INTRODUCTION
Over the past decades, the term ESG has gained significant attention in Indian and global capital markets, sparking widespread discussion and debates. ESG stands for Environment, Social & Governance. These are three factors that investors and companies consider when evaluating investments or business practices. It encompasses a set of criteria utilized to assess a company’s performance in environment, sustainability, social responsibility and corporate governance.[1] These criteria hold increasing significance for both investors and businesses, providing a framework to evaluate a company’s impact on the environment, society and its internal management. Socially conscious investors use ESG factors to screen potential investments while companies employ them to inform decision-making and reporting. ESG aims to encompass all financial risks and opportunities inherent in a company’s daily operations. It becomes synonymous with sustainability reporting.
The framework covers diverse indicators like greenhouse gas emissions, energy consumption, waste management, biodiversity, inclusion of human rights policy, board diversity, executive compensation, anti-corruption measures, etc. In India, these concerns were predominantly addressed through CSR(Corporate Social Responsibility) mandated by the Companies Act, 2013. Unlike CSR, ESG enables conscious investors to make informed decisions based on a corporation’s performance across environmental, social and governance factors.
TIMELINE OF ESG REGULATION IN INDIA
India has implemented many regulations as follows:
- CSR Guidelines: The Ministry of Corporate Affairs(MCA) came out with CSR guidelines in 2009.[2] According to these guidelines, companies have to invest a certain percentage of their profits in activities that indicate social responsibility. Such activities should aim to improve the standards of living of communities.
- National Voluntary Guideline(NVG) for Responsible Business: In 2011, MCA set out this guideline that served as the basis for BRR standards put out by SEBI in 2012.[3]
- Business Responsibilities Reporting(BRR) Guidelines: The first set of proper standards by SEBI that came out was BRR. This pertained only to business responsibility and not to the concept of sustainability as a whole. It mostly had CSR-related guidelines.[4]
- National Guidelines on Responsible Business Conduct(NGRBC): In 2018, MCA came out with NGRBC, which had nine principles that businesses were required to follow and report their progress.
- Business Responsibilities and Sustainability Reporting(BRSR): Based on NGRBC, SEBI came out with the latest guidelines in 2021. It mandates the top 1000 listed companies in India to publish BRSR reports.[5]
ESG REPORTING
ESG reporting is the disclosure report by a company covering its operations in environmental, social and governance areas.[6] ESG reporting by a company indicates that they have a long-term vision for the 3Ps(Planet, People, Profit). Such reporting helps reflect a positive image among the investors. It raises the transparency of the corporation’s mission and its inclination towards environmental and social metrics.
India has introduced an ESG reporting requirement for the top 1000 listed companies in the country by market capitalization. SEBI stipulated that disclosure must be made through a new format(BRSR). BRSR aims to establish a link between the financial results of the business with the ESG performance. SEBI has mandated these sustainability reporting requirements for listed companies to enable businesses to engage more meaningfully with their stakeholder. These companies will have to share quantifiable yardsticks, allowing investors to compare them across companies before investing.
HOW ESG REPORT PREPARED?
The environmental factor refers to a company’s impact on the natural world. These criteria in the report cover the company’s performance and practices to reflect how their practices are sustainable and help protect the environment. It uses yardsticks like the resources and energy used by the company, compliance with pollution norms, adopting efficient practices for water and energy saving, effective waste management practices, greenhouse gas emissions, natural resources and biodiversity protection.
The social factor refers to a company’s impact on people and society as a whole. This criteria examine how a corporation manages its relationship with employees, suppliers, customers and the community in which it operates. Factors like customer satisfaction, community relations, accountability of supply chain standards, gender and diversity, labour standards and human rights are considered under this criterion.
The governance refers to a company’s internal leadership and management practices. This criterion includes the system of practices that are incorporated into the company’s functioning. It has practices like the Board’s composition, the audit committee’s structure, internal controls, rights of shareholders, the whistleblower scheme, political contributions, business ethics, etc.
HOW ESG REPORTING BENEFITS A CORPORATION?
It invites positive feedback from different stakeholders like investors, customers, suppliers, employees, regulators, NGOs, media, competitors and Academia, resulting in reputation growth.[7] ESG disclosures are being compared by stakeholders who search for a company’s commitment to ESG through public disclosure of sustainability reports, annual reports or common rating publications. Global studies have shown that companies that embed ESG into their business practice outperform their peers.[8] ESG-compliant Companies attract more funding, secure better partnerships and receive higher valuations.[9] Now, the investors not just look at revenue but also at the impact a corporation has. Investors and Companies investing in ESG-compliant Companies receive higher returns on investments with lower financial risks.
REQUIREMENTS TO PREPARE AN ESG REPORT
Some documents and declarations that must be made by the company to help prepare a complete ESG report are as follows:- (i) Documents indicating the potential risk to the environment on the ESG front and the measures to handle them have to be provided. (ii) Documents related to ESG projects or initiatives being undertaken by the company. (iii) Document on the company’s governance indicating oversight mechanisms in ESG strategy policies and information. (iv) Document on management issues like action schemes, targets and initiatives to generate and preserve the value of the company and the stakeholders. (v) Performance documents to support sustainability outcomes from business activities.
CONCLUSION
In light of the challenges that India faces relating to climate change, environmental risks, growing inequality, etc. Businesses are realising that a positive impression on society and consumer can be made if they incorporate ESG Goals into their Business Goals. Ultimately, this will lead to a restructuring of the role of businesses in a society where the workforce and the consumers will not be treated as mere economic units for generating profit. ESG reporting will also indirectly lead to increased access to capital for Indian Businesses through investments, as investors are the largest consumers of this data, and several asset management companies have ESG funds with them, which are used to access the ESG performance reports of a company to make investment decisions. Now, both CSR and ESG contribute to India’s pursuit of SDGs(Sustainable Development Goals).
Author(s) Name: Ankit Saurashtriya (Prestige Institute of Management & Research, Indore (M.P.))
References:
[1] ‘A quick guide to ESG compliance in 2025’(Ideals Board, 20 January2025) <https://idealsboard.com/esg-compliance/> accessed on 25 June 2025
[2] Archana Rao,’ESG Reporting Mandates in India: Guidelines for Businesses’(India Briefing, 2 September 2024) <https://www.india-briefing.com/news/esg-reporting-mandates-in-india-guidelines-for-businesses-34217.html/> accessed on 24 June 2025
[3] Archana Rao,’ESG Reporting Mandates in India: Guidelines for Businesses’(India Briefing, 2 September 2024) <https://www.india-briefing.com/news/esg-reporting-mandates-in-india-guidelines-for-businesses-34217.html/> accessed on 24 June 2025
[4] Ibid
[5] Ibid
[6] Michelle Adams,’What is ESG Compliance?’(Z2 Data, 5 September 2023) <https://www.z2data.com/insights/what-is-esg-compliance> accessed on 25 June 2025
[7] ‘Environmental Social Governance Compliance’ (Keteres) <https://www.keteres.com/esg/compliance> accessed on 25 June 2025
[8] Ibid
[9] Ibid
