Is SEBI Softening Its ESG Disclosure Mandate for Listed Firms

The recent changes regarding India's environmental, social and governance (ESG) disclosure requirements have triggered an interesting discussion among regulators, companies and investors. As India continues to strengthen its commitment to sustainable development and responsible business, the Securities and Exchange Board of India (SEBI) has led the way in demanding proactive ESG disclosures. However, in a surprising twist, SEBI has commenced a review of its prior timelines and scope of ESG compliance. This recalibration, potentially characterized by a less aggressive approach to ESG mandates and potentially a delay of ESG disclosure timelines, leads to several interesting questions: Is SEBI backing away from the corporate sustainability agenda as a result of industry calls for delay? Or is it a move to adjust between the idealism of meeting the intended timelines of ESG disclosure and the realities of implementation?

As India's top market regulator, SEBI has aided in helping listed entities across the country push ahead with a set of ESG reporting rules that are comparable with those of other countries. However, the challenge of uniting the different companies and competing and changing ESG frameworks brought some significant challenges to the fore.  Although SEBI's Business Responsibility and Sustainability Report (BRSR) Core framework has received widespread acclaim for its forward-thinking, many have criticised it for its overly ambitious required supply chain disclosures and strive to be relevant to the diversity of business types in India. The outcome being that SEBI's ESG review has commenced at a time when corporate India is already dealing with resource restriction, data quality, standardization, and external verification issues.

SEBI’s evolving ESG framework aims to balance sustainability with practical compliance for listed firms in India.

1. Understanding SEBI’s ESG Push and its Current Reassessment:

In recent years, the Indian capital markets regulator, the Securities and Exchange Board of India, or SEBI, has begun to take sustainable finance very seriously. That changed in 2023 with the release of the BRSR Core frame. This new framework means companies in India will be forced to think differently about their environmental, social and governance (ESG) obligations. Rather than simply cranking out routine reports, businesses must work to identify clear, measurable metrics and have their data put through the process of independent verification. The framework also stresses the importance of reporting on supply chains, with larger listed companies expected to collect and validate ESG data not only from themselves but also from their most important suppliers and partners.

Yet for a lot of firms, particularly those whose supply chains are scattered or informal, this requirement to be compliant is proving difficult. As companies began to adopt these new rules, there was worry that smaller suppliers in particular would have difficulty providing accurate ESG data. Given these challenges, SEBI has suggested to postpone the deadline for these ESG disclosures.

That is in-line with the new SEBI Chairman Tuhin Kanta Pandey’s view that he wants to make compliance simple. He calls for an enhancement of capacity on a more sustainable ESG model rather than simply driving companies towards hard deadlines. His views indicate a turn to greater support for compliance.

2. Corporate Sustainability vs Practical Viability:

The central issue under debate relates to balance. Does this mean that India can accelerate corporate sustainability without choking its corporate sector? Corporates have generally recognized the spirit of the ESG mandates while pointing to a readiness gap-in particular in midsized and smaller listed firms. Technology integration, ESG literacy, human resource capabilities, and availability of standardized metrics continue to constitute bottlenecks.  

While multinational corporations and large Indian conglomerates are relatively well-positioned, with their practice conforming to global ESG reporting, many domestic companies are yet to reach this level. There is some fear that stringent enforcement may cause companies to opt for perfunctory compliance or greenwashing instead of genuine sustainability reporting.

The need for external assurance has led to increased costs and logistical challenges. With the ESG assurance market still in its infancy in India, and also an acute shortage of qualified persons and firms to perform audits of ESG indicators, compliance has become an often expensive and inconsistent affair. Therefore, the SEBI initiative to revisit the rollout, especially the supply chain reporting aspect, could well be seen as an attempt to address these systemic hurdles rather than dilute the intent behind the process.

3. Indian Market Regulation in Global ESG Context:

India is not the first to embark on the regulatory road. ESG reporting frameworks are changing rapidly around the world — from the Corporate Sustainability Reporting Directive (CSRD) in the EU to the Securities and Exchange Commission’s (SEC) proposed rules in the U.S. SEBI sought to standardize Indian reporting structures and keep Indian companies relevant in the eyes of global investors, who are increasingly factoring ESG metrics into the long-term value of a firm.

