On March 28, 2025, the Securities and Exchange Board of India (SEBI) issued a circular (ESG Circular) to simplify Environmental, Social, and Governance (ESG) disclosures for businesses. This circular introduces new measures for ESG reporting, including green credits, assessment or assurance options, and value chain disclosures.
Key Provisions:
- Green Credits: Green Credits has been included as an additional leadership indicator and companies that have earned green credits by engaging in sustainable practices, can report the same in their Business Responsibility and Sustainability Reports (BRSR) starting from FY 2024-25.
- Assessment or Assurance: The inclusion ‘assessment’ as an alternative term for ‘assessment’ stems from the notion that the latter bears an association with ‘financial audits’ which resulted in united consequences, additional financial burdens and challenges for the industry.
It is further specified that ‘assessment’ refers to third-party evaluations undertaken as per the standards developed by the Industry Standards Forum in consultation with SEBI.
In this regard, the ESG Circular also amends the applicability of disclosures by stating that listed entities shall mandatorily undertake assessment or assurance as per the glide path specified in the following table:
|
Financial Year |
Applicability of the BRSR Core to top listed entities |
|
2023-24 |
Top 150 listed entities |
|
2024-25 |
Top 250 listed entities |
|
2025-26 |
Top 500 listed entities |
|
2026-37 |
Top 1000 listed entities |
- Value Chain Disclosures: The threshold for of value chain partners has been amended to include the top upstream and downstream partners of a listed entity, individually comprising 2% or more of the listed entity’s purchases and sales (by value) respectively.
ESG disclosures for such value chain partners have been deferred by one year and will be voluntary for the top 250 listed entities from FY 2025-26 and mandatory from FY 2026-27. For the first year of a value chain partner’s ESG disclosures, the reporting of previous year’s data shall be voluntary as well.
Conclusion:
Amendments brought forth by the ESG Circular promote transparency and accountability and also align with SEBI’s broader goal of facilitating ease of doing business. By reducing the complexity and financial burden associated with ESG reporting, SEBI’s initiatives support businesses in their efforts to adopt and report on sustainable practices more effectively.