SEBI’s ESG relaxation to help corporate, value chains streamline their preparedness

SEBI’s directive deferring ESG (Environment, Social and Governance) disclosures for value chains and making it flexible will grant businesses the necessary time to streamline their preparedness at the same time allowing a window to encourage their value chain partners to embrace ESG, said experts.

SEBI said that companies can now opt for either 'assurance' or 'assessment' for Business Responsibility and Sustainable Reporting (BRSR) Core and ESG disclosures for the value chain. The Assessment will be guided by standards to be developed by the Industry Standards Forum (ISF) in consultation with SEBI.

According to experts, these changes are a key step towards balancing the ease of doing business with sustainability reporting, giving companies the much-needed flexibility while fostering transparency. The ‘comply-or-explain’ approach has been replaced with a voluntary requirement.

“The introduction of Assessment lowers the threshold of data accuracy responsibility on the listed companies. As the ESG disclosure regime in India is nascent, a lower threshold will encourage more voluntary disclosure from listed entities. It will enhance transparency in reporting and data availability to allow future policy formulation on ESG reporting and standards from an emerging market perspective,” Sidharth S Kumar, Senior Associate, BTG Advaya.

With regards to value chain ESG disclosures, the first reporting now starts from FY 2025-26 instead of the current financial year and assurance or assessment will follow in FY 2026-27. The ‘comply-or-explain’ approach has been replaced with a voluntary requirement.

Smitha Shetty, Regional Director, APAC, Achilles Information Ltd, said SEBI's phased approach to ESG reporting strikes the right balance by encouraging immediate action while giving businesses the time they need to adapt. Achilles is one of the ESG auditing and due diligence firms.  

“The deferment also calls for companies to begin their data collection processes immediately for effective ESG reporting, ensuring they have the correct baselines when the time comes. For MSMEs, it presents a valuable opportunity to kick-start sustainability practices and enhance market competitiveness, positioning them as responsible partners in the value chain,” said Shetty.

Kumar explains that turning value chain disclosures into a voluntary exercise will relieve the compliance burden of the listed companies. BTD Advaya is a disputes and transactional law firm.

“Furthermore, reducing the scope of value chain entities will encourage listed companies to voluntarily comply with the disclosure requirements, as they can determine and concentrate on key suppliers and distributors. Such measures from listed entities can unlock access to data related to MSMEs for ESG reporting without imposing a regulatory burden on MSMEs,” he further adds.

As the availability of value chain information remains a challenge worldwide, Dipankar Ghosh, Partner & Leader, Sustainability & ESG, BDO India, says this SEBI initiative grants businesses the necessary time to streamline their preparedness while allowing a window to encourage their value chain partners to embrace ESG in the right spirit, beyond mere compliance.

BDO India is a global professional services organisation offering tax, accounting, assurance, and advisory services.