1. ABSTRACT:
The creation of Business Responsibility reporting standards and a review of the current level of ESG disclosure by Indian firms are the main topics of this research, which looks at the evolution of ESG compliance in India. ESG considerations are becoming essential for long-term business value beyond financial measurements, driven by rising investor demand (global ESG assets reached $43.8 trillion in 2022[1]) and global sustainability imperatives (such as resource depletion and climate change). Additionally to the Companies Act of 2013, which requires CSR spending and director duties regarding the environment and community, the study charts India’s regulatory development from the Ministry of Corporate Affairs’ (MCA) voluntary programs (NVG
2009/2011, NGRBC) to the Securities and Exchange Board of India’s (SEBI)[2] mandatory Business Responsibility and Sustainability Report (BRSR) for top listed entities. Despite notable regulatory advancements, ongoing difficulties include a dispersed regulatory structure without unified Environmental and Social disclosure standards, obstacles to implementation for SMEs
(resource limitations, expertise gaps), prevalent greenwashing risks (partially addressed by the
2024 Greenwashing Guidelines), and a disparity where Governance stating surpasses Environmental and Social disclosure are some of the current problems despite significant regulatory innovations. The study reaches the view that in order to fully realize the promise of ESG, it is essential to close the gap between changing rules and corporate adoption, fight greenwashing, and create more precise, quantifiable standards for environmental and social concerns in order to guarantee true accountability.
- KEYWORDS:
ESG Reporting, Sustainability, Business Responsibility, Corporate Governance, Greenwashing, CSR.
- INTRODUCTION:
An urgent global fear is the rapid depletion of natural resources at a pace that is speedier than their replenishment. Investment choices are being drastically changed by problems including energy crises, emissions, pollution, water scarcity, and climate change. Investors are now considering a company’s environmental impact alongside or in addition to its financial performance, since they realize how important sustainability is to long-term success. As an effect of investors’ desire to match their portfolios with their values and make a positive impact on society and the environment, globally ESG assets jumped by 55% from 2020 to $43.8 trillion in 2022. Based on survey[3]s, 95% of Millennials are heavily involved in ESG investing, a trend that can also be seen by institutions and ordinary investors who are increasingly taking ESG assessments into account as they make decisions.
As an outcome of this paradigm shift, corporate reporting must change to meet the information needs of stakeholders. The structure for this is given by ESG, which stands for Environmental, Social, and Governance considerations. CSR, Sustainability, Non-Financial, Triple Bottom Line, and ESG reporting are just a few of the names that are used for reporting on these effects. The 2004 UN Global Compact report “Who Cares Wins” promoted the term ESG. Impacts on the natural world (climate risk, resource use, biodiversity) are covered within the Environmental pillar. Impacts on community members and employees (human rights, consumer safety, data privacy) are the primary focus of the social pillar. Corporate accountability is ensured by governance (transparency, anti-corruption, board independence).
ESG principles’ fundamental objective is to foster ethical business practices. As vital elements of the social structure, businesses are accountable to society in general as well as to shareholders for their economic prosperity. Thus, adopting ethical ESG practices is equally important as financial performance. Businesses with comprehensive ESG policies tend to be less susceptible to ESG risks, which may result in fewer risks and greater long-term profits. While organizations that are ESG compliant advantage operational independence, improved stakeholder connections, and possible government backing, non-compliance entails harsh penalties, including business closures.
The purpose of the research is to assess the current state of ESG factor reporting by Indian corporations and to address the progress of Business Responsibility reporting and associated regulatory frameworks in India. The growth of rules, business adoption issues (particularly greenwashing), and the ongoing contradiction between governance-focused regulations and the need for thorough Environmental and Social disclosure standards will all be addressed.
4. RESEARCH METHODOLOGY
Based on secondary data sources, this study is theological in nature. The analysis relies on a thorough examination of the regulatory frameworks, policy documents, and reporting guidelines that have recently been issued by important Indian regulatory bodies, such as the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Ministry of
Corporate Affairs (MCA). The provisions of significant laws, including the Companies Act of 2013 and the Consumer Protection Act of 2019, that are important to ESG and CSR compliance and fighting against greenwashing are analyzed.
