SEBI Introduces BRSR Core Regulatory Framework for ESG Disclosures on Value Chain and Assurance for Listed Entities

Circular No. SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122, Dated: 12.07.2023

Earlier, SEBI vide Circular No. SEBI/HO/CFD/CMD-2/P/CIR/2021/562, dated May 10, 2021 prescribed the Business Responsibility and Sustainability Report (BRSR), which was subsequently incorporated in the Master Circular No. SEBI/HO/CFD/PoD2/CIR/P/2023/120 dated July 11, 2023.

Based on the recommendations of the ESG Advisory Committee and pursuant to public consultation, SEBI has introduced a regulatory framework for listed entities on ESG disclosures for the value chain and assurance, as per the BRSR code. ESG refers to Environment, Social and Governance.

The BRSR Core is a sub-set of the BRSR (Business Responsibility and Sustainability Report), consisting of a set of Key Performance Indicators (KPIs)/metrics under 9 ESG attributes. As per the said framework, large listed companies are required to make disclosures and obtain assurance as per the ‘BRSR Core’ for their value chain.

In order to facilitate the verification process, the BRSR Core specifies the data and approach for reporting and assurance. For ease of reference, the BRSR Core contains a cross-reference to the disclosures contained in the BRSR.

Accordingly, From FY 2023–2024, the top 1000 listed entities (by market capitalization) must make disclosures for the value chain and assurance as per the updated BRSR format, as part of their Annual Reports. The requirement of BRSR Core is applicable in phases, depending upon the FY, which is as follows

For the financial year 2023-24, the BRSR Core requirements shall be applicable to the top 150 listed entities in terms of market capitalization. In the subsequent financial year 2024-25, the BRSR Core requirements shall extend to the top 250 listed entities. Continuing the trend, in the financial year 2025-26, the BRSR Core applicability shall encompass the top 500 listed entities.

Finally, by the financial year 2026-27, the BRSR Core requirements shall be applicable to the top 1000 listed entities, ensuring a more comprehensive coverage of significant companies operating in the market.

In this regard, the value chain must encompass the top upstream and downstream partners of a listed entity, cumulatively comprising 75% of its purchases or sales by value respectively.

Further, listed entities must report the KPIs in the BRSR Core for their value chain to the extent it is attributable to their business with that value chain partner. Such reporting may be segregated for upstream and downstream partners or can be reported on an aggregate basis.

The Board of the listed entity is required to ensure that the assurance provider of the BRSR Core has the necessary expertise for undertaking reasonable assurance. Also, the listed entity must ensure that there is no conflict of interest with the assurance provider appointed for assuring the BRSR Core.

The introduction of the regulatory framework for ESG disclosures and the requirement of BRSR Core in annual reports will significantly enhance transparency and accountability among listed entities, leading to improved environmental, social and governance practices. This initiative aims to drive sustainable business practices and promote responsible value chain management in the corporate sector.

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