SEBI's New ESG Disclosure Regulations: Key Changes and Benefits for Businesses

SEBI Eases ESG Disclosure Rules: A Pragmatic Shift Toward Strategic Sustainability and Compliance Flexibility

In a move aimed at striking the right balance between regulatory ambition and on-ground feasibility, the Securities and Exchange Board of India (SEBI) has introduced key relaxations in its Business Responsibility and Sustainability Reporting (BRSR) framework. The changes, announced on December 18, 2024, ease the compliance burden for listed entities while encouraging a more measured, long-term approach to ESG integration.

These reforms underscore SEBI’s commitment to ensuring that sustainability reporting evolves meaningfully—without overwhelming companies, particularly those relying on vast and diverse supply chains.

What’s Changing: A Phased Rollout and Voluntary Value Chain Disclosures

The most significant shift involves the treatment of value chain disclosures, which were earlier expected to begin under a strict “comply-or-explain” regime from FY 2024–25. SEBI has now relaxed this mandate, making these disclosures voluntary until FY 2025–26. In addition:

• Third-party assessment or assurance of ESG data, once slated to begin with FY 2025–26, has now been deferred to FY 2026–27.
• Companies will be allowed to choose between “assessment” and “assurance”, offering flexibility in how they demonstrate the reliability of their ESG data.

This reprieve is expected to ease transitional pressures and enable better preparation—especially among companies navigating complex supplier and customer networks.

Support for MSMEs: Inclusive Growth Through ESG

A key element of SEBI’s recalibration is the recognition of the constraints faced by Micro, Small, and Medium Enterprises (MSMEs), which form a critical component of many large firms’ value chains. By deferring the mandate and allowing voluntary disclosures for now, SEBI is giving MSMEs time to strengthen their ESG frameworks without the pressure of immediate compliance.

This move is likely to improve long-term participation of smaller entities in global ESG-aligned supply chains, which increasingly demand traceable, verifiable sustainability practices.

Industry Perspective: A Shift Toward Strategic ESG Engagement

Market experts have largely welcomed SEBI’s tempered approach. Smitha Shetty, APAC Regional Director at Achilles Information, observed that this extension provides companies with an opportunity to embed ESG thinking strategically rather than treat it as another checkbox exercise. According to her, early engagement in data collection will be key, given the cross-functional coordination ESG reporting requires.

Dipankar Ghosh, Partner and Sustainability Leader at BDO India, echoed this sentiment. He noted that the challenge of collecting credible data from sprawling value chains is a global concern, and SEBI’s staggered rollout reflects an understanding of this operational reality.

Refinements for Practical Implementation

To ensure disclosures remain both actionable and relevant, SEBI has narrowed the scope of mandatory value chain disclosures:

• Only vendors or clients that account for at least 2% of the company’s total purchase or sales value need to be considered.
• Overall, companies may limit disclosures to cover 75% of the total purchase and sales value.

This scope capping is intended to preserve materiality, reduce unnecessary reporting fatigue, and focus attention on the most impactful relationships.

Additionally, SEBI’s partnership with the Industry Standards Forum to co-develop ESG metrics will help standardize definitions and practices, ensuring disclosures are comparable and meaningful for investors and stakeholders alike.

Conclusion: Fostering a Measured and Mature ESG Culture

SEBI’s latest changes represent a thoughtful pivot—from rigid timelines and blanket mandates toward a more strategic and phased ESG implementation framework. While regulatory expectations remain firm on the importance of sustainability, the relaxed timelines and clarified scope signal a deeper appreciation of business realities on the ground.

For India’s capital markets, this regulatory fine-tuning not only supports ease of doing business, but also encourages companies to view ESG as a long-term value driver, not merely a compliance obligation. As global investors increasingly price in sustainability metrics, SEBI’s direction helps position Indian firms to respond credibly—and competitively—in the years ahead.