BRSR disclosures for Value Chain Partners eased by SEBI

– Prapti Kanakia, Manager | corplaw@vinodkothari.com

Updated on 7th April, 2025

Original Article dated 26th December, 2024

The requirement of disclosing BRSR Core for value chain partners of the listed entity and to obtain its limited assurance was introduced vide SEBI (LODR) (Second Amendment) Regulations, 2023. SEBI vide BRSR Core – Framework for assurance and ESG disclosures for value chain Circular dated July 12, 2023 (Erstwhile BRSR Circular), had come up with the framework on BRSR Core for listed entities and its value chain partners (VCPs). 

With the aim to simplify, ease and reduce the cost of compliance from the Ease of Doing Business (EoDB) perspective, SEBI had constituted an Expert Committee on BRSR. Based on the report of the said committee, a Consultation Paper dated May 22, 2024 was issued inviting suggestions. Majority of the suggestions provided in the Consultation Paper have been approved by the SEBI in its Board meeting dated December 18, 2024 and are introduced by way of a Circular titled Measures to facilitate ease of doing business with respect to framework for assurance or assessment, ESG disclosures for value chain, and introduction of voluntary disclosure on green credits dated March 28, 2025 (Revised BRSR Circular). 

This article analyses the amendments in line as approved by SEBI with respect to the BRSR framework.

Value Chain Partners Redefined

Erstwhile BRSR Circular defined VCPs to include the top upstream and downstream partners of a listed entity, cumulatively comprising 75% of its purchases/ sales (by value) respectively.

The identification of VCPs is important as the listed entities are required to report the KPIs in the BRSR Core for their VCP to the extent it is attributable to their business with that VCP (i.e. ESG disclosure for VCP). Further, the listed entities are also required to obtain limited assurance on BRSR Core disclosure for the VCPs.

Expert Committee on BRSR discussed that reporting of KPIs for VCP could result in cost burden for VCP and difficulty in compliance by the listed entity. As per the erstwhile requirements, the tentative number of VCP partners covered were ranging from 85 to 1260. Hence, it was suggested to rationalise the definition to cover only the significant VCP.

Basis the data, the Committee suggested encompassing only those VCP comprising 2% or more of the listed entity’s purchase/sales (by value). The suggested revised VCP definition will result in significant reduction of the number of VCPs. As per the data collated by the Expert Committee on BRSR for facilitating EoDB w.r.t. BRSR, the number of VCP identified basis the revised criteria would be approx 0-10. 

Basis the recommendation, SEBI revised the definition of VCPs as follows: ‘value chain shall encompass  the  top  upstream  and  downstream  partners  of  a  listed entity,  individually  comprising  2%  or  more  of  the  listed  entity’s  purchases and  sales  (by  value)  respectively.  However,  the  listed  entity  may  limit disclosure  of  value  chain  to  cover 75%  of  its  purchases  and  sales  (by value) respectively.

The revised criteria ensures that ESG disclosure of only key/significant VCP is reported. Further, it will also avoid undue cost burden for smaller companies who may be VCP for large listed entities or listed entities with long tails in their value chain. 

Basis the revised criteria, listed entities will first identify its vendors comprising 2% or more of its purchase and sales by value. Out of the identified details of all the vendors which cumulatively represent at least 75% of its purchases and sales, respectively should be identified for the purpose of disclosure under BRSR framework.

E.g. Listed entities total purchases amounts to Rs. 1000 Crore and sales amounts to Rs. 6000 Crore. In such a case, the listed entities will identify the vendors with concentration of 2% or more of purchase and sales respectively in value, which amounts to Rs. 20 crore for purchases and Rs. 120 Crore. Lets say the listed entity has following vendors:

Upstream partners	Percentage of total purchases	Downstream partners	Percentage of total sales
Person A	7%	Person S	2.5%
Person B	3%	Person Y	8%
Person C	2%	Person Z	1.5%
Person D	1%	Person Q	10%

Here, Person A, Person B, Person C, Person S, Person Y, & Person Q will be identified as the VCPs. Now, in terms of reporting, the entity needs to ensure that at least 75% of the total, i.e. (6*75%) in value are covered for the purpose of disclosure.

