped from 157,320 GJ in 2020-21 to 126,000 GJ in 2021-22 – but the company does not provide any reasons for this reduction. Similarly, in the case of water consumption, Bharat Forge Limited, JSW Energy Limited, Orient Cement, Tata Chemicals and Tata Power report that they have increased their water consumption between 2020-21 and 2022-23 – without clarifying why this increase happened,” it noted.

Energy intensity is a critical parameter in view of India’s commitment to reduce the emissions intensity of its GDP by 20-25% over the 2005 levels by 2050.

“SEBI should clarify how energy intensity values can be used to assess the performance of a company and its contribution in achieving this national target – especially as companies are expected to report on GHG emissions intensity separately under the BRSR format,” it recommended.