Supplier ESG and Value Chain Guide: Credible Supplier Data Without Burying MSMEs in Questionnaires
How Indian companies can build a supplier ESG programme that is credible and fair: SEBI’s BRSR value chain rules and the EU rules as amended in 2026, which suppliers to screen, what to ask and what not to, how to check, how to build supplier capability, and why paying MSMEs on time is part of it. With best cases from TERRA and three free templates.
What the guide covers
- Why suppliers, why now
- Supplier ESG by numbers
- The rules in one page
- Map your value chain
- What to ask, and what not to
- Assess and verify
- Build supplier capability
- Pay on time
- Best cases from TERRA
- Case: data from the ground
- Seven common weaknesses
- A 12-step programme
- Checklist for CPOs and CFOs
- Glossary
Free templates
Supplier ESG Programme Workbook (Excel)
A 2% value chain screener, risk tiers, a weighted supplier scorecard, an engagement and corrective action tracker, an MSME 45-day payment check and a 12-month calendar.
Supplier Code of Conduct (Word)
A plain-language model code an MSME can follow: law and ethics, people, safety, environment, data, checks, support, breaches and a signed acknowledgement.
Corrective Action Plan (Word)
Findings, severity, actions, owners, dates, buyer support, 12-month improvement goals and review log, agreed with the supplier.
Supplier ESG by numbers
CDP found Scope 3 supply chain emissions average 26 times a company’s direct operations. MSMEs account for 30.1% of India’s GDP and 45.73% of its exports, and most have never been asked for ESG data. SEBI’s value chain partner threshold is 2% of purchases or sales, and micro and small suppliers must be paid within 45 days.
The rules in one page
| Rule | What it means for supplier data |
|---|---|
| SEBI BRSR value chain (India) | Partners individually at 2% or more of purchases or sales, coverage may be limited to 75%. Voluntary for the top 250 listed companies from FY2025-26; assessment or assurance voluntary from FY2026-27. |
| MSMED Act, section 15 | Pay micro and small suppliers within the agreed period, never more than 45 days from acceptance; 15 days without a written agreement. |
| Income-tax Act, section 43B(h) | From FY2023-24, amounts owed to micro and small enterprises and paid late are deductible only in the year actually paid. |
| EU CSRD value chain cap | Companies may not ask suppliers with fewer than 1,000 employees for more than the voluntary VSME standard covers. |
| EU CSDDD | Due diligence for companies with 5,000+ employees and EUR 1.5 billion turnover, applying from 26 July 2029; requests to smaller partners must be targeted and proportionate. |
| EU CBAM | Embedded emissions data for steel, aluminium, cement, fertilisers, hydrogen and electricity, with a cost since 2026. |
| EU Deforestation Regulation | Applies from 30 December 2026, and from 30 June 2027 for micro and small operators. |
Pay on time
Days of accounts payable, as reported in BRSR Core for FY2025-26. The figure covers all suppliers, not just MSMEs, so a high number does not by itself mean MSMEs are paid late, but it is the number investors compare.
| Company | Days payable |
|---|---|
| Persistent Systems | 34 |
| HCLTech | 46.5 |
| Dalmia Bharat | 60 |
| Ashok Leyland | 77 |
| Tata Steel (standalone) | 94 |
| HUL | 103 |
| ABB India (2025) | 157 |
Best cases from TERRA
| Company | What their reports show | Worth copying |
|---|---|---|
| Hindustan Unilever | 92.9% of suppliers by value risk-assessed and compliant; 5,241 vendors trained digitally; 25.8% sourced from MSMEs and small producers | Coverage by value |
| Tata Steel | 1,359 critical suppliers assessed; contractors need a 3-star safety rating to bid | Safety as a gate to business |
| HCLTech | 308 partners (76.4% by value) assessed on one third-party platform; CDP Supplier Engagement ‘A’ four years running | One platform, one questionnaire |
| Ashok Leyland | BRSR data from 102 key suppliers via a digital tool; ₹1,727 crore spent with MSME vendors | Starting value chain data early |
| ABB India | ESG assessments for about 51% of suppliers; training included a carbon calculator | Tools, not just questions |
| Dalmia Bharat | Onboarding help for non-digitised suppliers; timely MSME payments a stated priority | Helping suppliers who are not online |
| Persistent Systems | Supplier ESG Engagement Programme aligned to BRSR Core value chain indicators | Focus where risk is highest |
A 12-step supplier ESG programme
- Screen spend and sales: who is at 2% or more?
- Tier suppliers by spend and ESG risk
- Issue a supplier code of conduct
- Ask proportionate questions, in plain language
- Review answers against evidence
- Visit or audit the highest-risk sites
- Agree corrective action plans
- Train and support suppliers
- Pay MSMEs on time
- Track progress quarterly
- Report in BRSR and to buyers
- Reward leaders; exit only as a last resort
Cite or share this guide
Procurement teams, industry associations, MSME bodies, consultants, NGOs and universities are welcome to link to this page, add it to training material, and embed the infographics. Please link to this page rather than the PDF, so readers always get the latest edition.
Questions
Is the Supplier ESG and Value Chain Guide free?
Yes. The guide, the Supplier ESG Programme Workbook (Excel) and the two Word templates are free to download without a sign-up, and free to share or adapt with credit to Earth5R.
Which suppliers count as value chain partners under BRSR?
SEBI defines them as suppliers and customers that individually account for 2% or more of a listed company’s purchases or sales, and allows coverage to be limited to 75% of purchases or sales. Value chain disclosure is voluntary for the top 250 listed companies from FY2025-26.
What ESG data should we ask MSME suppliers for?
Data a small business can produce from its own records: electricity and fuel from bills, water, waste, workers, injuries, consents and certifications. For BRSR value chain partners, ask for BRSR Core KPIs attributable to your business. Avoid long global questionnaires.
How fast must companies pay MSME suppliers?
Under section 15 of the MSMED Act, micro and small suppliers must be paid within the agreed period and never later than 45 days from acceptance, or within 15 days if there is no written agreement. Under section 43B(h) of the Income-tax Act, late payments are deductible only in the year paid.
Do EU rules apply to Indian suppliers?
Indirectly. EU companies subject to CSRD, CSDDD, CBAM and the Deforestation Regulation ask their suppliers for data. After the 2026 amendments, CSRD limits what EU companies may ask of suppliers with fewer than 1,000 employees to the voluntary VSME standard.
Can I use the infographics on my website?
Yes. Each infographic on this page has embed code. Please keep the credit link to this page.
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