SEBI has issued a circular aims to enhance transparency and standardization in corporate disclosures related to environmental, social, and governance (ESG) practices, as per the provisions under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations).
The circular comes at a time when there is increasing global and domestic demand for robust corporate sustainability practices. It marks a significant step towards aligning India’s corporate reporting with international standards of ESG disclosures. Let’s delve into the key elements of this circular and its potential impact on listed entities in India.
Purpose of the Circular
The primary objective of this circular is to facilitate the effective implementation of the BRSR Core disclosure requirements for listed entities. The BRSR Core, introduced by SEBI in 2021, mandates listed companies to report their performance across several sustainability indicators, covering areas such as climate risk, resource use, stakeholder engagement, and governance practices. This circular serves to standardize the process and simplify the way companies report these parameters, ensuring consistency, comparability, and transparency in their ESG disclosures.
In collaboration with the Industry Standards Forum (ISF)—which consists of representatives from three major industry associations (ASSOCHAM, FICCI, and CII)—SEBI has formulated these industry standards to streamline the implementation of BRSR Core. The circular outlines the specific framework that listed entities must follow when disclosing their BRSR Core, ensuring that the disclosures meet SEBI’s stringent standards for clarity, accuracy, and consistency.
Key Highlights of the Circular
- Introduction of Industry Standards: The Industry Standards Forum (ISF) has developed the industry standards in consultation with SEBI. These standards are designed to ensure that listed entities comply effectively with the BRSR Core disclosure requirements. The standards will be made available on the websites of ISF members—ASSOCHAM, CII, FICCI—and the stock exchanges, serving as a valuable resource for companies.
- Mandatory Compliance for Listed Entities: SEBI has mandated that all listed entities follow these industry standards to ensure compliance with the BRSR Core requirements under Regulation 34(2)(f) of the LODR Regulations. Companies must incorporate these standards in their annual disclosures, which will cover aspects such as governance practices, environmental impact, social responsibility, and sustainable development goals.
- Implementation Timeline: The new disclosure requirements outlined in the circular are applicable for the financial year (FY) 2024-25 and onwards. This gives listed companies sufficient time to align their reporting frameworks and adopt the new guidelines for their upcoming financial disclosures.
- Publication of Standards by Stock Exchanges: The recognized stock exchanges will play a key role in ensuring that these standards are disseminated to listed entities. The exchanges are tasked with publishing the industry standards on their websites and monitoring the compliance of listed companies.
- Increased Focus on ESG Disclosure: The circular reinforces the growing importance of Environmental, Social, and Governance (ESG) factors in corporate reporting. The BRSR Core is a significant step towards improving transparency on sustainability issues, making it easier for investors and stakeholders to assess the sustainability practices of listed companies.
Implications for Listed Entities
Listed companies in India will need to adapt to these new standards and update their internal processes for collecting, analyzing, and reporting sustainability data. The industry standards will help streamline the reporting process, making it easier for companies to meet SEBI’s disclosure expectations. The standardized framework will also foster comparability between companies in terms of their ESG performance, which can be crucial for attracting sustainability-conscious investors.
Additionally, as the global investment community increasingly emphasizes sustainability, the enhanced ESG disclosures mandated by SEBI will likely boost investor confidence in Indian markets. Companies that effectively implement BRSR Core disclosures will be better positioned to attract long-term, responsible capital, which increasingly focuses on ESG performance as a critical factor in investment decisions.
Conclusion
SEBI’s circular on Industry Standards for Reporting of BRSR Core marks a milestone in India’s journey toward improved corporate governance and sustainability practices. By standardizing ESG disclosures, SEBI is helping listed entities navigate the complexities of sustainability reporting and ensuring that companies are more transparent in their environmental and social impact. This is a significant step in creating a more sustainable and investor-friendly corporate ecosystem in India. For listed companies, adopting these standards will not only ensure regulatory compliance but also enhance their reputation as responsible corporate citizens in an increasingly eco-conscious global economy.
