Authored By: Sahana A
Karnataka State Law University
Introduction
Environmental, Social and Governance compliance has moved from the margins of corporate reputation to the centre of business regulation. In India, this shift is visible in the emergence of Business Responsibility and Sustainability Reporting, mandatory corporate social responsibility obligations, climate-related risk disclosures, and stakeholder-oriented governance norms. The Securities and Exchange Board of India introduced Business Responsibility and Sustainability Reporting for listed entities in 2021, and subsequently issued the BRSR Core framework for assurance and value-chain ESG disclosures in 2023.¹ The Ministry of Corporate Affairs has also framed the National Guidelines on Responsible Business Conduct, which set out nine principles requiring businesses to act ethically, protect the environment, respect human rights, and respond to stakeholder interests.²
This article argues that ESG compliance in India is no longer a matter of voluntary philanthropy or brand-building. It is gradually becoming a legal architecture of corporate accountability. However, the current framework remains fragmented. Environmental obligations are enforced through pollution control laws, social obligations through labour and human rights frameworks, governance duties through company law and securities regulation, and sustainability disclosures through SEBI’s reporting framework. This fragmentation creates three major challenges: inconsistent enforcement, risk of greenwashing, and limited accountability for value-chain impacts.
This article examines the legal framework governing ESG compliance in India, analyses relevant judicial developments, evaluates the gaps in the present regime, compares India’s approach with global trends, and proposes reforms for converting ESG from a disclosure exercise into a credible accountability mechanism.
Legal Framework Governing ESG Compliance in India
Corporate Governance under the Companies Act, 2013
The Companies Act, 2013 forms the foundation of corporate governance in India. It imposes duties on directors, regulates board conduct, mandates financial transparency, and creates internal mechanisms for accountability. Section 166 of the Act requires directors to act in good faith to promote the objects of the company for the benefit of its members as a whole, while also considering the interests of employees, the community, and the environment.³ This provision is significant because it moves Indian company law away from a narrow shareholder-only model and towards a stakeholder-sensitive model.
Corporate accountability under the Companies Act is also strengthened through audit committees, independent directors, vigil mechanisms, board reporting, and related-party transaction norms. These governance tools directly relate to the “G” component of ESG. A company that lacks internal controls, transparent decision-making, or independent oversight cannot meaningfully claim ESG compliance.
However, the Companies Act does not yet define ESG as a unified legal concept. It imposes governance duties and certain social responsibilities, but does not create a comprehensive ESG liability framework. Therefore, the Act provides an important but incomplete foundation for ESG accountability.
Corporate Social Responsibility under Section 135
Section 135 of the Companies Act, 2013 makes corporate social responsibility mandatory for companies satisfying prescribed financial thresholds. The provision applies to companies having a net worth of rupees five hundred crore or more, turnover of rupees one thousand crore or more, or net profit of rupees five crore or more during the immediately preceding financial year.⁴ Such companies must constitute a CSR Committee and spend at least two per cent of their average net profits on eligible CSR activities.
CSR is often confused with ESG, but the two are not identical. CSR is primarily concerned with social spending and community development. ESG is broader. It concerns how a company conducts its business, manages environmental risks, treats workers, governs itself, and reports its impact. A company may spend money on CSR while still having poor ESG performance if its core operations cause pollution, exploit workers, or lack transparency.
This distinction is important for corporate accountability. CSR cannot become a substitute for environmental compliance, labour rights, or ethical governance. It should be treated as one component of a broader ESG framework, not as a defence against irresponsible business conduct.
SEBI’s Business Responsibility and Sustainability Reporting Framework
The most important ESG-specific regulatory development in India has come from SEBI. In 2021, SEBI introduced the Business Responsibility and Sustainability Report framework for listed entities. The BRSR requires listed companies to disclose their performance on environmental, social, and governance parameters. SEBI’s framework is based on the National Guidelines on Responsible Business Conduct and aims to create standardized, comparable, and decision-useful ESG disclosures.⁵
BRSR is mandatory for the top 1,000 listed entities by market capitalisation from financial year 2022–23 onwards.⁶ In 2023, SEBI introduced BRSR Core, which requires assurance of selected key ESG indicators and also addresses ESG disclosures for the value chain.⁷ This marks a major shift. Earlier, ESG reporting largely depended on voluntary sustainability reports. Now, listed companies are subject to regulatory expectations of structured disclosure, third-party assurance, and value-chain accountability.