But in contrast to developed jurisdictions where the ESG compliance is more institutionalised, the Indian regulators are treading a more disjointed terrain. The Indian regulation space being dynamic and forward-looking, has to also be cognizant of the wide range of business sizes, maturity of industry and access to technology. The SEBI ESG review appears to acknowledge this complexity—one that prefers to be inclusive and focus on long-term adoption rather than Z” short-term enforcement.

Equally concerning is the issue of comparability and interoperability. Indian companies, either listed on foreign bourses or getting international funding, in many cases have to adhere to ESG norms in both domestic and global markets. It becomes important to align the Indian BRSR with other international reporting mechanisms (GRI, SASB, ISSB etc.) to avoid duplication of efforts and information overload. An overly hasty or dogmatic move could threaten to deter foreign investors rather than reassure them.

4. The Crux of ESG Reporting Challenges in India:

As SEBI rethinks its position, it is worth unpacking the reality of the ESG reporting hurdles companies are grappling with. First, ESG data quality and traceability are uneven, especially regarding Scope 3 emissions, diversity metrics, or supplier-level waste management. In many industries, suppliers don’t even have basic digital systems, much less ESG readiness, making data collection unreliable or impossible.

Second, there is no clear guidance for industry specific. Although the BRSR Core of SEBI presents a common set of considerations, it is insufficient to ensure that the sectoral considerations are sufficiently treated for reporting of substance. This framework is used less frequently by companies in verticals such as agriculture, logistics, or microfinance, as it’s not always clear how to map the stages of these industries to the investment Readiness map.

Third, the pressure to meet ESG demands with limited in-house expertise is driving companies to depend more on consultants and assurance providers. This creates an uneven playing field and threatens to turn ESG into templated checklists, with the potential to threaten the genuineness, and strategic embedding of ESG into business decision-making.

Fourth, there is still confusion due to the absence of standardized taxonomies and definitions. The definition of a “sustainable activity” or an “inclusive workforce” can differ widely between companies, resulting in inconsistencies and destroying investor confidence.

5. The Road Ahead: From Mandate to Maturity

The current phase of interaction by SEBI with its stakeholders sounds like an inflection point in India’s ESG-journey. So when we think about extending a disclosure deadline, then, it’s not about losing resolve, but about shifting strategically to make sure we’re helping to build sustainable, scale-able, inclusive ESG practices. While SEBI seeks feedback and refines the rollout, it’s also the moment for companies to lay a strong internal ESG foundation — this isn’t just about compliance but about leadership.

SEBI Chairman Tuhin Kanta Pandey has alluded to this long-term ambition in public pronouncements, emphasising that ESG is not going to be a tick-in-box exercise. Instead, it should be considered a business imperative that reduces risk, adds value to the brand and builds confidence among stakeholders, while also making capital more available. The role of the regulator in this context is not so much that of the policeman as the partner — with business, investors, credit rating agencies, auditors — to build a systemic, trustable ecosystem.

SEBI is likely to introduce stricter rules or deadlines in due course, which will subsequently relax the load of filing, without any sacrifice on the quality of disclosure. There is stakeholder consultation at the heart of this recalibration, and whether the final framework will actually work will depend a great deal on how well it accommodates on-ground operational realities of Indian businesses, while keeping them in sync with ESG benchmarks globally.

Conclusion: A Course Correction or a Strategic Shift?

As SEBI takes a holistic view of its ESG mandate, the discussion will have to move beyond mere compliance talk to an in-depth understanding of corporate responsibility, regulatory empathy, and long-term sustainability. The move also does not really represent a backpedalling of the regulator, but a wish that ESG reporting becomes a genuine and long-standing business norm in India.

The obstacles to supply chain reporting, the obstacles to ESG compliance in India and constraints within the wider ecosystem are real and require to be tackled through targeted capacity building, standardization, and digital innovation. Where extension of ESG disclosure timeline is undertaken – to be effective by the way, we need to see a list of active support: education tools for SMEs, sector-specific guidance, and campaigns to improve ESG literacy.

The ESG future of India lies in shared progress — where regulators, corporates and investors collectively march towards a more transparent, responsible, sustainable economy. The current introspective phase of SEBI is, to an extent, an invitation to Indian corporate to not only follow the ESG writ but integrate the same into their corporate DNA and process. And if that means taking things a bit more slowly and thoughtfully today so we could go faster tomorrow, that decision might very well be worth making.

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