Many of us turn our homes into a flawless masterpiece when guests are expected and isn’t it fascinating how we manage a complete 180-degree makeover, turning our spaces into something completely alluring hiding the dirt in unseen corners. This act of making something appear deceptively attractive or favourable amounts to “Window-dressing”.
The practice of window-dressing has evolved beyond the realm of financial statements and related disclosures and is encompassing responsibility and sustainability claims and disclosures as well.
To promote businesses to shift towards being more ethical in their conduct, the Securities Exchange Board of India (SEBI) mandated the top 1000 companies (as per market cap) to make certain disclosures in their board’s report in the form of BRSR, to foster an environment that discourages deceptive practices.
What may amount to window-dressing of BRSR
As the ESG (Environmental, Social, and Governance) landscape continues to evolve, it is anticipated that regulatory frameworks may undergo changes. Therefore, it becomes crucial to understand what may amount to window-dressing, to avoid engaging in such practices, especially in anticipation of potential legal developments in the realm of responsible business reporting.
As the ESG (Environmental, Social, and Governance) landscape continues to evolve, it is anticipated that regulatory frameworks may undergo changes. Therefore, it becomes crucial to understand what may amount to window-dressing, to avoid engaging in such practices, especially in anticipation of potential legal developments in the realm of responsible business reporting.
– Greenwashing: Greenwashing involves marketing gimmicks, giving a false impression of a product. This can include overstating or exaggerating the positive impact of a range of products, using misleading labels, or making ambiguous claims without any certification or scientific backing.
– Superficial Initiatives: By focusing on easily achievable, high-profile initiatives, Companies tend to create the illusion of strong sustainability practices while conveniently neglecting more substantial, systemic issues within their operations.
– Token Gestures: Token Gestures are actions that are unimportant but are meant to show insincere intentions. Token initiatives are those initiatives that have small or negligible impact but are presented in a way that gives an exaggerated impression to the stakeholders.
– Vague Language: Vagueness is the easiest route to deceive stakeholders. Use of vague or ambiguous language in one’s reports to confuse the readers and shift their focus from the actual impact is another way of window-dressing reports.
– Lack of Data Transparency: Window dressing of reports involves providing insufficient data or using vague metrics, making it difficult for stakeholders to assess the true impact of a company’s sustainability efforts.
– Shifting Baselines: Adjusting baseline metrics or comparison criteria over time without clear justifications makes it challenging for stakeholders to assess genuine progress accurately.
Implications of Window-dressing of BRSR
The action of window-dressing BRSR results in scepticism among stakeholders, erodes their trust and as a reaction to the corporate’s action, long term consequences like damaged reputation and adverse financial impact. In a brand study conducted by Edelman , it was found that two-thirds (64 percent) of consumers around the world may boycott a brand solely because of its position on a social issue.
While financial losses may be recoverable, the painstaking process of rebuilding a tarnished reputation can take years and cast a long shadow on a company’s market standing
Public exposure of window-dressing practices thrusts the company into the regulatory limelight, triggering intricate inspections and inquiries. Regulatory bodies, armed with the responsibility of ensuring fair and transparent business practices, may impose sanctions or penalties if deceptive reporting is substantiated.
When a company is found guilty of window dressing, it further breaches the trust investors place in the reliability of reported data.
Addressing Window Dressing with common sense
The point to be noted is, if we intricately investigate, the disclosures demanded in BRSR are based on plane common sense. Both regulatory authorities and companies play pivotal role in mitigating window-dressing, ensuring the disclosures are done right.
The Guidance notes for BRSR provide specific formulae, definitions, and methodologies simplifying complex questions, and it will further solidify with time with strict Indian standards and specifications in the form of law. What is law? It is codified common sense. Therefore, applying common sense is all it’s going to take to make disclosures in the BRSR.
The National Stock Exchange of India issued a circular i on May 10, 2024, regarding BRSR FAQs, guidelines, and general observations. This circular, based on the filing of BRSR for the previous year, addresses various FAQs, such as the process for entities to upload their BRSR and the entities required to get their BRSR Core data Assured. Additionally, NSE provided several observations from the reports submitted in the previous year and offered corresponding guidelines.
As part of its observations, NSE noted the following:
- The Financial Services industry, while claiming that GHG emissions are not materially relevant when disclosing environmental parameters, exhibited greater emissions than the Automobiles industry.
- Certain companies in sectors such as Construction Materials, Cement, Power, and FMCG disclosed that the total waste they recovered or disposed of, exceeded the total waste generated by them.
Let’s give benefit of doubt to the companies and see what basic steps they may take; Upgrading and learning about Ethical and Best Practices to conduct businesses
- Having a peripheral view and conducting an impact analysis prior to taking key decisions
- Learning about sustainable ways of doing a business and setting reasonable milestones and KPIs for improvements
- Declaring futuristic targets in the current BRSR and take genuine steps to achieve them
- Becoming open as well as resilient to change
Sustainability is about applying basic sense while doing businesses. We have been measuring risks and opportunities before making decisions anyway, sustainability only asks for further inclusion of all stakeholder interests while making decisions. Embedding sustainability into the core values of the organization, formulating robust policies, and consistently implementing these policies can make a substantial difference for the company in the longer run. Such a commitment not only safeguards the company’s reputation but also contributes to its financial health.
“A company that feels good, looks good; and a company would be able to feel good, when it does good”.
i https://www.edelman.com/news-awards/two-thirds-consumers-worldwide-now-buy-beliefs
