Over 9 crore MSMEs risk exclusion as India advances scope 3 emissions reporting: Study

New Delhi, Nov 12 (IANS) More than 9 crore MSMEs could face significant compliance challenges as India advances Scope 3 emissions reporting requirements under the Securities and Exchange Board of India's (SEBI) Business Responsibility and Sustainability Reporting (BRSR) Core framework, according to a study released by the Chintan Research Foundation (CRF) on Thursday. 

The report, titled "Building India's Scope 3 Architecture: A Phased Roadmap for Credible, Interoperable, and Equitable Emissions Accounting," examines India's preparedness for value-chain emissions reporting as top-listed companies prepare for mandatory Scope 3 disclosures.

Authored by CRF researchers Shagun Mamgain and Sandra V. Kurian, the study argues that while India has moved quickly on disclosure mandates, the supporting infrastructure required for reliable and consistent emissions accounting is yet to fully develop.

According to the report, about 27 per cent of major Indian companies already disclose value-chain emissions, significantly above the global average of 15 per cent. 

However, the study highlights substantial inconsistencies in reporting methodologies, with companies relying on a mix of international frameworks such as the Greenhouse Gas Protocol and Global Reporting Initiative (GRI) Standards without a unified national baseline.

The absence of a nationally validated emissions-factor database and standardised reporting boundaries has resulted in significant variations across disclosures, making it difficult to distinguish genuine decarbonisation progress from changes in reporting methodologies, the report noted.

The study said the burden of compliance is likely to be most acute for India's MSME sector, which forms a critical part of the supply chains of large corporations. Many smaller enterprises already face multiple regulatory requirements and environmental compliance obligations and often lack the technical expertise or dedicated teams needed to monitor and report greenhouse gas emissions.

While some large companies have initiated supplier capacity-building programmes, the report said MSMEs will increasingly need to reduce their own Scope 1 and Scope 2 emissions to remain competitive as suppliers, since these emissions directly influence the Scope 3 footprints of larger corporate buyers.

Without adequate support mechanisms, sudden compliance requirements could increase costs for smaller businesses and potentially push some suppliers out of corporate value chains, the study warned.

To address these challenges, the report proposes a three-phase roadmap for developing India's Scope 3 reporting ecosystem.

"Phase 1 prioritises refining methodology, including standardising boundary protocols, identifying material categories via a sector-cluster approach, establishing a nationally validated emission factor database, and ensuring interoperability between other reporting frameworks," it said.

The second phase centres on capacity building, including formalising anchor-firm-led supply-chain engagement, creating targeted support mechanisms for MSMEs, and expanding the ecosystem of trained third-party auditors.

The final phase envisions enforcement measures such as mandatory third-party verification, legally binding disclosure requirements, and integration with emerging carbon markets.

--IANS

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