SEBI to utilise green credits for tracking ESG activities

Capital markets regulator SEBI's directive to utilise the Green Credit Program (GCP) by listed entities as a benchmark for measuring environmental activities under the Business Responsibility and Sustainability Reporting (BRSR) framework is expected to enhance transparency and accountability in ESG reporting.

SEBI, on Friday, said ‘green credits’ generated by the listed company and their top 10 value chain partners can be added as a leadership indicator, ensuring that businesses respect and make efforts to protect and restore the environment.

Dipankar Ghosh, Partner & Leader, Sustainability & ESG, BDO India, says the inclusion of the Green Credit Program under BRSR (Principle 6) is a significant step towards encouraging environmentally sustainable practices by companies.

“In the long term, we expect trading of green credits (such as carbon credits) to encourage many corporations to participate which will contribute immensely to the environmental good of the country,” says Ghosh.

There are seven notified activities under the green credit program: Water management (Draft methodology already available), Sustainable Agriculture, Waste Management, Air Pollution Reduction, Mangrove Conservation, Ecomark Label Development, and Sustainable Building and Infrastructure.

Smitha Shetty, Regional Director, APAC, Achilles Information Limited, opined that by integrating voluntary Green Credit reporting, SEBI is fostering a culture where businesses are not only accountable for their ESG commitments but are also incentivised to drive real environmental impact.

“This move reinforces the need for measurable, transparent sustainability initiatives that align business growth with ecological responsibility,” she says.  

This new requirement will be applicable for BRSR disclosures starting from FY24-25 and onwards. The disclosure is also in line with the Ministry of Environment, Forest and Climate Change notification issued in February 2024.

Sidharth S. Kumar, Senior Associate, BTG Advaya feels that this might be another step by the regulators to utilise GCP as a benchmark for measuring the environmental activities under the ESG framework.

“It’s been two years since GCP was launched by the Environment Ministry. Corporates had sufficient time to onboard the GCP platform. Inclusion in the BRSR will provide more visibility on the data related to GCP generation and trading by listed companies and their value chain entities,” he adds.