The research paper charts the evolution of ESG reporting requirements in India through the years, from voluntary guidance to the current BRSR framework that is required. It examines these frameworks’ requirements and structure (NVG, BRR, BRSR). With regard to particular regulatory responses such as the 2024 Greenwashing Guidelines, the current state of ESG reporting will be assessed by identifying gaps and challenges, especially the lack of uniformity in reporting standards, the disparity between governance and environmental/social disclosures, difficulties with implementation faced by companies (particularly SMEs), and the emerging issue of greenwashing. Corporate opinions are integrated through discussion of the reasons (investor demand, reputation, risk mitigation) and obstacles (resources, expertise, ambiguous standards) for ESG integration, along with illustrative examples of ESG practices implemented by significant Indian companies (such as TCS, Infosys, Asian Paints, Havells, and Mahindra & Mahindra).
5. REVIEW OF LITERATURE
Despite becoming well-known following the publication of the Global Compact report “Who Cares Wins”[4] in 2004, the concept of ESG has gone through substantial change. The idea that integrating environmental, social, and governance considerations into capital markets leads to more sustainable markets and better outcomes for society was ignited by this paper. While business Social Responsibility (CSR) formerly concentrated on voluntary efforts for reputation development without defined tests, ESG has emerged as a separate investment concept centered on evaluating business sustainability performance using quantitative standards. Data like the
Global Sustainable Investment Review 2023, which shows a rapid increase of ESG assets to $43.8 trillion, highlights the significance of ESG on a global scale.
Linking investments with values and seeing the relationship between ESG and long-term financial success and risk avoidance are two factors that drive investor motivation, as shown by polls like as Morgan Stanley’s, which found 95% of Millennials are interested. While proactive cooperation offers advantages like cost savings, enhanced capital access, and enhanced reputation, companies that overlook ESG risk financial liabilities, boycotts, legal ramifications (such as under environmental acts like the Environment Protection Act, 1986[5], or The Air Act, 1981)[6], and reputational harm. The regulatory response in India has been developing, although in pieces. While there are numerous laws relating to corporate governance, employee welfare, and the environment, there is not a single law that includes ESG in its entirety.
The MCA’s Voluntary Guidelines (2009), the National Voluntary Guidelines (NVG, 2011), and the National Guidelines on Responsible Business Conduct (NGRBC) are the initial steps in India’s ESG reporting path, which is documented in the literature. Based on the NVG, SEBI introduced the Business Responsibility Report (BRR), the first regulated non-financial reporting structure, for leading listed businesses in 2012. Prior to being replaced in 2021 by the more thorough and metrics-driven Business Responsibility and Sustainability Report (BRSR[7]) with required crucial indicators, this mandate was gradually broadened (top 500 in 2015, top 1000 in 2019). A significant modification was made at the same time by the Companies Act of 2013, which established directors responsibilities to the community and environment (Section 166) and required CSR expenses for qualified businesses.
In 2021, the RBI created the Sustainable Finance Group (SFG) to deal with climate concerns and offer ESG disclosure guidelines for companies under its authority. Greenwashing is a critical developing issue in the literature. Greenwashing, which SEBI defines as “false, misleading, unsubstantiated, or otherwise incomplete claims about sustainability,” moves legitimate ESG initiatives. Instances such as Nike (Kasky v. Nike) and H&M show how common it is. India’s response comprises the 2024 Guidelines for Prevention and Regulation of Greenwashing, which specify severe penalties, and the Consumer Protection Act, 2019, which specifies unfair commercial practices. It often emphasizes the following major issues: the discontinuous development of rules; the absence of precise, quantifiable standards, especially for environmental and social concerns in contrast to governance; and the major implementation difficulties faced by SMEs as a result of limited resources and insufficient experience.
6. METHOD
6.1 Regulatory Evolution: From Voluntarism to Mandated Reporting
The establishment of ESG regulations in India has been slow and disjointed. No single law provides an integrated ESG framework, even while many laws seek to address different areas (such as corporate governance, labor welfare, and environmental protection). Initial efforts were spontaneous. The National Voluntary Guidelines (NVG) on Social, Environmental, and
Economic Responsibilities of Business evolved from the MCA’s 2009 launch of the “Voluntary
Guidelines on Corporate Social Responsibility.” The National Guidelines on Responsible Business Conduct (NGRBC) were an update on these NVGs. When SEBI[8] mandated the top 100 listed companies (by market capitalization) to include a Business Responsibility Report (BRR) in their annual reports in 2012, it represented a significant change. The first regulatory non-financial reporting system in India that emphasized ESG activities and stakeholder value generation was the BRR, and was based on the NVG 2011.
