In a world where transparency demonstrates and drives credibility, non-financial disclosures by corporates have emerged as a vital marker. These disclosures do more than signal compliance – they shape stakeholder trust and resilience in the modern corporate landscape.
What are Non-Financial Disclosures?
Non-financial disclosures offer insights into how a company operates and financial details that may impact balance sheet in the future. These include:
- Environmental Metrics – carbon footprint, carbon emissions, energy efficiency, waste and water management, and biodiversity protection.
- Social Dimensions – diversity and inclusion, labor rights, employee welfare, human rights protection and community engagement.
- Governance Element – board composition and independence, risk management, ethics and anti-corruption policies, and data security protocols.
These disclosures bridge the gap between financial performance and ethical conduct, offering stakeholders a more rounded view of a company’s long-term sustainability. These are just some areas but a wider list would include financial elements meeting certain categories:
Related Party Transactions,
Promoter Impacted Changes,
Changes in Director Interests,
Executive Compensation,
Complaints,
Delays in Payments or Receipts,
Conflicts of Interest risks,
Key Governance Issues or KMP Changes
ESG Risks or Climate Reporting,
Material Events and Litigations,
… and, of course, governance related compliance issues, penalties, letters of displeasure, etc,
Compliance issues, penalties, letters of displeasure, etc,
Legal and Regulatory Landscape: India and the World
Globally, non-financial reporting is transitioning from voluntary to mandatory. Bodies like the EU, U.S. Securities and Exchange Commission (SEC), and the Task Force on Climate-Related Financial Disclosures (TCFD) are setting frameworks that push companies toward transparent and consistent non-financial reporting.
In India, SEBI’s Business Responsibility and Sustainability Reporting (BRSR) framework stands at the forefront. Mandated from fiscal year 2022-23 for the top 1000 listed companies, BRSR aligns with global standards like Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and Task Force on Climate-related Financial Disclosures (TCFD). It requires companies to disclose ESG metrics across environmental, social, and governance categories.
SEBI continues to redefine BRSR with incremental mandates:
- The BRSR Core is a subset of BRSR, consisting of a set of Key Performance Indicators (KPIs) metric under ESG attributes. The BRSR Core specifies the data and approach for reporting and assurance.
- The BRSR Core, which became applicable to the top 150 listed entities in the financial year 2023-24, will be extended to top 1000 listed entities by the financial year 2026-27.
- Disclosures for value-chain shall encompass the top upstream and downstream partners of a listed entity contributing 75 % of its purchases/sales (by value) cumulatively, starting from financial year 2024-25 with limited assurance applicable from financial year 2025-26.
While aimed at boosting transparency, these rules bring challenges – costs, standardization issues, greenwashing risks, but also signal a shift toward stakeholder-centric corporate reporting.
Why Non-Financial Disclosure Matter?
Non-financial disclosures are critical for several reasons:
- Risk Identification and Management -ESG metrics help identify long-term risks that financial reports may miss – such as supply chain vulnerabilities, regulatory impositions or environmental liabilities.
- Investor trust and Market Access– Investors increasingly prefer companies with solid ESG credentials, associating them with long-term resilience and ethical governance.
- Regulatory Alignment – As frameworks like BRSR and international standards gain traction, comprehensive ESG reporting becomes vital for compliance and future readiness.
- Reputation and Brand Equity – Transparent ESG performance strengthens brand credibility and stakeholder loyalty- from customers to communities.
- Strategic Differentiation – Companies leading in ESG disclosures set themselves apart through commitment to sustainability, risk transparency, and good governance.
Financial, non-financial disclosures and disclosures that include both in part are instrumental in shifting perception – from “What has the company earned” to “How transparent it is“, “How can I trust in the sustainability of its earnings” “How sustainable is the business itself“. Legal mandates globally are rapidly institutionalizing all such reporting andmoving away from language suggesting “best practices” to “mandatory obligation“.
