ESG Regulations Importance in India

In recent years, companies around the world have been held accountable for their environmental impact, commitment to social issues, and sound governance practices. These considerations have become increasingly important to investors who want to assess a company’s risk profile accurately. In India, the focus has been on providing protections regarding the environment and workplace conditions, without the controls and disclosures that are a hallmark of ESG regulation.

ESG regulations differ from corporate social responsibility (CSR) rules. CSR mandates that corporations engage in initiatives that contribute to the welfare of society. In contrast, ESG regulations emphasise monitoring, quantification, and disclosure, akin to ESG requirements found in other parts of the world.

India has long had laws and bodies regarding environmental, social, and governance issues, including the Environment Protection Act of 1986, quasi-judicial organisations such as the National Green Tribunal, and laws governing employee engagement and corporate governance practices. The Securities and Exchange Board of India (SEBI) revised the annual Business Responsibility and Sustainability Report required by the 1,000 largest listed companies in India, with disclosures ranging from greenhouse gas emissions to the company’s gender and social diversity.

Compliance with ESG regulations poses a significantly different challenge than India’s CSR regulations. Indian companies must comply with ESG regulations from the US, the UK, the EU, and elsewhere to take full advantage of the growing decoupling from China and play a more prominent role in global supply chains. Thorough due diligence is required to comply with international ESG standards. Companies that wish to maximise their opportunities in the global economy need to embrace these new requirements and adjust their organisations accordingly.