Sebi To Reassess ESG Disclosure Rules, Supply Chain Reporting Under Review

Tuhin Kanta Pandey, the new head of India's market regulator, told Reuters that the agency is reconsidering the sustainability or ESG disclosures that listed businesses are expected to provide, including its already postponed plans for corporations to include supplier chains in their reporting.

According to a source familiar with the regulator's thinking, the review, which comes after the Indian sector voiced concerns about labour, environmental, and other reporting requirements that it considers burdensome, may concentrate on making disclosures easier for smaller businesses. Since the conversations are private, the individual refused to be named.

Similar actions on ESG in other regions of the world are followed by SEBI's evaluation. 

With Moody's Ratings placing India in the high risk category for environmental and social concerns, the nation has performed poorly on ESG rankings.

Since 2022–2023, ESG disclosures from the top 1000 listed businesses by market capitalisation have been required by the Securities and Exchange Board of India (SEBI).

The biggest 250 companies were requested by SEBI in July 2023 to begin revealing sustainability data for 75% of their supply chain partners, along with a guarantee of their accuracy for the fiscal year 2025–2026.

In May 2024, SEBI relaxed parts of the supply chain disclosure criteria. In December, the sector expressed worries about their capacity to produce the required data, therefore SEBI extended the deadline by one year.

In an interview with Reuters, Pandey said that the disclosures have to be honest disclosures and there has to be a capacity to measure (accurately). Because if they turn out to be only paper disclosures or false disclosures, then it is going to create another set of problems.

The regulator will work with industry to ensure capacity to measure sustainability accurately is developed and provide adequate time for firms to comply, Pandey said.

SEBI's review of its mandated disclosures has not been reported before. Pandey, who became SEBI chairman in March 2025, did not clarify whether the final rules would be relaxed or what changes might be made.

SEBI Chairman Ananth Narayan Pandey said to Reuters that the regulator will adopt a principle of “optimal regulations,” prompting a review of disclosure norms across categories like ESG and related-party transactions. Emphasising a more balanced approach, Pandey said, “Rather than taking a sledgehammer approach, we should be more fine-tuned in regulations.”

Pandey's predecessor, Madhabi Puri Buch, had significantly increased disclosure requirements for listed companies, fund houses, and investors.

SEBI is also reviewing nearly 800 investor responses on proposed changes to how open interest in derivatives is measured. These proposals, aimed at managing risks in India’s fast-growing derivatives market, were criticised by the Futures Industry Association for potentially reducing market liquidity, raising trading costs, and creating operational challenges.

Pandey acknowledged the need for safeguards but said the regulator wants India’s derivatives market to continue growing.

(Source: Reuters)