In 2015, the rule was widened to the top 500 businesses, and in 2019, it was expanded to the top
1000. In 2021, SEBI replaced the BRR with the Business Responsibility and Sustainability Report (BRSR) in acknowledging the need for greater detail and quantified disclosure. With required general disclosures, management and process disclosures, and principle-wise performance disclosures (further split into essential/mandatory and leadership/voluntary indicators), the BRSR created a more comprehensive framework. SEBI’s commitment to sustainable and open processes is reflected in the BRSR Core. During the same time, major changes were introduced by the Companies Act of 2013. For companies that met certain financial limits, Section 135 forced CSR spending, which was firmly monitored through reporting.
Furthermore, Section 166 codified the duties of the board of directors, requiring that they operate in the environment’s and community’s best interests. To help coordinate on climate change obstacles and create an ESG disclosure framework for banks and other regulated organizations, the Reserve Bank of India recently created a Sustainable Finance Group. To find relevant ESG aspects, SEBI also promotes materiality reviews. In October 2024, India released the ‘Guidelines for Prevention and Regulation of Greenwashing or Misleading Environmental Claims, 2024’ in an attempt to tackle the growing danger of false statements. The Central Consumer Protection Authority (CCPA) enforces these rules, that forbid making unproven generic environmental claims (such as “green,” “clean,” or “sustainable”) and impose penalties under the Consumer
Protection Act of 2019 (fines ranging from INR 10 lakh to 50 lakh, plus two to five years in jail).
6.2 Corporate Adoption: Progress and Pioneers
Indian companies are gradually implementing ESG practices due to laws and regulations, investor demand, reputational concerns, and a desire for operational freedom. Major businesses are cited as examples, including Mahindra & Mahindra, Asian Paints, Havells, Infosys[9], and Tata Consultancy Services (TCS). Amongst the specific initiatives are:
- Infosys: Demonstrating great corporate governance by proactively promoting social growth and educational initiatives.
- Asian Paints[10]: The choice to produce using environmentally friendly materials.
- Havells: Limiting our radioactive isotope usage.
- Driving the way in electric vehicle technology while upholding environmental sustainability objectives is Mahindra & Mahindra.
- TCS[11] and Reliance Industries Limited (RIL) are early and reliable ESG performance reporters.
- Companies are compelled to handle ESG disclosure with the same level of value as financial disclosure as a result of stakeholders, especially investors, demanding ever more precise and pertinent ESG data.
6.3 Persistent Challenges and Gaps
Despite advancements, India possesses significant obstacles in achieving ESG compliance: Defective Structure & Absence of Consistent Standards: Regulations lack a unified strategy and have developed piecemeal. In contrast to international standards, MCA and SEBI [12]have set up transparency criteria; yet, defined, quantifiable, and vital standards for environmental and social elements are either nonexistent or underdeveloped, causing inconsistent and frequently poor reporting on these key aspects. Investor assessment and well-informed decision-making suffer from this discrepancy. Execution Barriers for SMEs: It is hard to incorporate ESG into fundamental operations. Inadequate data, a lack of internal ESG knowledge, and the absence of a strong, well-recognized regulatory framework make up the difficulties. Small and mid-sized businesses (SMEs) often lack the financial, human, and technological resources required for ESG reporting, which makes assessing their ESG performance tough.
The Hazard of Greenwashing: As ESG grows more prevalent, it poses a greater chance that people will make deceptive or fraudulent sustainability claims. When disclosed, this deceitful approach (such as Nike’s prior infractions and H&M’s marketing strategies) confuses customers, erodes sincere sustainability initiatives, and destroys company reputations. Although laws like the 2024 Greenwashing Guidelines[13] are an advance, detection and enforcement are still challenging. Surprisingly, some firms may be driven to engage in greenwashing by the pressure of environmental rules and corporate social responsibility standards.
