The Gap between ESG Disclosure and Actual Performance: Evidence from India’s BRSR Core Reporting
This study of India's NIFTY 50 companies reveals that while the quality of mandatory BRSR Core ESG disclosures is high and converging, it fails to reflect actual ESG performance, showing an inverse relationship where comprehensive reporting does not equate to better sustainability outcomes.
Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer
In the world of corporate responsibility, a company's promise to be good is often measured by what it says it is doing. For years, regulators and investors have operated on a simple belief: if you force a company to write down its environmental and social impacts in a standardized way, that transparency will pressure the company to actually improve. This idea rests on the assumption that a detailed report is a window into reality, where the quality of the writing reflects the quality of the work. However, there is a growing suspicion that this window might be foggy, or even a mirror that only shows what the company wants to see, rather than what is actually happening. This suspicion is known as "greenwashing," where a firm projects an image of sustainability that does not match its true performance. To understand whether this gap is real, researchers need to look at the raw data of what companies report versus what they actually achieve, stripping away the marketing fluff to see if the numbers tell a consistent story.
A recent study by Kanika Jindal, an assistant professor at Aryabhatta College in Delhi, investigates exactly this disconnect within India's largest companies. The research focuses on a new, strict reporting system called BRSR Core, which was introduced by India's market regulator. This system requires the top 1,000 listed companies to report on nine specific areas of responsibility, ranging from greenhouse gas emissions and water usage to employee safety and gender diversity. Unlike previous voluntary reports, these new rules demand that companies provide specific, verified numbers in a machine-readable format, and the largest firms must have these numbers checked by independent auditors. The goal was to create a clear, comparable picture of corporate behavior. Jindal's team took the filings of the 50 largest companies in India, known as the NIFTY 50, for the first two years this strict system was in place. They did not rely on outside ratings or scores; instead, they measured two things directly from the official documents: how well the companies followed the reporting rules, and how well they actually performed on the metrics they reported.
The researchers found that the companies were incredibly good at following the rules of the report. The quality of the disclosure was very high, with an average score of 0.92 on a scale from zero to one, and it improved slightly in the second year. Almost every company provided the required numbers, and many went beyond the minimum requirements to include extra details. In the social areas, such as employee well-being and gender diversity, the reporting was nearly perfect, with almost all companies scoring the maximum possible marks. However, this high quality of reporting told the researchers almost nothing about how well the companies were actually performing. When the team compared the quality of the report against the actual performance data, they found no positive link. In fact, the gap between what was reported and how the company performed was so large that it looked as if the two were paired at random. In eight out of the nine categories studied, a company that wrote a perfect report was no more likely to be a high performer than a company that wrote a poor one.
The study explicitly rules out the idea that better-performing companies use these reports to signal their excellence. In a voluntary system, a company that is doing well might choose to publish detailed data to prove its superiority, while a company doing poorly might hide. But under this mandatory system, every large company must publish the same data, so the act of reporting no longer separates the good from the bad. The researchers also tested whether the gap was larger for companies in dirty industries, like oil and gas, or for environmental issues like carbon emissions. They found no evidence for this either; the disconnect was just as strong for social issues and for companies in clean industries. The only slight exception was in the area of energy, where companies that performed better actually filed slightly lower-quality reports, but this was a weak signal and not the main story.
Perhaps the most surprising finding was that the disconnect was not caused by companies lying or hiding bad news. Instead, the study found that many companies were simply making calculation errors that made their reports look inconsistent. About one-quarter of the filings contained numbers that did not add up; for example, a company might report an energy intensity figure that was mathematically impossible given its total energy use and revenue. These errors were so common that they appeared even in reports that had been checked and approved by independent auditors. This suggests that the auditors might be checking that the numbers exist, but not necessarily that the math inside the report makes sense. The result is a system where companies are compliant and assured, yet the data they provide does not reliably reveal their true environmental or social impact.
The study concludes that while India has successfully achieved a uniform standard for what companies say, it has not yet achieved a system where what they say reveals what they do. The mandatory rules have forced companies to fill out the forms correctly, but they have not forced the forms to reflect reality. The researchers suggest that for transparency to be meaningful, regulators and auditors need to move beyond checking if the boxes are ticked. They need to ensure the numbers inside the boxes are consistent and accurate, and that the reports connect the data to actual targets. Until then, the high-quality reports from India's biggest companies remain a testament to their ability to follow instructions, rather than a clear window into their performance.
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