- The Securities and Exchange Board of India (SEBI) has revised ESG disclosure norms for listed companies, redefining value chain partners that are part of the reporting.
- India’s ESG framework is evolving rapidly, with SEBI aligning domestic norms with global standards.
- The ESG-related new mandates also include green credit disclosures, which experts say is an effort to increase the visibility of the government’s Green Credit Programme.
Indian market regulator, the Securities and Exchange Board of India (SEBI), has redefined value chain partners as part of its revised requirements for listed companies reporting their Environmental, Social and Governance (ESG) practices and impact.
As per its latest circular released on March 28, value chain partners include top upstream and downstream partners, such as suppliers and customers, of a listed entity, each of which account for 2% or more of its purchases or sales by value. However, companies may now limit reporting their ESG data to 75% of their total purchases and sales.
SEBI has been mulling over bringing value chain partners of top listed companies into the mandatory disclosure ambit for a few years. After mandating the ESG-related disclosure for the top 1000 listed companies from 2022-23, SEBI introduced the idea of incorporating value-chain ESG disclosure in 2023 when it came with a more simplified version of Business Reporting and Sustainability Reporting (BRSR), a reporting framework. This version is called BRSR Core and requires disclosure on nine key parameters, including greenhouse gas footprint, water footprint, energy footprint, circularity, and other social and governance parameters.
The market regulator released a consultation paper in May 2024 based on an expert committee’s recommendations, which has asked for redefining value chain partners and some relaxation in the disclosure requirement to facilitate ease of doing business. In its board meeting organised in December 2024, SEBI approved these key decisions making it legally binding for entities that fall under SEBI’s jurisdiction.
Experts say that incorporating value chain partners is vital in ESG disclosures. Shubhashis Dey, part of SEBI’s ESG advisory committee, explains that incorporating value chain partners is essential because, in many large companies, most of the value creation happens within the supply chain. “Take garment or automobile firms, for example — they are largely assemblers, while the actual operations occur at the supply chain level. If ESG disclosures are limited to listed companies alone, we miss the broader picture. To build investor trust, the regulator must ensure that the entire value chain adheres to the same ESG standards, says Dey, who is also the co-founder of SoSul, a social enterprise focused on bridging the gap between climate finance, policy, and innovation.
However, with its latest circular, the market regulator has extended the deadline for one year. ESG reporting for value chain partners will now apply voluntarily to the top 250 listed entities from the financial year 2025-26, which began on April 1 and will end on March 31 next year. The assessment will begin from 2026-27, where the companies will be encouraged to voluntarily assess or get assurance (third-party verification) of the specified ESG disclosures.
Experts call it the right step, as many small players are not equipped to follow the norms.
“The supply chain here is vast and made up of many small businesses that don’t have the resources or infrastructure to track ESG data. The complexity comes from the sheer scale and fragmentation,” says Rajesh Patel, CEO of Snowkap, a Mumbai-based company offering environmental sustainability management solutions and insights to drive ESG-related decision making.
“SEBI has responded to industry requests to avoid major disruptions and ensure compliance remains manageable,” says Sidharth S. Kumar, Senior Associate at BTGAdvaya, a New Delhi-based law firm tracking industry-related issues.
Evolution of ESG regulations in India
As the world is increasingly experiencing the impact of climate change, policymakers across the globe see merit in ESG as a crucial component for addressing climate change because it provides a framework for businesses to reduce their environmental impact, adopt sustainable practices and manage climate-related risks, thus contributing to broader climate goals. Regulatory authorities in many countries have set mandatory ESG disclosure regulations in place.
The concept of ESG came into existence in 2004 when the United Nations Global Compact proposed a systematic evaluation framework that examines non-financial factors related to a company’s environmental, social, and governance aspects, moving on from the lens of improving market performance and maximising profits. Then in 2006, the United Nations (UN) launched the Principles for Responsible Investment (PRI) to encourage institutional investors to voluntarily incorporate ESG factors.
