The Securities and Exchange Board of India (SEBI) has issued a new circular concerning the Business Responsibility and Sustainability Reporting (BRSR) Core Standards. This circular, vital for listed entities, outlines industry standards, compliance requirements, and a regulatory framework aimed at enhancing corporate disclosures related to environmental, social, and governance (ESG) factors.

ESG Reporting: Value Chain Reporting Deferred to FY 2025-26

What is Value Chain Reporting?

Value chain reporting requires companies to disclose the ESG-related impacts across their entire business ecosystem, which includes:

• Upstream: Activities of suppliers and raw material sourcing.
• Operations: The company’s direct activities, such as manufacturing and logistics.
• Downstream: Distribution, customer use, and product end-of-life impacts.

Reasons for Deferral

The implementation of mandatory value chain reporting has been deferred to FY 2025-26 due to several challenges:

• Complexity: Collecting accurate data from suppliers and other stakeholders is both resource-intensive and challenging.
• Preparation Time: Companies require additional time to establish robust processes, technologies, and collaborations for effective data collection.
• Global Alignment: The deferral allows Indian companies to better align with international ESG standards, ensuring they have adequate time to adapt and comply.

Impact of Deferral

• The deferral provides companies with more time to enhance data accuracy and build robust ESG systems.
• It reduces immediate compliance pressure, allowing businesses to focus on refining their ESG processes.
• By FY 2025-26, companies are expected to provide high-quality ESG disclosures, benefiting both investors and stakeholders.

SEBI Measures for Ease of Doing Business for ESG Rating Providers (ERPs)

SEBI has approved measures to ease the business environment for ESG Rating Providers (ERPs). These initiatives aim to improve transparency, regulatory compliance, and operational efficiency in the ESG rating process.

Subscriber-Pays Model Proposals

To enhance transparency, SEBI has introduced a Subscriber-Pays Model, which mandates:

• ESG rating reports to be shared simultaneously with both subscribers and the rated issuers.
• Establishing a clear process for handling appeals and representations from rated issuers, ensuring fairness in the rating process.

Activity-Based Regulatory Framework

To address jurisdictional overlaps, SEBI has directed ERPs to:

• Separate activities under other regulators’ jurisdiction into a distinct entity.
• Transfer non-regulated activities to a separate entity to prevent conflicts of interest.

Operational Guidelines for Hived-Off Entities

SEBI has issued specific guidelines for hived-off entities:

• Resource sharing between the main ERP and the hived-off entity is permitted, provided it does not result in legal liabilities for the ERP.
• The hived-off entity is prohibited from using the ERP’s brand name unless compliance with SEBI’s code of conduct is ensured.

Summary of SEBI Circular on BRSR Core Standards

Industry Standards Forum (ISF)

The Industry Standards Forum (ISF), established under the aegis of stock exchanges, includes representatives from ASSOCHAM, CII, and FICCI. It has played a crucial role in developing BRSR Core disclosures in consultation with SEBI to ensure transparent and consistent ESG reporting.

Publication of Standards

The industry standards will be published on the official websites of:

• ASSOCHAM
• FICCI
• CII
• Stock Exchanges

Effective Date

The BRSR Core Standards will be applicable starting FY 2024-25, providing entities with the necessary lead time to align their practices with the updated regulations.

Regulatory Framework for Compliance

These standards are aligned with:

• Regulation 34(2)(f) of the SEBI (LODR) Regulations, 2015.
• Chapter IV-B of SEBI’s master circular dated 11.11.2024.

Compliance by Listed Entities

All listed entities are required to adopt these standards to comply with SEBI’s BRSR Core disclosure requirements.

Stock Exchange Responsibilities

Stock exchanges are tasked with informing their listed entities about these standards and ensuring compliance to streamline the implementation process.

Race Eco Chain Ltd: Advancing ESG Compliance Across the Value Chain

At Race Eco Chain Ltd, we have successfully conducted an ESG audit and achieved a score of 58.

We are already on our journey to collaborate with our PAN-India Value Chain Partner base of 300, and support them in achieving ESG compliance. With our partners who have already joined hands on this journey with us, we at RACE ECO CHAIN LTD are committed to create a robust ESG- Compliant Value Chain for Recyclers.

Stay tuned for more updates from Race Eco Chain Ltd as we continue to drive sustainability and compliance initiatives.

Conclusion

SEBI’s circular on BRSR Core Standards and its measures for ESG rating providers represent a significant stride toward transparency, governance, and sustainability in India’s corporate landscape. The deferral of value chain reporting provides companies with essential time to refine their ESG processes. These initiatives highlight SEBI’s commitment to fostering a transparent, responsible, and sustainable business environment.

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