ESG Compliance in India: Legal Foundations for Sustainable Business
As India’s economy expands and integrates with global expectations, ESG compliance—covering Environmental, Social, and Governance dimensions—is no longer optional. It is now a legal, strategic, and reputational necessity. Indian companies, large or small, must embed ESG practices into their operations to meet regulatory demands, investor standards, and public expectations.
Understanding ESG Compliance in the Indian Legal Framework
ESG compliance in India is built on various laws and regulatory guidelines rather than a single statute. Key frameworks include:
- Companies Act, 2013 – Section 135 mandates Corporate Social Responsibility (CSR) for companies above a certain financial threshold.
- SEBI’s Business Responsibility and Sustainability Reporting (BRSR) – Mandatory for the top 1,000 listed companies.
- Environmental Protection Act, 1986 – Controls emissions, effluents, and waste under strict standards.
- Labour Codes, 2020 – Unify and modernise India’s employment laws.
- SEBI (LODR) Regulations, 2015 – Promote transparent governance practices.
- Digital Personal Data Protection Act, 2023 – Strengthens social rights around privacy and data use.
1. Why ESG Legal Issues Arise Frequently in India
In India, several challenges make ESG compliance complex:
- Limited awareness among SMEs and startups
- Fragmented enforcement by different regulators
- Token CSR projects with minimal impact
- Greenwashing or inflated sustainability claims
- Lack of standardised ESG disclosures
These issues often lead to legal trouble, reputational damage, or loss of investor confidence.
2. Environmental Responsibility and Legal Enforcement
Indian law mandates clear responsibilities for environmental protection under the Environment (Protection) Act, 1986, and other rules governing air, water, waste, and hasardous substances.
Insights: Many Indian firms fail to comply with environmental norms due to outdated technologies or weak internal monitoring systems.
Actionable Steps:
- Conduct environmental audits regularly
- Obtain proper clearances before project launches
- Follow Extended Producer Responsibility (EPR) rules for plastic and e-waste
- Align with SEBI’s BRSR for environmental disclosures
Case Law: The Sterlite Industries case highlights how the National Green Tribunal can order closures and heavy penalties when environmental norms are violated.
3. Social Responsibility and Labour Law Compliance
Social responsibility in ESG focuses on fair treatment of employees, community impact, safety, inclusion, and data rights.
Laws such as the Code on Wages, 2019, Occupational Safety, Health and Working Conditions Code, 2020, and the POSH Act, 2013 play vital roles in safeguarding rights.
Insights: Violations often stem from underpayment, unsafe workspaces, or poor HR practices.
Actionable Steps:
- Strictly follow labour regulations
- Maintain fair wages and safe conditions
- Implement internal grievance systems
- Deliver measurable, transparent CSR programmes
Case Law: In Hindustan Coca-Cola Beverages Pvt. Ltd. v. State of Kerala (2023), the Kerala High Court held the company responsible for community-level water conservation, linking social responsibility with environmental sustainability.
4. Governance and Ethical Conduct in Indian Companies
Governance ensures that boards make decisions ethically, with transparency and stakeholder accountability. Key legal anchors include the Companies Act, 2013, and SEBI (LODR) Regulations, 2015.
Insights: Many governance issues in India stem from non-independent boards, poor disclosures, or lack of risk controls.
Actionable Steps:
- Appoint independent and diverse board members
- Create and implement an ethical code of conduct
- Improve ESG-related data collection and reporting
- Ensure whistleblower and audit committees function independently
Judgment: In SEBI v. Subrata Roy Sahara (2022), the Supreme Court reinforced the importance of fair disclosures and governance to protect investor interest.
5. Green Finance and Impact Investing: Funding Sustainable Growth
India’s climate goals, including Net Zero by 2070, are pushing financial regulators and companies towards green finance and impact investing. SEBI’s framework for green debt securities and the RBI’s emphasis on renewable energy financing are key drivers.
Examples: SBI and NTPC have both issued green bonds to fund clean energy projects. Startups with clear ESG goals are now raising funds from global impact investors.
Actionable Steps:
- Align ESG reporting with investor requirements
- Apply for green funding options through approved channels
- Use third-party verification to increase transparency and trust
Outlook: The Future of ESG Compliance in India
The path forward will be shaped by:
- Mandatory third-party ESG assurance for large entities
- Expanded BRSR disclosures across entire value chains
- Laws penalising greenwashing and false claims
- Growth in AI-based ESG risk detection tools
- Stronger cross-border ESG regulations for exporters
Indian businesses that proactively adopt ESG compliance will gain strategic advantages—better access to capital, improved brand reputation, and stronger stakeholder trust.
Action Plan for Indian Companies
- Conduct customised ESG audits across departments
- Build ESG policy frameworks based on Indian and global standards
- Create internal governance structures for ESG implementation
- File accurate BRSR reports in SEBI-mandated format
- Engage legal advisors to review disclosures, contracts, and sustainability claims
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