ESG Score (BRSR Framework)
An ESG Score in the Indian listed company context quantifies a company's performance on Environmental, Social, and Governance dimensions using disclosures made under SEBI's Business Responsibility and Sustainability Report (BRSR) framework, which became mandatory for the top 1,000 listed companies by market capitalisation from FY2022-23.
SEBI introduced the Business Responsibility and Sustainability Report (BRSR) through its circular dated May 10, 2021, replacing the older Business Responsibility Report (BRR) which had been mandatory for top-500 companies since 2012. The BRSR was a significantly more comprehensive disclosure framework, drawing on internationally recognised standards including the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD). It was structured around three main sections: essential indicators (mandatory disclosures) and leadership indicators (voluntary disclosures) across nine principles drawn from the National Guidelines on Responsible Business Conduct (NGRBC).
The nine NGRBC principles covered: ethical and transparent conduct (P1), environmental sustainability (P2), employee wellbeing (P3), stakeholder engagement (P4), human rights (P5), environmental responsibility (P6), consumer welfare (P7), inclusive growth (P8), and policy advocacy (P9). Under each principle, companies disclosed quantitative and qualitative data including energy consumption, water usage and recycling, greenhouse gas (GHG) emissions broken into Scope 1, Scope 2, and (voluntarily) Scope 3, waste generation and disposal, gender diversity ratios, health and safety incident rates, CSR spending details, and board independence metrics.
ESG rating agencies in India — including Sustainalytics (now part of Morningstar), MSCI ESG Research, CRISIL ESG Ratings, ICRA ESG Ratings, and domestic specialists such as Care Analytics and Infomerics — used BRSR disclosures as a primary data source to generate proprietary ESG scores for covered companies. Each rating agency applied a different weighting methodology across E, S, and G pillars and used different normalisation techniques, leading to imperfect correlation across agency scores for the same company — a phenomenon documented in ESG literature as low inter-rater reliability.
SEBI further refined the BRSR framework through BRSR Core, introduced via circular in 2023, which mandated a smaller set of Key Performance Indicators (KPIs) for which listed companies needed to obtain third-party assurance (i.e., independent verification rather than self-reported data). BRSR Core KPIs included greenhouse gas intensity per rupee of revenue, energy intensity, water consumption intensity, gender pay gap, and board governance metrics. The assurance requirement significantly improved data reliability compared to unverified self-disclosures, addressing a longstanding concern about greenwashing risk in ESG ratings based solely on company-reported data.
Foreign portfolio investors (FPIs) operating in India — particularly those based in Europe subject to SFDR (Sustainable Finance Disclosure Regulation) and other ESG mandate requirements — increasingly used BRSR disclosures and derived ESG scores in their portfolio construction and risk assessment processes. Several large global passive asset managers including BlackRock and Vanguard engaged with Indian company boards on BRSR disclosure quality and governance improvement as part of their stewardship activities, reinforcing the commercial importance of BRSR compliance for companies seeking to attract or retain foreign institutional capital.
Investors assessing BRSR-derived ESG scores needed to be aware of structural limitations. Large companies with dedicated sustainability reporting teams produced detailed, well-organised BRSR disclosures that enabled sophisticated scoring. Smaller companies in the top-1000 who had just come under the mandatory threshold often produced minimal or low-quality disclosures, leading rating agencies to assign lower scores that may have reflected reporting gaps rather than genuinely poor ESG practices. Additionally, sector-adjusted ESG scoring — comparing a company's performance to peers in the same industry rather than the universe — was more analytically meaningful than absolute scores that disadvantaged inherently resource-intensive businesses.