📰 SEBI’s New ESG Disclosure Norms: What Companies Must Know in 2025

Environmental, Social, and Governance (ESG) considerations have rapidly moved from boardroom discussions to regulatory mandates. In a landmark push toward sustainability and responsible business conduct, the Securities and Exchange Board of India (SEBI) has introduced revised ESG disclosure norms, set to reshape how listed companies operate, report, and engage with stakeholders.

As of April 2025, SEBI’s new ESG framework—anchored in the Business Responsibility and Sustainability Report (BRSR) Core format—has taken effect for the top 150 listed entities by market capitalisation. This blog unpacks what these changes mean for Indian companies and how businesses should prepare for compliance.

🔍 What Are the New ESG Disclosure Norms?

SEBI has introduced the BRSR Core, a more detailed and quantifiable ESG reporting format, supplementing the original BRSR guidelines issued in 2021. The key objectives behind the updated framework include:

1. Enhancing transparency on ESG practices
2. Ensuring data consistency and comparability
3. Enabling investors to make informed decisions
4. Encouraging companies to adopt sustainable business models

📌 Who Must Comply?

1. FY 2024–25: Top 150 listed companies by market cap are required to report under BRSR Core on a voluntary basis.
2. FY 2025–26 onwards: The same companies must mandatorily submit the BRSR Core disclosures as part of their annual reports.

SEBI may consider extending the scope of mandatory reporting to the top 250 or 500 companies in subsequent phases.

📊 Key Features of BRSR Core

 1. Carbon Emissions (Scope 1 & Scope 2)

Definition:
These refer to the greenhouse gas (GHG) emissions generated by a company’s operations, divided into two main categories:

1. Scope 1: Direct emissions from sources owned or controlled by the company.
   📌 Examples: Emissions from factory fuel combustion, company-owned vehicles, industrial processes.
2. Scope 2: Indirect emissions from the generation of purchased electricity, heat, or steam used by the company.
   📌 Examples: Electricity consumption in offices or manufacturing plants.

Why It Matters:
High carbon emissions increase a company’s environmental risk exposure and affect compliance with climate regulations (like India’s National Action Plan on Climate Change or global Net Zero targets).

Disclosure Requirement:
Companies must report the volume of emissions (in metric tons of CO₂ equivalent) and detail efforts to monitor, reduce, or offset them (e.g., solar energy, energy efficiency programs).

 2. Gender Diversity

Definition:
The representation of women (or individuals of other genders) in a company’s workforce, particularly at:

1. Board level
2. Senior management
3. Mid-level roles
4. Overall employee base

Why It Matters:
Diverse workplaces lead to better decision-making, innovation, and represent fairness and inclusivity—critical markers of social responsibility.

Disclosure Requirement:
Companies must disclose:

1. Percentage of women employees overall
2. Percentage of women in leadership positions
3. Policies or programs promoting gender equity (e.g., maternity policies, anti-harassment laws, diversity hiring targets)

3. Wage Parity

Definition:
The principle that employees performing the same work or work of equal value must be paid the same wage, regardless of gender, caste, or other biases.

Why It Matters:
Wage disparity can lead to:

1. Legal risks under labor and equal pay laws
2. Reputation damage for unfair labor practices
3. Low employee morale and high attrition

Disclosure Requirement:
Companies must disclose the pay ratio between:

1. Top management and median employees
2. Male and female employees in similar roles
   Also, report on internal wage parity audits and correction mechanisms.

4. Employee Turnover

Definition:
The rate at which employees leave an organization over a given period. High turnover can signal poor workplace culture or lack of employee satisfaction.

Why It Matters:
High attrition increases:

1. Recruitment and training costs
2. Operational disruptions
3. Brand risks (especially in customer-facing sectors)

Disclosure Requirement:
Companies need to report:

1. Annual turnover rate
2. Turnover by gender, department, or region (if available)
3. Steps taken to improve retention (e.g., upskilling, flexible work policies)

 5. Water and Energy Consumption

Definition:
The amount of water and energy a company uses in its operations, manufacturing, supply chain, and offices.

1. Water Consumption: Measured in kiloliters; includes usage for production, sanitation, cooling, etc.
2. Energy Consumption: Measured in kWh; includes electricity, fossil fuels, or renewable energy sources.

Why It Matters:
Sustainable resource usage:

1. Reduces operational cost
2. Prevents legal exposure under environmental regulations
3. Improves stakeholder trust

Disclosure Requirement:
Companies must report:

1. Total energy and water consumed
2. Portion of renewable energy used
3. Conservation/recycling practices (e.g., rainwater harvesting, solar power)

 6. ESG Risk Mitigation Plans

Definition:
These are the strategies and systems put in place by a company to identify, assess, and manage risks related to Environmental, Social, and Governance aspects.

Why It Matters:
Poor ESG risk management can lead to:

1. Regulatory fines
2. Investor pull-outs
3. Supply chain disruptions
4. Loss of consumer trust

Disclosure Requirement:
Companies must describe:

1. ESG risks identified (e.g., climate change, child labor, board independence issues)
2. Internal policies, SOPs, or controls to mitigate such risks
3. ESG risk governance (e.g., Board oversight, ESG committees, audits)
4. Assurance Requirement: SEBI has mandated reasonable assurance of BRSR Core disclosures by a third-party assurance provider starting FY 2026–27, similar to statutory audits.
5. Value Chain Reporting: From FY 2026–27, companies will also need to disclose select ESG data of their value chain entities, covering at least 75% of their upstream and downstream partners.
6. Greenwashing Prevention: The disclosures aim to curb greenwashing by emphasizing auditable, verified, and standardized ESG metrics.

Legal and Compliance Implications

Companies must now treat ESG disclosures as a regulatory compliance mandate, not just voluntary CSR. Key legal takeaways include:

• ESG data accuracy is now a compliance risk, akin to financial disclosures.
• Audit committees must review ESG disclosures in line with financial statements.
• Misreporting or omission may attract penalties under SEBI (LODR) Regulations.
• Cross-verification with disclosures made under Companies Act, Environment (Protection) Act, and Labour Laws is crucial to avoid contradictions.

Challenges Companies May Face

• Data collection and system readiness across business units and suppliers
• Interpreting new ESG metrics and aligning them with global standards (e.g., GRI, TCFD, SASB)
• Lack of internal ESG audit capabilities
• Preparing for external assurance and scrutiny

How Companies Should Prepare

1. Conduct an ESG Readiness Assessment
   Understand your current ESG footprint and identify data gaps.
2. Build ESG Governance Structures
   Establish internal ESG committees or appoint Chief Sustainability Officers.
3. Align Policies & SOPs
   Update HR, environment, and supplier policies to support BRSR Core compliance.
4. Engage Legal & Assurance Experts
   Work with law firms and ESG auditors to review legal risks and align disclosures with multiple regulatory frameworks.
5. Train Your Board & Senior Management
   Ensure top leadership understands ESG risks, regulatory duties, and stakeholder expectations.

Conclusion

SEBI’s new ESG disclosure norms mark a decisive shift toward accountability, sustainability, and responsible investing in India’s capital markets. These norms are not just compliance checkboxes—they reflect an evolving legal and commercial landscape where ESG performance is as critical as financial returns.

At Narendra Madhu Associates, we advise listed and private companies on ESG compliance strategy, regulatory audits, value chain diligence, and board-level policy alignment.