For years, corporate climate reporting stayed within organizational boundaries: fuel burned, electricity consumed, facilities operated. That boundary is dissolving. Across most industries, the majority of a company’s carbon footprint is now embedded in the value chain, in suppliers, distribution chains, and downstream use of products.
In 2023, for companies disclosing to CDP, their Scope 3 supply chain emissions averaged 26 times higher than their combined Sope 1 & 2 emissions. Yet only 15 percent had set a target for Scope 3 emissions, and corporates were more than twice as likely to have measured Scope 1 and 2 than Scope 3[1]. That gap between exposure and action is the backdrop against which India’s disclosure regime is evolving from enterprise-level ESG reporting toward full value-chain accountability.
A Regulatory Shift Beyond the Enterprise
SEBI’s Business Responsibility and Sustainability Reporting (BRSR) framework applies to the top 1,000 listed entities by market capitalisation. Within it, BRSR Core, a focused set of 9 ESG attributes and associated KPIs, including GHG emissions intensity, requires independent assessment or assurance in phased manner, with the choice between the two left to the entity.
Value chain disclosure follows a parallel but distinct timeline, and this is where the framework changed materially in the past year. SEBI’s original 2023 circular defined value chain partners (VCPs) as upstream and downstream entities cumulatively accounting for 75% of a company’s purchases and sales by value, with no floor on individual partner size, a threshold flagged as impractical since it could pull in hundreds of small vendors. Following an Expert Committee review, SEBI’s Board approved revisions on 18 December 2024, formalised via circular on 28 March 2025: VCPs are now defined as individual partners each accounting for 2% or more of purchases or sales, with total coverage optionally capped at 75%[2]. In practice, this caps the reporting perimeter at each company’s key partners rather than an open-ended list.
Under the revised timeline, ESG disclosure for value chain partners becomes applicable for the top 250 listed entities from FY2025-26, on a voluntary basis, with prior-year (FY2024-25) data optional in this first year. Assessment or assurance of these disclosures has been deferred to FY2026-27 and remains voluntary. The same circular adds a leadership indicator under Principle 6 requiring disclosure of Green Credits generated or procured by the entity and its top 10 value chain partners.
Why Scope 3 Emissions Matter More Than Ever
This regulatory tightening coincides with worsening emissions trends, at both a global level and within India. According to the IEA’s Global Energy Review 2025, global energy-related CO₂ emissions (including from industrial process) rose to a record 37.8 Gt CO2 in 2024, an increase of 0.8% year-on-year, despite a record level of clean investment. Energy-related CO₂ emissions from India were up 5.3% in 2024, the highest increase among major economies, driven by a surge in electricity demand during a severe heatwave, which outstripped additions of nearly 35 GW of solar and wind[3].
Meanwhile, investors, lenders and global buyers are pricing in the risk of climate change across wider supply chains. For manufacturers with hundreds of suppliers, consumer goods companies with nationwide distribution networks, or automakers with thousands of suppliers across multiple tiers, it will typically be Scope 3 which dominates Scope 1 & 2 combined.
The Real Constraint: Data, Not Methodology
GHG accounting methodology is mature enough now. The bottleneck is data quality. Most Indian MSME suppliers are early in their ESG reporting journey, with inconsistent measurement practices and limited digital infrastructure. This makes value chain reporting structurally harder than Scope 1&2 reporting; the challenge isn’t calculation, it’s building a supplier data ecosystem that is accurate, comparable, and assurance ready.
From Compliance to Capability
The 2% threshold and phased timeline give reporting entities more room, but raise the stakes for the partners pulled in. Suppliers accounting for even 2% of purchases can now sit inside a listed entity’s voluntary disclosure perimeter, and, from FY2026-27, its voluntary assurance perimeter too.
Leading companies are prioritising three things: mapping material Scope 3 hotspots by category, building structured supplier engagement ahead of the FY2026-27 voluntary assurance timeline, and strengthening internal controls for ESG data comparable to financial controls. Digital ESG platforms and supplier portals are emerging as practical enablers for collecting comparable data across fragmented vendor bases.
The Road Ahead
FY2025-26 is a transition year, not an endpoint, it sets the disclosure perimeter that FY2026-27’s voluntary assurance phase will test. Companies that begin structured supplier engagement now, rather than waiting for the voluntary assurance timeline, will face a materially lighter lift once they opt into voluntary assurance in FY 2026-27. Given that a significant share of corporate climate and sustainability impacts reside outside direct operational control, India’s value chain disclosure requirements represent an important step toward improving visibility into ESG performance across supplier and customer ecosystems, not just within reporting entities themselves
References:
[1] https://www.cdp.net/en/press-releases/corporates-supply-chain-scope-3-emissions-are-26-times-higher-than-their-operational-emissions
[2] https://www.sebi.gov.in/legal/circulars/mar-2025/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_93102.html
[3] https://www.iea.org/reports/global-energy-review-2025/co2-emissions
