BRSR materiality assessment: a step-by-step guide for consultants

Materiality assessment is one of the most misunderstood requirements in BRSR. The format does not prescribe a specific methodology, but it does require evidence of a process: identifying stakeholders, engaging them, and determining which ESG topics are material to the company and its stakeholders. Only 34% of BSE 100 companies publicly disclose their materiality assessment methodology, according to WBCSD India's 2024 review. The rest either skip the disclosure or present a pre-screened topic list without evidence of a genuine stakeholder process. Here is how to build one that is defensible.

What BRSR actually requires

Principle 4 of BRSR (Stakeholder Engagement) requires companies to identify their material stakeholders and describe the process through which they engage with them. The broader BRSR format implicitly requires identification of material ESG topics because the Section B management disclosures ask about policies, targets, and governance structures for ESG issues. A defensible materiality assessment needs to demonstrate both "outside-in" materiality (which ESG topics could affect the company's financial performance) and "inside-out" materiality (what impact does the company's activity have on the environment and society). This is broadly similar to the double materiality concept formalised under the EU's CSRD, but is less prescriptive in the BRSR context.

Step 1: Stakeholder mapping

BRSR identifies six stakeholder groups that companies are expected to engage: communities (affected by the company's operations), employees (permanent and contract), shareholders and investors, regulators, customers, and value chain partners (suppliers and distributors). Before running the assessment, map which specific groups within each category are most relevant to your client. For a cement manufacturer, "communities" means the villages within 5 km of the plant, not communities in general. For an IT company, "employees" may be the most material stakeholder group given the company's impact profile.

Step 2: Build the topic list

Start with the GRI Universal Standards topic list, which covers all major ESG topics across environment, social, and governance. Then add sector-specific topics from NSE's sector-specific ESG guides or from the BRSR principle structure itself (P1 ethics, P2 products, P3 employees, P4 stakeholders, P5 human rights, P6 environment, P7 policy advocacy, P8 inclusive development, P9 responsible consumption). For manufacturing clients, add sector-specific regulatory topics: effluent standards, PCB consents, EPR obligations, energy efficiency targets. The final topic list is typically 30 to 60 items before prioritisation.

Step 3: Assess impact and financial materiality

Score each topic on two dimensions. Impact materiality: how significant is the company's positive or negative impact on the environment or society through this topic (scale 1 to 5)? Financial materiality: how likely is this topic to affect the company's revenues, costs, access to capital, or license to operate (scale 1 to 5)? These scores can come from management assessment, stakeholder input, or expert review. Plot the results on a 5x5 matrix. Topics in the upper-right quadrant (high impact, high financial materiality) are material.

Step 4: Stakeholder consultation

The scoring in step 3 is management's starting point, not the final answer. SEBI expects evidence that the company consulted relevant stakeholders about which topics they consider material. The minimum acceptable process: a structured survey or interview with at least one representative group from each of the six BRSR stakeholder categories, with documented responses. For smaller companies, this can be done through existing touchpoints (the AGM for shareholders, a focus group with plant workers, a supplier meeting). The output is an adjusted materiality matrix that incorporates stakeholder perspectives alongside management's own assessment.

Step 5: Document and disclose

What goes into the BRSR disclosure: the list of topics assessed, the stakeholder groups consulted and how, the methodology used for scoring, the date of the last assessment (SEBI expects this to be updated at least every two to three years), and the final list of material topics with a brief rationale for each. The materiality matrix itself (a visual plot of all topics) is a best practice addition that many assurers and analysts appreciate.

The shortlist trap: what not to do

The most common mistake is presenting a pre-screened topic list (for example, "our material topics are climate change, employee wellbeing, and ethics") without any evidence of the process that produced it. This is sometimes called the "shortlist trap": the consultant or management team selected topics based on industry norms or what other companies disclose, without running an actual assessment. SEBI's language in the BRSR format refers to an assessment process. An assurer reviewing BRSR Core KPIs will look for evidence that a process was run, not just a topic list.

Key takeaways

• BRSR requires evidence of a materiality assessment process, not just a topic list. The process must include stakeholder consultation.
• Map six BRSR-defined stakeholder groups before starting: communities, employees, shareholders, regulators, customers, value chain partners.
• Score topics on two dimensions: impact materiality (inside-out) and financial materiality (outside-in).
• Adjust management scores with input from at least one representative from each stakeholder group.
• Disclose the methodology, stakeholder groups consulted, date of assessment, and final material topics in the BRSR.
• The shortlist trap: a pre-screened topic list without a documented process will not satisfy SEBI or an assurer.