The Securities and Exchange Board of India (SEBI) has introduced key regulatory changes to enhance Environmental, Social, and Governance (ESG) disclosures, assurance frameworks, and voluntary Green Credit disclosures for listed companies. These updates aim to streamline ESG reporting, increase transparency, and provide companies with greater flexibility in compliance.
1. Introduction of Green Credit Disclosures
SEBI has added a new leadership indicator under Principle 6 of the Business Responsibility and Sustainability Report (BRSR), requiring companies to disclose their involvement in the Green Credit mechanism. Green Credits are earned by companies undertaking environmentally beneficial activities and can be traded or utilized.
- Companies must report Green Credits generated or procured by them and their top 10 value chain partners (based on financial transactions).
- This disclosure will be mandatory from FY 2024-25 to promote sustainable business practices.
2. ESG Assurance vs. Assessment – A Flexible Approach
SEBI has introduced a choice between ‘assurance’ and ‘assessment’ for BRSR Core ESG disclosures.
- Companies can choose between independent assurance or assessment to validate ESG data.
- The third-party provider must be independent and have expertise in ESG audits.
3. Staggered Implementation Timeline for ESG Compliance
To ensure a smooth transition, SEBI has implemented a phased rollout for ESG compliance:
| Financial Year | Applicability |
| FY 2023-24 | Top 150 listed entities |
| FY 2024-25 | Expands to Top 250 entities |
| FY 2025-26 | Extends to Top 500 entities |
| FY 2026-27 | Covers Top 1,000 entities |
This timeline reduces compliance pressure on smaller companies and allows businesses to adapt gradually.
4. One-Year Deferment for Value Chain Disclosures
Recognizing challenges in tracking ESG data from supply chain partners, SEBI has:
- Deferred mandatory value chain disclosures by one year (until FY 2025-26).
- Allowed voluntary assurance of value chain data until FY 2026-27.
Conclusion
SEBI’s updates aim to enhance ESG transparency, encourage Green Credit adoption, and provide businesses with regulatory flexibility. The phased rollout ensures companies have sufficient time to implement compliance mechanisms, leading to more reliable and impactful ESG disclosures in India.