6.4 ESG vs. CSR: A Clarification
A major contradiction in the given information is made obvious by the analysis: though they are related, ESG and CSR are distinct thoughts. ESG operates on apparent quantitative criteria to evaluate sustainability performance and give investors crucial data they may use to assess risk and long-term value. CSR, as required by Section 135 of the Companies Act 2013, involves voluntary (now required in India for qualified firms) corporate initiatives that tackle stakeholder relations and socio-environmental issues. These efforts often lack widely accepted comparable metrics and focus primarily on project and expenditure submission rather than integrated performance measurement.
7. SUGGESTIONS
- Create precise, quantifiable criteria for social (S) and environmental (E) factors: Building exact, quantifiable, and required release standards for ecological (such as carbon emissions, water use, waste management, and biodiversity impact) and social (such as labor practices throughout the value chain, diversity & inclusion metrics, community engagement impact, and supply chain human rights due diligence) aspects must be the primary objective for regulators (MCA, SEBI, and RBI). Solving the current disorder, where Governance (G) reporting is significantly more sophisticated, needs this. For better comparability, these norms should, whenever possible, be consistent with internationally accepted frameworks.
- Build Support Systems for SMEs: In view of SMEs’ limited resources, industry associations and regulators should create:
- simplified, tiered systems of reporting that are suitable for the size and complexity of the business.
- training courses, templates, and guidance documents that boost ESG knowledge and proficiency.
- Potential rewards or access to assistance services to reduce the stress of implementation.
3. Increase Enforcement Against Greenwashing: The CCPA should vigorously carry out the 2024 Greenwashing Guidelines. This asks for:
- Improving regulatory capacity by keeping an eye on investigations and claims.
- outlining exact processes for proving environmental claims.
- ensuring swift, substantial penalties can act as a disincentive.
- Supporting systems for industry self-regulation and verification.
- Strengthen Regulatory Coordination and Clarity: To decrease fragmentation and give companies a clearer, simpler path, efforts should be made to unify ESG-related regulations across multiple bodies (MCA, SEBI, RBI, MoEFCC, and Labour Ministry).
The encouragement of materiality assessments by SEBI must be defined and regulated.
- Support Awareness and Capacity Building: Companies and regulators must make investments in:
- training staff members at all levels to develop internal ESG competence (“making them ESG experts”), with an emphasis on leadership and compliance/strategy teams.
- boosting investor understanding of the value of strong ESG performance beyond compliance and its long-term benefits.
- Use technology to improve the accuracy and efficiency of data management, reporting, and gathering.
8. CONCLUSION
The indisputable global challenges of pollution, climate change, and resource depletion, as well as rising investor demand shown by the fact that worldwide ESG assets hit $43.8 trillion in 2022, have prompted a considerable, albeit complex, evolution in India’s ESG compliance trajectory. This unique set of events has led to a paradigm shift in corporate success criteria, which now encompass social responsibility, environmental stewardship, and sound governance in addition to financial success. From the early voluntary efforts (NVG 2009/2011, NGRBC) of the Ministry of Corporate Affairs (MCA) to the more stringent mandates of the Securities and Exchange Board of India (SEBI), the regulatory response, described in this paper, comes a clear trajectory which culminates in the thorough and metrics-driven Business Responsibility and Sustainability Report (BRSR) for the top 1000 listed entities.
An expanding institutional awareness of ESG’s criticality for risk reduction and sustainable economic development is demonstrated by legislative interventions such as the Companies Act, 2013, which established director responsibilities for the community and environment (Section 166) and mandated Corporate Social Responsibility (CSR) spending (Section 135). In addition, the Reserve Bank of India (RBI) created the Sustainable Finance Group (SFG) and introduced the 2024 Greenwashing Guidelines. Notable Indian companies, including TCS, Infosys, Mahindra & Mahindra, Asian Paints, and Havells, are showing concrete affirms due to pressure from stakeholders, the desire for operational autonomy, improved reputation, and an awareness of the hazards of inadequate ESG performance on a global scale. ESG integration is thought to provide tangible strategic benefits, such as decreasing susceptibility to governance, social, and environmental risks, which could result in lower long-term risks and higher returns.