Disclosure of quantum of VCPs Identified for the purpose of reporting

With the revision in the meaning of VCPs and disclosure requirements, every entity might not limit their ESG disclosure for VCPs to 75%. To ensure comparability of the ESG disclosures for VCPs, SEBI has mandated all the listed entities disclosing ESG details of its VCPs to clearly disclose the percentage of total purchases and sales covered by the VCPs in their disclosures. This will also provide useful information for ESG rating providers, ESG mutual funds and other stakeholders for analysis of ESG disclosures for the value chain of a listed entity.

Fig. I – Value Chain Partners

Voluntary ESG Disclosure for VCP 

In ESG disclosure for VCP, the role of the listed entity is to collect the data from VCP and report in the BRSR, however the systems/compliance are required to be ensured by the VCP. Also, ESG disclosure being the new requirement, the data systems to report for VCP are not in place and will take time to develop. 

As the ESG disclosures for VCP are on a comply-or-explain basis, the listed entities are under the responsibility to explain the reasons for non reporting. The ‘comply-or-explain’ approach results in listed entities being identified as non-complaint for the data beyond their realm of verifiability/ reporting. Hence, on the suggestions of the Expert Committee SEBI approved changing the approach of ESG disclosure for VCP and obtaining its third party assurance from ‘comply-or-explain’ to ‘voluntary’. 

Fig. II – ESG disclosure for VCP – I

Deferred Applicability for ESG Disclosure for VCP

Top 250 listed entities by market cap were required to report ESG disclosures for the VCP (i.e. BRSR Core disclosure for VCP) from FY 24-25 i.e. the current financial year. Further, the limited assurance on the above was required to be obtained from FY 25-26 onwards. 

The said disclosures are deferred by one financial year which means the top 250 listed entities have one more year to develop the system for reporting the details. Given the intent, SEBI has also relaxed the requirement of reporting the comparatives for first year reporting of ESG disclosure for VCP.

Fig. III – ESG disclosure for VCP – II

Fig. IV – Limited Assurance on ESG disclosure for VCP

Third part Assessment of ESG disclosure for VCP

The listed entities are required to undertake reasonable assurance of BRSR Core and limited assurance of ESG disclosure for value chain partners. The usage of the term ‘assurance’ results in unwarranted association with a particular profession, hence, SEBI vide SEBI (Listing Obligation and Disclosure Requirements) (Amendment) Regulations, 2025 added the term ‘assessment’. Further, vide the Revised BRSR Circular the format of BRSR has also been updated to include the above change. The said change will result in decreased cost and effort for listed entities and their VCPs for verifications of sustainability reporting.

Fig. V – Third Party Assessment 

Further, the ISF (Assocham, CII, & FICCI) will develop standards on third party assessment in consultation with SEBI. ISF has already developed standards on BRSR Core which provides more clarity with respect to disclosure and methodology and the same ispublished on their website.

Disclosure of Green Credits 

Green Credits Program was introduced by Ministry of Environment, Forest and Climate Change (MoEFCC) on October 13, 2023, as a part of LiFE – ‘Lifestyle for Environment’ movement announced by the Hon’ble Prime Minister in 2021. Under this program the stakeholders may undertake voluntary environmental measures, particularly tree plantation, resulting in the award of Green Credits. 

The notification dealing with methodology for calculation of green credit in respect of tree plantation stated that the green credits generated may be used for reporting under ESG leadership indicator or under CSR. Hence, the format of BRSR has been aligned by introducing the requirement of disclosing the green credits procured or generated by the listed entity and top 10 VCP (in terms of value of purchases and sales, respectively) under leadership indicator of Principle 6  – Businesses should respect and make efforts to protect and restore the environment. The said disclosure is applicable from FY 2024-25 onwards.

Actionables

The listed entities are required to 

• Identify its VCP as per the revised criteria;
• Disclose the green credits generated or procured as per the revised format of BRSR Core for FY 24-25
  • Disclose for top-10 VCP (in terms of value of purchases and sales, respectively) for FY 26 onwards
• Ensure that systems are in place for reporting the ESG disclosure for VCP FY 26;
• Ensure that the third party assurance or assessment report for ESG disclosure is in line with the standards to be developed by ISF.

---

Our Resources on BRSR and BRR :

Resource Center on ESG and sustainability