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SEBI suggests measures to facilitate listed businesses’ ESG disclosures

Proposals have been made by the Securities and Exchange Board of India (SEBI) to facilitate the disclosure of environmental, social, and governance (ESG) information by listed firms and their value chain partners. Only value chain participants that together account for two percent or more of the company’s acquisition or sales by value would be required to disclose ESG indicators, according to plans by the market regulator.

SEBI has also suggested that, for the first year, value chain partners’ disclosures be voluntary rather than required to comply with or provide an explanation for.As per a previous order, starting with the financial year 2024–2025, the top 250 listed firms are required to disclose ESG data for their value chain partners in their annual reports.This declaration is for value chain participants who together account for 75% of sales or purchases. The goal of the new plan is to make this compliance easier.

The Business Responsibility and Sustainability Reporting (BRSR) Core will include these disclosures as one of its main metrics. BRSR Core is an ESG disclosure requirement with a restricted scope that prioritizes data verifiability for listed firms. Top 1000 listed businesses are already required to report in BRSR, a broader format.

The proposed adjustments aim to mitigate concerns over the financial strain on smaller suppliers to larger publicly traded firms, as well as the duration required to establish procedures and information systems for the purpose of reporting and validating these disclosures.

In an additional endeavor to lessen the cost of compliance, Sebi has suggested redefining  “assurance” of ESG data as “assessment.” Due to the elimination of the difficulties involved in conducting an audit of this data, the modification will lessen the load and expense. Concerns were voiced by businesses on the strict requirements for the value chain, which would affect hundreds of related businesses and other stakeholders.

ESG indicators have become more popular as a result of the trend toward responsible investment.

Green credits for publicly traded companies. The market regulator also suggested using green credits as a leading indicator in BRSR in the consultation paper that was released on Wednesday.

Green credits are awarded to a corporation that engages in ecologically friendly practices. The green credit computation technique for tree plantations was notified in February by the Ministry of Environment, Forests, and Climate Change (MoEFCC).