SEBI Plans To Integrate Green Credit Under BRSR Framework, Redefine Value Chain Partners

Capital markets regulator Securities and Exchange Board of India has proposed to include disclosure pertaining to the 'Green Credit Program' by listed companies under the Business Responsibility and Sustainability Reporting (BRSR) framework.

The Green Credits can be generated by a listed company and its value chain partners through plantations of trees on waste or degraded lands and river catchment areas.

In its consultation paper, SEBI has proposed that 'green credits' generated by the listed company and the value chain partners can be added as a leadership indicator under Principle 6 of BRSR, which states that businesses should respect and make efforts to protect and restore the environment.

"Inclusion in BRSR shall incentivise listed entities and their value chain partners to participate in the generation of green credits by following environmentally sustainable activities," SEBI said.

The disclosure is also in line with the Ministry of Environment, Forest and Climate Change notification issued in February 2024.

In addition, SEBI has proposed to redefine 'value chain partners', which should now encompass the upstream and downstream partners of a listed entity, individually comprising 2% or more of the listed entity's purchases or sales by value respectively. This will be voluntary for listed companies to make ESG disclosure about value chain partners for the first year of reporting-- FY 2024-25 in its annual report.

This is aimed at bringing down the maximum possible number of upstream or downstream value chain partners enabling additional ease of doing business. These proposals, based on the recommendations of an expert committee under the chairmanship of Sebi's former Whole Time Member SK Mohanty, aimed at facilitating ease of doing business with respect to the BRSR framework.

SEBI has sought comments from the public till June 12 on the proposals.

With regards to BRSR, the term 'assurance' should be substituted with 'assessment'. This move will provide flexibility to listed entities to undertake either an assessment of ESG data (which is the most effective and not burdensome) or assurance (which may be requested by investors/ clients of listed entities).

The option of undertaking assessment rather than assurance of ESG data will also facilitate ease of doing business.

The markets regulator in May 2021 introduced BRSR, which requires the top 1,000 listed entities by market capitalisation to file Business Responsibility and Sustainability Reporting covering Environmental, Social, Governance perspective as part of the annual report from FY 2022-23 onwards.

Later in July 2023, SEBI introduced BRSR Core, a sub-set of the BRSR comprising nine Key Performance Indicators for several E, S and G factors that need to be assured.