More than 9 crore MSMEs could face compliance challenges as India advances Scope 3 emissions reporting. A Chintan Research Foundation (CRF) study highlighted gaps in India’s emissions accounting infrastructure.
The report examines preparedness for value-chain emissions disclosures under SEBI’s Business Responsibility and Sustainability Reporting (BRSR) Core framework. It comes as major listed companies prepare for mandatory Scope 3 disclosures.
Titled Building India’s Scope 3 Architecture: A Phased Roadmap for Credible, Interoperable, and Equitable Emissions Accounting, the study was released on Thursday. Researchers Shagun Mamgain and Sandra V. Kurian authored the report.
The study said India had advanced disclosure requirements faster than supporting measurement and verification infrastructure.
Scope 3 reporting lacks a unified national framework
Around 27 per cent of major Indian companies already disclose value-chain emissions, according to the study. This compares with a global average of 15 per cent.
However, companies follow different reporting methodologies. These include international frameworks such as the Greenhouse Gas Protocol and Global Reporting Initiative (GRI) Standards.
The absence of a unified national baseline creates inconsistencies across disclosures. Furthermore, India lacks a nationally validated emissions-factor database and standardised reporting boundaries.
Consequently, differences in reported emissions can reflect changes in methodologies rather than actual decarbonisation. This makes comparisons across companies and supply chains difficult, the report said.
MSMEs face rising compliance costs and supplier risks
The study identified MSMEs as particularly vulnerable to expanding reporting requirements. Smaller businesses form an important part of large corporations’ supply chains.
However, many lack dedicated teams and technical expertise for measuring greenhouse gas emissions. They also face multiple regulatory requirements and existing environmental compliance obligations.
The report said MSMEs would increasingly need to reduce their Scope 1 and Scope 2 emissions. These emissions contribute to the Scope 3 footprints of larger corporate buyers.
Some large companies have already started supplier capacity-building programmes. Nevertheless, the study warned that inadequate support could increase compliance costs for smaller suppliers.
Sudden reporting requirements could also push some MSMEs out of corporate value chains. This could affect their ability to remain competitive as suppliers.
Study proposes three-phase roadmap for Scope 3 reporting
The report recommends a three-phase approach to building India’s emissions reporting ecosystem.
Phase 1: Standardise methodologies
The first phase focuses on establishing consistent reporting methodologies. It proposes standardised boundary protocols and sector-cluster approaches to identify material emissions categories.
Additionally, the study recommends creating a nationally validated emissions-factor database. It also calls for better interoperability across reporting frameworks.
Phase 2: Build supplier capacity
The second phase prioritises capacity building across corporate supply chains. It proposes formalising anchor-firm-led supplier engagement programmes.
The report also recommends targeted support for MSMEs. Furthermore, it calls for expanding the pool of trained third-party auditors.
Phase 3: Strengthen verification and enforcement
The final phase focuses on stronger compliance and accountability. It proposes mandatory third-party verification and legally binding disclosure requirements.
The study also recommends integrating emissions reporting with emerging carbon markets. These measures aim to improve the credibility and consistency of corporate emissions disclosures.
The proposed roadmap seeks to balance stronger climate accountability with the practical capabilities of smaller businesses. Its implementation could shape how Indian companies and their suppliers prepare for wider Scope 3 reporting.
