Industry body CII to seek clarity from Sebi on upcoming ESG norms

India’s largest industry body, the Confederation of Indian Industry (CII), is expected to meet the markets regulator Securities and Exchange Board of India (Sebi) after a number of major companies have raised concerns about the lack of clarity regarding upcoming environmental, social and governance (ESG) disclosure mandates and their implementation guidelines.

Several companies from the top-250 pack on Indian bourses have approached CII to relay these concerns on ESG mandates which Sebi had outlined in a circular dated July 12, 2023, and a formal consultation with the market regulator is expected soon, representatives from CII told DH.

The said circular mandates ESG disclosures for 75% of the value chain of the top-250 listed entities by market capitalisation, on a comply-or-explain basis, starting April 1, 2024. 

“As of now, at CII, we’re collecting information on concerns of the top industry players to understand their challenges and take them to Sebi,” said Shikhar Jain, executive director at CII centre of excellence for sustainable development.

“The concerns regarding further clarity were communicated to Sebi as part of larger review meetings in August and we are expected to meet the regulator again,” said another CII official, on condition of anonymity.

Sebi did not respond to DH’s query seeking comments. 

While the move by Sebi was hailed as well-intentioned, experts who spoke  to DH unanimously agreed that the timeline to furnish the required data from value chain partners is “extremely challenging”.

Responding to DH’s query on prospects of companies in meeting the mandate within the prescribed time frame, technology services and consulting company Wipro Limited remarked: “It is a challenging task…companies that have only recently embarked on their ESG journey may encounter challenges in gathering value chain data, as this information tends to be distributed across the organisation and often compartmentalised in various silos.” 

While Wipro has been disclosing its ESG efforts for 15 years, the company finds Scope 3 carbon emissions (those by supply chain partners) more complex in nature due to a lack of control and influence. “The ecosystem is not mature enough, both for estimating and addressing Scope 3 emissions,” it revealed.

“The upstream and downstream partners of the top-250 companies, which are numerous and smaller companies in many cases, may not have the wherewithal in terms of knowledge, finance and infrastructure to measure and record their ESG data,” said Nirav Karkera, who heads research at financial services provider Fisdom. 

“Value chain partners, especially unlisted companies that have not previously reported BRSR information may need to put in place adequate IT systems, processes and controls to consistently and accurately record and report the granular sustainability data,” explained Sumit Seth, who is a partner at Price Waterhouse & Co Chartered Accountants LLP.

Furthermore, these smaller companies, which are spread across international geographies, do not fall under the obligatory bracket as per Sebi’s requirements and may even display reluctance due to fears of being flagged, Karkera added. 

To start with, companies have begun identifying critical suppliers (non-substitutable or high value), undertaking capacity building and working on templates to obtain ESG data from their supply chains, noted Pranav Master, Senior Practice Director – Consulting, CRISIL Market Intelligence and Analytics.

With less than a year between release of the circular in July and the starting date for data tracking i.e April 1, 2024, the top-250 companies are expected to showcase stewardship by rendering educational and infrastructural support to their suppliers and vendors.

“Strong capacity building is what is really required and that is what some of the larger corporates are now starting to do,” Master said. This does involve added expenditure for the listed entities in the short term, be it monetary or in terms of time, he added. 

In light of the fast moving changes, demand for ESG experts saw a 19% month-on-month surge in August 2023, data from talent platform foundit revealed.

Owing to the relatively nascent and evolving nature of the ESG landscape in India, experts pointed to a lack of established and certified talent specialising in ESG roles in the country.

“Organisations are sourcing ESG talent from various avenues - environmental management, corporate social responsibility, compliance, ethics and related areas - to transition into ESG roles and address the shortage of professionals in this space,” said foundit chief executive Sekhar Garisa.

Others agreed.

“The talent pool in the space, at 36,000 professionals as of January 2023, come from over 20-plus related roles and functions across adjacent functions and clusters,” co-founder Kamal Karanth of specialist staffing company Xpheno added.