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Sebi proposes measures to ease ESG disclosures by listed companies

Sebi has also proposed to make the disclosures for value chain partners voluntary for the first year instead of comply or explain basis

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The Securities and Exchange Board of India (Sebi) has proposed measures to ease environmental, social and governance or ESG-related disclosures by listed companies.

Khushboo Tiwari Mumbai

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The Securities and Exchange Board of India (Sebi) has proposed measures to ease environmental, social and governance or ESG-related disclosures by listed companies and their value chain partners.

The market regulator is planning to mandate disclosures on ESG metrics for only those value chain partners who individually comprise 2 per cent or more of the company’s purchase or sales by value.

Sebi has also proposed to make the disclosures for value chain partners voluntary for the first year instead of comply or explain basis.

According to an earlier directive, top 250 listed companies have to give disclosures on ESG metrics for their value chain partners in annual reports from financial year 2024-25.

This disclosure is for value chain partners cumulatively comprising 75 per cent of the purchases or sales. The new proposal aims to ease this compliance.

These disclosures will be part of the key indicators in line with the Business Responsibility and Sustainability Reporting (BRSR) Core.  BRSR Core is an ESG disclosure mandate for listed companies on a limited set of parameters, but with more focus on verifiability of the data. BRSR, a wider reporting format, is already mandated for top 1000 listed companies.

The new parameters for environment-related disclosures require assurance on greenhouse gas emissions, water wastage, consumption and treatment, waste management, among others. They include collecting ESG-related information at each sale and purchase order level, specifically for manufacturing companies.

The changes have been proposed to address concerns over the cost burden on smaller players which supply to large listed companies and the time needed to set up processes and data systems to report and verify such disclosures.

In another step to remove the compliance burden, Sebi has proposed to change ‘assurance’ of ESG data to ‘assessment’.  The change will decrease the burden and cost as it will remove the challenges associated with an audit of this data.

Companies had raised concerns over the stringent norms for the value chain, which will trickle down to thousands of ancillary companies and third parties.

ESG metrics have gained momentum owing to the inclination towards responsible investing.

Green credits to listed firms

In the consultation paper floated on Wednesday, the market regulator also recommended adding green credits as a leadership indicator in BRSR.

Green credits are generated if the company follows environmentally sustainable activities.

In February, the Ministry of Environment, Forest and Climate Change (MoEFCC) had notified the methodology for calculation of green credit in respect of tree plantation.

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First Published: May 23 2024 | 8:22 AM IST

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