The analysis in this piece, however, clearly demonstrates that there remain major implementation and structural issues that might hinder the true revolutionary potential of ESG in India. The regulatory framework’s diversity and inadequacy continue to be the most significant deficit. Despite there have been major developments in governance disclosures and broad reports such as the BRSR, the staring difference that is consistently brought to light is the continued absence of explicit, measurable, and necessary disclosure standards for Environmental (E) and Social (S) factors, as stated in the content that is provided. Investors’ ability to effectively assess ESG performance and make informed choices is severely limited by this regulation gap, which consequently contributes to inconsistent and frequently poor reporting on these important aspects when compared to worldwide standards.
It is still a significant implementation overhead, particularly for small and mid-sized businesses (SMEs). Financial and technological constraints, a lack of internal ESG expertise, and the difficulty and expense of establishing extensive reporting systems in line with shifting, sometimes unclear criteria are the primary challenges these organizations must overcome. Trust is further eroded by the growing problem of “greenwashing,” which SEBI defines as making excessive or deceptive sustainability promises. Deceptive practices, such as those associated with global giants like Nike and H&M, or those driven by pressure from CSR mandates and environmental compliance risks, pose a serious threat, misleading stakeholders and destroying genuine sustainability efforts, also in the face of the introduction of the 2024 Greenwashing Guidelines and the underlying Consumer Protection Act, 2019 (which transports severe penalties, including fines of up to INR 50 lakh and imprisonment).
Deliberate action is essential for the future. Despite the current emphasis on governance, regulators should prioritize bridging the gap by creating and enforcing specific disclosure rules.
Meanwhile, acknowledging the distinct obstacles encountered by SMEs, helpful support systems such as streamlined reporting, guidelines, templates, and capacity-building programs are essential to promote wider and significant adoption. In an effort to preserve the integrity of ESG claims and prevent dishonest behavior, the Central Consumer Protection Authority (CCPA) will not ease up on its enforcement of the 2024 Greenwashing Guidelines. Businesses need to stop thinking of ESG as merely a compliance exercise or a way to safeguard their brand. Only by carefully integrating ESG concepts into core company operations and decision-making, using technology to enhance data management, and investing in internal learning will true value be realized.
Delina Sharma
3rd year BA.LLB (Hons.)
Kirit P. Mehta School of Law
NMIMS, Mumbai
[1] Global Sustainable Investment Alliance, Global Sustainable Investment Review 2022, at 6 (2023) https://www.gsi-alliance.org
[2] Securities and Exchange Board of India, Circular No. SEBI/HO/CFD/PoD2/CIR/P/2024/0112
[3] Morgan Stanley Inst. for Sustainable Investing, Sustainable Signals: Individual Investor Interest Driven by Impact, Conviction and Choice, at 5 (2019), https://www.morganstanley.com/assets/pdfs/sustainable-signals-whitepaper-2019.pdf.
[4] U.N. Global Compact, Who Cares Wins: Connecting Financial Markets to a Changing World (2004), https://www.ifc.org/wps/wcm/connect/2e6032f1-e6cd-4b40-861b-500ad12a82a7/WhoCaresWins2004.pdf.
[5] Environment (Protection) Act, No. 29 of 1986, India Code (1986).
[6] Air (Prevention and Control of Pollution) Act, No. 14 of 1981, India Code (1981)
[7] Business Responsibility and Sustainability Reporting by Listed Entities (May 10, 2021), https://www.sebi.gov.in.
[8] Securities and Exchange Board of India, Circular No. SEBI/HO/CFD/CMD-2/P/CIR/2021/562
[9] Infosys Ltd., ESG Report 2022–23, https://www.infosys.com.
[10] Asian Paints Ltd., Business Responsibility and Sustainability Report 2022–23, https://www.asianpaints.com.
[11] Tata Consultancy Services Ltd., Integrated Annual Report 2022–23, https://www.tcs.com.
[12] Securities and Exchange Board of India, Consultation Paper on the Regulatory Framework for ESG Disclosures, Ratings and Investing (Jan. 24, 2022), https://www.sebi.gov.in.
[13] Guidelines for Prevention and Regulation of Greenwashing or Misleading Environmental Claims (Oct. 2024),