November 2, 2023
New Delhi, India
Sebi’s New Mandate: ESG Disclosures for Listed Firms
The Securities and Exchange Board of India (Sebi) has rolled out a new regulatory framework aimed at compelling listed companies to provide Environmental, Social, and Governance (ESG) disclosures within their value chains. This move is directed at enhancing transparency and accountability in the operations of large listed entities.
What Does This Mean?
Under this framework, large companies listed on Indian stock exchanges are obligated to disclose and seek assurance as per the ‘BRSR Core,’ a subset of the Business Responsibility and Sustainability Report. The BRSR Core consists of nine Key Performance Indicators (KPIs) related to various Environmental, Social, and Governance factors.
Focus Areas and Scope
The framework caters to the Indian market’s specific needs, introducing new KPIs for assurance. These include factors like job creation in small towns, business transparency, and wages paid to women. To ensure global comparability, intensity ratios based on revenue adjusted for purchasing power parity have been incorporated.
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Value Chain Emphasis
Sebi’s initiative concentrates on ESG disclosures and assurance concerning the value chain of listed entities. The top 250 companies will need to start reporting according to the BRSR Core from 2024-25, and assurance requirements will follow in the subsequent year.
Reporting Criteria
Listed companies are mandated to report KPIs as per the BRSR Core, covering 75% of their purchases or sales by value, involving both upstream and downstream partners. The reporting can be segmented or aggregated based on the relationship with these partners.
Assurance Provider Criteria
For quality assurance, it is crucial for the board of the listed entity to ensure the assurance provider possesses the necessary expertise. Additionally, to maintain objectivity, any conflict of interest between the listed entity and the assurance provider needs to be avoided.
Sebi‘s move underscores the growing significance of ESG considerations and accountability within the value chain of listed entities. This new framework sets specific KPIs and reporting requirements to reinforce transparency and responsibility in ESG-related matters.
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