Sebi moots including Green Credits in BRSR Core, redefining value-chain partners

On February 22, 2024, the Ministry of Environment, Forest and Climate Change of India (India) notified the the methodology for calculation of green credits.

The market regulator has proposed including Green Credits generated by a listed company and its value-chain partners.

Green Credits can be earned by tree-plantation drives on degraded land parcels identified by the Forest Department.

On May 22, the Securities and Exchange Board of India (Sebi) released a consultation paper on recommendations made by the Expert Committee for Facilitating Ease of Doing Business with respect to Business Responsibility and Sustainability Report (BRSR). Last March, the regulator had issued the ESG Reporting method called BRSR Core.

Also read: SEBI introduces Core BRSR ESG reporting, tackles unregulated ESG rating providers

The other proposals on the recommendations made include redefining value-chain partners, making ESG disclosures of value chain voluntary for the first year (FY25) and allowing the flexibility of choosing "assessment" of BRSR Core data disclosures instead of "assurance" of the same.

Among the three proposals was the inclusion of a leadership indicator in the BRSR, which would capture Green Credits generated by the company and its value chain. Value chain encompasses the upstream and downstream partners of a listed entity, individually comprising 2 percent or more of the listed entity's purchases/sales (by value) respectively.

The “Green Credit Rules, 2023” were notified on on October 12, 2023. They notified Indian Council of Forestry Research and Education as “the administrator” – responsible for implementation of Green Credit Programme (GCP), including its management and operation under the rules. On February 22, 2024, the Ministry of Environment, Forest and Climate Change of India (India) notified the the methodology for calculation of green credits.

The notification also said that the green credits so generated can be used for reporting under environmental, social and governance leadership indicator.

Redefining value-chain partners

Value chain partners, under the current framework, are defined as e top upstream and downstream partners of a listed entity, cumulatively comprising 75 percent of its purchases / sales (by value) respectively.

The consultation proposes that this be redefined  as follows: "“Value chain shall encompass the upstream and downstream partners of a listed entity, individually comprising 2 percent or more of the listed entity's purchases / sales (by value) respectively."

Alternatively it be defined as: “Value chain shall encompass the upstream and downstream partners of a listed entity, individually comprising 2% or more of the listed entity's purchases / sales (by value) respectively, and cumulatively comprising at least 75 percent of the listed entity’s purchases / sales (by value), respectively."