Introduction
The concept of Environmental, Social and Governance (ESG) reporting has moved from being a voluntary disclosure to a regulatory and reputational imperative. Globally, investors, regulators, and consumers are increasingly assessing organizations not only on profitability but also on how responsibly they operate. In India, the introduction of the Business Responsibility and Sustainability Report (BRSR) and the emerging assurance framework for ESG data have placed new responsibilities on companies—and, importantly, on the audit profession.
For Chartered Accountants, this evolution opens a new chapter in assurance and advisory services. Understanding ESG metrics, compliance obligations, and reporting standards is now critical to staying relevant in a changing audit landscape.
What Is ESG Reporting?
ESG reporting involves the systematic disclosure of an organization’s performance on environmental factors (like energy use, waste, carbon footprint), social factors (like labour standards, diversity, community engagement), and governance practices (like board structure, ethics, and transparency).
It goes beyond traditional financial statements to capture how sustainably a company creates value. Investors use ESG reports to assess long-term risk and resilience, while regulators see them as tools for better corporate accountability.
In India, ESG reporting has been formalized primarily through SEBI’s BRSR framework, which requires listed entities to report quantitative and qualitative information across nine principles of responsible business conduct.
Who Is Impacted in India?
ESG disclosure obligations are now binding on a growing segment of Indian corporates:
- Top 1,000 listed companies (by market capitalization) must file BRSR as part of their annual report.
- BRSR Core, introduced by SEBI in 2023, mandates limited assurance of key ESG metrics by a third-party assurance provider.
- Unlisted large companies are also adopting voluntary sustainability reporting to meet investor and lender expectations.
- PSUs and financial institutions are increasingly aligning with RBI’s sustainability guidelines and global frameworks like TCFD and GRI.
With this shift, the demand for independent ESG assurance has risen sharply—placing auditors and advisory firms at the heart of the sustainability conversation.
Role of Auditors and Advisory Firms
1. Assurance on ESG Data
Just as auditors verify the accuracy of financial statements, they are now being called upon to provide assurance on ESG disclosures. This involves verifying data quality, evaluating internal controls over ESG reporting, and ensuring consistency with applicable frameworks such as BRSR Core, GRI, or SASB.
2. Evaluating Governance and Risk Controls
Auditors must assess whether ESG reporting is backed by governance structures—like an internal sustainability committee, board oversight, and defined KPIs. They should also verify whether environmental and social risks are integrated into the organization’s enterprise risk management (ERM) system.
3. Advisory and Capacity Building
Beyond assurance, CA firms can guide clients on ESG data readiness, establishing internal controls, training staff, and aligning sustainability KPIs with business goals. Advisory teams may help organizations draft ESG policies, map disclosures to regulatory expectations, and design reporting dashboards.
4. Integration with Financial Reporting
ESG metrics increasingly intersect with financial disclosures—such as asset impairment due to climate risk, or provisions linked to environmental liabilities. Auditors must understand how these non-financial elements affect financial statements to ensure holistic reporting.
Roadmap for Firms Advising Clients on ESG
For CA firms and practitioners looking to build ESG-focused services, a structured roadmap can help:
Step 1: Understand the Frameworks
Begin with SEBI’s BRSR and BRSR Core, and study global standards like GRI, SASB, and ISSB’s IFRS-S1/S2. Familiarity with these will help firms bridge local and international reporting expectations.
Step 2: Develop a Sustainability Audit Checklist
Create internal templates for assessing ESG controls, verifying emission data, and testing compliance with BRSR principles. Ensure the checklist aligns with ICAI’s guidance on assurance engagements.
Step 3: Collaborate with Subject Matter Experts (SMEs)
Environmental or social metrics may require external expertise—such as engineers, sustainability professionals, or data analysts. CA firms can build multidisciplinary alliances to strengthen their assurance teams.
Step 4: Build Internal Competence
Train staff in ESG data interpretation, carbon accounting, and sustainability KPIs. ICAI’s Sustainability Reporting Standards Board (SRSB) publications offer valuable starting material.
Step 5: Integrate Technology
Leverage data-analytics tools to validate ESG data accuracy and monitor trends. AI-based dashboards can help automate sustainability KPIs and flag anomalies.
Step 6: Educate Clients
Many SMEs and even large corporates are still in the early stages of ESG adoption. Firms can add value by helping clients develop ESG governance frameworks, stakeholder engagement strategies, and annual sustainability calendars.
Challenges and the Road Ahead
The assurance of ESG data is not without challenges. Unlike financial reporting, ESG frameworks are still evolving, data quality varies widely, and there is no single global standard. However, regulators, industry bodies, and ICAI are steadily closing this gap by developing guidelines for uniformity and reliability.
As India aligns with global sustainability disclosure norms, audit professionals will increasingly play a pivotal role in ensuring credibility and transparency of ESG information. Firms that embrace this transition early will not only expand their service offerings but also strengthen client trust.
Conclusion
ESG reporting marks a defining transformation in corporate transparency. For Indian businesses, it signifies accountability beyond balance sheets; for auditors, it represents the future of assurance.
As sustainability disclosures become mandatory and investors demand deeper insight into non-financial performance, Chartered Accountants stand at a unique intersection—bridging finance, governance, and ethics. Firms that adopt a structured roadmap for ESG advisory and assurance today will be the ones leading responsible business transformation tomorrow.
