ESG in Indian Corporate Governance
ESG Framework in India Gets Parliamentary Spotlight: India is moving towards integrating Environmental, Social, and Governance (ESG) standards into corporate strategy. The Parliamentary Standing Committee on Finance has recently highlighted the urgency to provide a dedicated legal framework for ESG implementation.
While the Companies Act, 2013 does not mention ESG directly, its provisions related to energy conservation, workplace safety, and Corporate Social Responsibility (CSR) implicitly reflect ESG principles.
Risks and Gaps in Current Practices
Despite the growing emphasis, ESG in India still faces major challenges. Greenwashing remains a serious concern, where companies falsely claim to follow ESG principles. Moreover, small businesses struggle due to limited resources and unclear sector-specific guidelines.
Static GK fact: The term “greenwashing” was coined in 1986 by environmentalist Jay Westerveld, referring to misleading environmental claims.
Key Recommendations by the Committee
The Committee has made several significant proposals to strengthen ESG norms in India:
- Establish a dedicated ESG oversight body under the Ministry of Corporate Affairs (MCA) to monitor disclosures and introduce penalties for violations.
- Amend the Companies Act, 2013 to explicitly incorporate ESG, making it a legal obligation for companies.
- Form Independent ESG Committees within companies, similar to audit panels, to drive internal accountability.
- Introduce sector-specific ESG guidelines, especially for Micro, Small, and Medium Enterprises (MSMEs) to enable inclusive compliance.
- Include a dedicated ESG chapter in the MCA’s Annual Report starting from FY 2025-26 to improve transparency and reporting.
Existing ESG-Related Initiatives in India
Several frameworks are already laying the foundation for ESG compliance in India:
- Business Responsibility and Sustainability Reporting (BRSR): Mandated by SEBI for the top 1000 listed companies.
- BRSR Core: A recent initiative by SEBI to address greenwashing through strict disclosures.
- National Guidelines on Responsible Business Conduct (NGRBCs): Issued by MCA to encourage responsible business behavior.
- Corporate Social Responsibility (CSR): Under Section 135 of the Companies Act, companies meeting specific financial thresholds must spend 2% of their average net profit over the past 3 years on CSR.
Static GK Tip: The Ministry of Corporate Affairs was established in 2004, and oversees corporate regulation in India, including CSR and ESG-linked practices.
Strategic Importance of ESG
Strengthening ESG mechanisms aligns India’s corporate sector with global best practices. It also supports India’s climate goals, sustainable development agenda, and enhances investor confidence. With increased monitoring, legal backing, and sectoral clarity, ESG can evolve into a core pillar of Indian business ethics.
Static Usthadian Current Affairs Table
ESG Framework in India Gets Parliamentary Spotlight:
| Topic | Detail |
| ESG Full Form | Environmental, Social, and Governance |
| Greenwashing | False or exaggerated claims about eco-friendly practices |
| MCA | Ministry of Corporate Affairs |
| BRSR | Business Responsibility and Sustainability Reporting |
| SEBI Mandate | Top 1000 listed companies must file BRSR |
| CSR Rule | 2% of average net profit to be spent on CSR (for eligible companies) |
| Section for CSR | Section 135 of Companies Act, 2013 |
| New ESG Chapter | In MCA Annual Report from FY 2025-26 |
| ESG Committees | Proposed to function like audit committees |
| NGRBCs | National Guidelines on Responsible Business Conduct |