The BRSR framework strengthens corporate accountability in three ways. First, it requires companies to publicly disclose non-financial performance. Second, it enables investors and stakeholders to compare companies on ESG parameters. Third, it reduces the scope for vague sustainability claims by requiring quantitative and principle-based reporting.
However, the framework remains disclosure-oriented. It tells companies what to report, but does not always impose direct liability for poor ESG performance unless the disclosure is false, misleading, or connected to other statutory violations.
National Guidelines on Responsible Business Conduct
The National Guidelines on Responsible Business Conduct, issued by the Ministry of Corporate Affairs in 2019, provide the ethical and policy foundation for responsible business in India. The nine principles require businesses to act ethically and transparently, provide sustainable and safe goods, promote employee well-being, respect stakeholder interests, protect human rights, protect and restore the environment, influence public policy responsibly, promote inclusive growth, and engage responsibly with consumers.⁸
Although the NGRBC is not a statute in itself, it has regulatory significance because SEBI’s BRSR framework draws from it. Its importance lies in articulating an Indian model of responsible business that integrates constitutional values, sustainable development, and stakeholder governance.
The limitation is enforceability. The NGRBC provides principles, but these principles become legally meaningful only when incorporated into binding regulations, contractual obligations, investor expectations, or judicial reasoning. Therefore, the future of ESG accountability depends on converting responsible business principles into operational legal duties.
Environmental and Labour Law Dimensions
The “E” and “S” components of ESG are also regulated through India’s environmental and labour law framework. Environmental accountability arises under laws such as the Environment Protection Act, 1986, Water Prevention and Control of Pollution Act, 1974, Air Prevention and Control of Pollution Act, 1981, and rules governing waste, hazardous substances, and environmental impact assessment. Labour and social accountability arise through wage laws, occupational safety laws, industrial relations laws, social security laws, anti-discrimination principles, and human rights norms.
These laws show that ESG is not a new area created from outside the legal system. Instead, ESG brings together existing legal duties under a common accountability framework. The difficulty is that these duties are administered by different regulators and enforced through different mechanisms. This creates regulatory silos and weakens integrated ESG compliance.
III. Case Law Analysis
Environmental Accountability and Sustainable Development
Indian courts have played a central role in developing corporate environmental accountability. In M.C. Mehta v. Union of India, the Supreme Court evolved the principle of absolute liability for hazardous industries.⁹ The Court held that an enterprise engaged in a hazardous or inherently dangerous activity owes an absolute and non-delegable duty to the community to ensure that no harm results from such activity. This principle is highly relevant to ESG because it rejects the idea that companies can externalise environmental risk onto society.
In Vellore Citizens Welfare Forum v. Union of India, the Supreme Court recognised the precautionary principle and polluter pays principle as part of Indian environmental law.¹⁰ These principles directly support ESG accountability. The precautionary principle requires companies to anticipate and prevent environmental harm, rather than act only after damage occurs. The polluter pays principle requires companies to internalise the cost of environmental damage.
Similarly, in Indian Council for Enviro-Legal Action v. Union of India, the Supreme Court held that industries responsible for environmental degradation must bear the cost of remedial measures.¹¹ This case is important because it connects corporate activity with restorative responsibility. ESG accountability cannot be limited to disclosure; it must include remediation where harm has occurred.
Corporate Governance and Board Accountability
Corporate governance disputes in India have also shaped the meaning of accountability. In Tata Consultancy Services Ltd. v. Cyrus Investments Pvt. Ltd., the Supreme Court dealt with issues relating to oppression, mismanagement, board powers, and corporate governance in the context of the Tata group dispute.¹² Although the case was not an ESG case, it is relevant because it reaffirmed the importance of board autonomy, corporate structure, and compliance with company law mechanisms.
Good governance is not merely procedural. It determines how companies manage conflicts of interest, stakeholder concerns, ethical risks, and long-term sustainability. Weak governance can lead to ESG failures because environmental and social risks often originate from poor board oversight, short-termism, or lack of internal accountability.