The Ministry of Corporate Affairs (MCA) in India also framed Business Responsibility Reporting (BRR) guidelines in 2009. In 2012, SEBI mandated the top 100 listed companies to file BRR. In December 2019, SEBI extended the BRR requirement to the top 1000 listed companies. In 2020, a committee on Business Responsibility Reporting, constituted by MCA, proposed new formats of sustainability reporting named BRSR to incorporate the current global practices. The market regulator SEBI made it mandatory for the top 1000 listed entities to adopt from 2022-23.
SEBI highlights the importance of ESG-related risks by saying, “In recent years, there has been a growing recognition of the significant economic and financial impact of climate change and environmental, social, and governance (ESG) risks.” It adds, “As ESG Investing becomes mainstream, companies have been urged by both investors and regulators to make ESG-related disclosures to their stakeholders.” Besides making it mandatory for 1000 top listed companies, it has also mandated disclosures for ESG labelled Mutual Funds.
Experts call the journey related to ESG regulation in India balanced with ensuring sustainability and ease of doing business.
“India’s ESG journey is still in its early stages compared to Europe and the U.S., but it is moving fast, and there is a noticeable difference from just a few years ago. In the past, ESG was often seen as something “nice to do,” but not critical. Now, it is central to how businesses operate,” says Rajesh Patel, CEO of Snowkap. He adds, “What’s driving this change is the growing investor interest. Investors are no longer just asking if companies are profitable. They want to know if they are sustainable, too. The pressure from global investors has had a big impact, pushing Indian businesses to get more serious about sustainability. And while we are not there yet, the pace at which things are changing is exciting to see.”
Kumar adds that while India began with voluntary ESG principles introduced by the Ministry of Corporate Affairs, SEBI is now working to align Indian ESG standards with global frameworks. “This will allow easier comparison with multinational companies and support cross-border evaluations,” he notes.
Meanwhile, on March 19, a Parliamentary Standing Committee on Finance suggested stronger rules to improve how Indian companies handle ESG issues. The committee said the Companies Act, 2013 should be amended so that company directors are legally responsible for keeping ESG goals in mind while making decisions like they do for financial matters.
It has also recommended setting up independent ESG committees on company boards, similar to audit committees. It says that these ESG committees would help make sure companies follow through on their ESG promises and track their progress. The committee advised the MCA to start including a dedicated chapter on ESG in its annual report from the next financial year (2025–26) to highlight progress and priorities on ESG at a national level.
Green credits part of ESG disclosure
The latest SEBI circular also seeks disclosure on green credits generated or procured by the listed entities or their top ten value chain partners.
The Ministry of Environment, Forest and Climate Change (MoEF&CC) launched the Green Credit Program (GCP) in 2023 to incentivise environmental actions. It is a market-based mechanism to incentivise voluntary environmental actions across different sectors by individuals, communities, private sector industries, and companies. The scheme came as an effort to take ahead Prime Minister Narendra Modi’s announcement ‘LiFE’ – ‘Lifestyle for Environment’ at COP26 in Glasgow in 2021.
The latest SEBI circular asks for disclosure by listed entities and their top ten value chain partners about how many green credits they have generated or procured.
Experts say this is an effort to push the scheme as it was not getting sufficient visibility. Kumar says, “The GCP was launched two years ago but lacked visibility. The government is now trying to highlight the programme, particularly within the financial sector.”
Dey says, “The GCP is a priority area for the government of India to channel funds on the ground. It is likely they are looking at the CSR spending of listed companies. Until now, there was no way to know if companies were using a portion of their CSR budget to purchase green credits. With this new mandate, if a company buys green credits, it would report it in the BRSR.” Under Section 135 of the Companies Act 2013, listed companies are required to spend 2% of their average net profit from the past three years on social initiatives.
Read more: Green credit scheme rolls out with oil and coal leading the way
Banner image: Workers pushing cotton bales at Kolkata railway station. Cotton bales are a key raw material for the textile industry. Image by Jorge Royan via Wikimedia Commons (CC BY-SA 3.0).
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