Enhancing ESG Disclosure Credibility Through SEBI’s Regulation and Independent Assurance Requirements

The Securities and Exchange Board of India (SEBI) has been trying to make ESG an integral part of corporate culture in India for more than 10 years. In order to meet the growing demands of the Governments, stakeholders and the public in general, and on the issue of climate change in particular, SEBI has increased the rigour of its ESG requirements. To this end, Business Responsibility and Sustainability Reporting (BRSR) has been made mandatory for top 1,000 listed companies from 2022-23, with a voluntary report for the current financial year 2020-21.

In order to enhance the reliability and transparency of the ESG disclosures, SEBI has introduced BRSR Core with limited key performance indicators (KPIs) that should be submitted with reasonable assurance. As an additional measure, a regulatory framework has also been established for ESG Rating Providers (ERPs), intended to standardize, as well as increase the credibility and consistency of ESG ratings.

However, most companies are yet to fully comply with ESG requirements, due in large part to the lack of preparedness, best reporting practices and standards. Despite the flexibility of the glide path for compliance, the users of ESG disclosures still face numerous challenges, primarily a lack of data and its poor quality. The new regulations would propel companies to ensure discipline and urgency in their ESG compliance.

In order to ensure better ESG compliance, the boards need to play a greater role in meeting both short-term and long-term goals. Boards should also assess their current knowledge level, identify the gaps and incorporate ESG in the enterprise-wide risk framework. Trade and industry associations, as well as rating agencies, should come together to develop industry-specific standards, as well as appropriate tools and techniques to measure data. Hopefully, the new requirements of assured disclosure and regulated rating will boost the credibility of ESG disclosure.

The company mentioned in this article is the Securities and Exchange Board of India (SEBI) which is the primary regulator of the Indian securities market. Established in 1988, SEBI possesses full authority to regulate and develop the country’s securities market. The goals of SEBI are to protect investor interests, promote fairness, regulation insider trading as well as help develop the Indian stock market.

The person mentioned in this article is Ajay Tyagi, who is the Chairman of SEBI Board. He assumed office in March 2017 and has been leading SEBI’s efforts to protect and foster the growth of the capital market in India. During his tenure, SEBI has aimed to develop the markets for venture capital and the alternative investments space. He also encouraged financial literacy initiatives and investor protection measures.