SEBI’s more is better fallacy on ESG disclosures

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Editor's note: The Securities and Exchange Board of India is ready to put the cart before the horse when it comes to environmental, social and governance regulation. In 2021, the market regulator asked the top 1,000 listed companies by market capitalization to file a Business Responsibility and Sustainability Report on a voluntary basis. Under this, firms were required to make disclosures on about 800 parameters related to environmental, social and governance, or ESG, factors. This included data on companies’ waste disposal practices, energy consumption, water usage, greenhouse gas emissions, workforce diversity and more. Reporting of such data was made mandatory for the financial year 2022-23. In March this year, SEBI revamped the framework. The regulator identified 49 key indicators that will have to be disclosed and independently audited. In addition to the mandatory BRSR reporting, companies will now have to undergo a third-party audit on these parameters, which SEBI calls BRSR Core. This will be applicable to the top 150 companies for 2023-24, and expanded to 250 by 2025-26 and 1,000 by 2026-27. SEBI says the change was made after the industry …