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Research Scholar, School of Commerce and Management Studies, Dayanand Sagar University, Bengaluru, Karnataka, India
Associate Professor, School of Commerce and Management Studies (SCMS), Dayananda Sagar University, Bangalore, Karnataka, India
The rising number of firms adopting ESG reporting frameworks has led to several inconsistencies in ESG ratings by various agencies, making it difficult to assess corporate sustainability performance for the benefit of the stakeholders, investors, and regulatory agencies. While the Business Responsibility and Sustainability Reporting (BRSR), which is a recent introduction by SEBI to enhance ESG reporting standards, offers an opportunity to address these gaps in the existing literature through the causal effect on ESG rating and financial sustainability performance, very few studies have been conducted to determine whether there is such a causal relationship. The current research bridges this research gap through an integration of Propensity Score Matching (PSM) and Difference-in-Differences (DiD) models to examine the impact of mandatory BRSR reporting on ESG rating improvement and financial sustainability among Indian FMCG firms. While past research has been carried out focusing mainly on voluntary ESG practices, this study analyzes the effect of regulatory sustainability reporting on addressing information asymmetry and improving ESG accountability. In this analysis, the factors considered were ESG scores, financial metrics, firm attributes, and sustainability disclosure metrics through PSM, DiD regression, linear regression, and robustness check. The outcomes show substantial gains in the effectiveness of ESG disclosures following the implementation of BRSR, as the average scores in ESG rose from 50 to 75. It was established that there is a positive correlation between ESG disclosure and financial performance (β = +0.21, R² = 0.74). DiD findings indicate the existence of a significant treatment effect of adopting BRSR in improving ESG (β = +25.00, p < 0.01). These results suggest that implementing mandatory BRSR provides higher sustainability disclosure, better stakeholder confidence, good governance, and long-term sustainability of firms, with no risks of financial loss. Overall, the analysis shows that mandatory ESG disclosure frameworks work effectively as a strategy to support responsible business operations and sustainable growth.
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