Public Trust, Intergenerational Equity and Corporate Conduct
In several environmental cases, Indian courts have linked development with constitutional duties, public trust, and intergenerational equity. The public trust doctrine, recognised in M.C. Mehta v. Kamal Nath, holds that certain natural resources are held by the State in trust for the public.¹³ While the doctrine is addressed to the State, it indirectly affects corporate conduct because companies using public resources cannot claim unlimited freedom to exploit them.
The doctrine of intergenerational equity also strengthens ESG reasoning. Companies operating today must consider long-term ecological consequences. ESG accountability therefore reflects a broader legal shift: corporate conduct is being judged not only by profit generation, but also by its impact on communities, workers, consumers, and future generations.
Critical Evaluation of the Existing ESG Framework
Disclosure without Sufficient Enforcement
The first weakness of India’s ESG framework is that it is heavily disclosure-based. BRSR improves transparency, but disclosure alone does not guarantee responsible conduct. A company may disclose emissions, workforce diversity, waste management data, or board composition without necessarily improving performance.
This creates a risk of “box-ticking compliance.” Companies may treat ESG reporting as a documentation exercise rather than a governance transformation. For ESG to become meaningful, disclosures must be connected to board responsibility, investor scrutiny, regulatory review, and liability for misleading statements.
Risk of Greenwashing
Greenwashing occurs when a company exaggerates, misrepresents, or selectively presents its environmental or social performance. In India, greenwashing risks are increasing because companies are under pressure to appear sustainable to investors, consumers, and regulators. ESG labels, sustainability reports, net-zero claims, and green finance instruments can become misleading if they are not supported by verifiable data.
BRSR Core and assurance requirements are important steps towards reducing greenwashing. However, assurance must be independent, technically sound, and comparable across companies. Without clear standards for assurance providers and penalties for misleading ESG claims, greenwashing may continue in more sophisticated forms.
Limited Value-Chain Accountability
Modern corporations often operate through complex supply chains. Environmental harm, labour violations, unsafe working conditions, and human rights abuses may occur not within the main company, but through suppliers, contractors, vendors, or subsidiaries. SEBI’s move towards value-chain ESG disclosures is therefore significant. However, implementation will be difficult.
Large companies may have thousands of suppliers across sectors and geographies. Smaller suppliers may lack capacity to collect ESG data. There is also a risk that ESG compliance costs will be pushed downwards onto small and medium enterprises. Therefore, value-chain accountability must be phased, practical, and supported by capacity-building.
Fragmentation Across Regulators
ESG compliance involves SEBI, MCA, RBI, Ministry of Environment, labour authorities, sectoral regulators, stock exchanges, and courts. This multi-regulator structure can create overlaps and gaps. For example, SEBI regulates listed company disclosures, MCA regulates company law and CSR, RBI addresses climate-related financial risks for regulated entities, and environmental regulators address pollution. A company may comply with one regulator while violating expectations under another.
India therefore needs greater regulatory coordination. ESG should not become a maze of unrelated forms and reports. It should become an integrated risk-management and accountability framework.
Absence of a Clear Liability Standard
The most serious gap is the absence of a clear ESG liability standard. If a company fails to meet ESG commitments, what follows? If it makes misleading sustainability claims, who is liable? If its supplier violates labour rights, when should the lead company be responsible? If climate risks are ignored by the board, can directors be held accountable?
These questions remain underdeveloped. Current law can address specific wrongs through environmental penalties, securities law action, company law remedies, or tort claims. But India does not yet have a comprehensive ESG accountability doctrine.
Comparative Perspectives
European Union
The European Union has moved towards a more mandatory and due-diligence-based ESG model. The Corporate Sustainability Reporting Directive requires large companies to report sustainability information in a detailed and standardised manner. The EU has also moved towards corporate sustainability due diligence, requiring companies to identify and address adverse human rights and environmental impacts in their operations and value chains.
The EU model is significant because it goes beyond disclosure. It expects companies to conduct due diligence, assess risks, prevent harm, and address impacts. India can draw lessons from this approach, especially for value-chain accountability and human rights due diligence.
United Kingdom
The United Kingdom has focused on corporate governance codes, modern slavery reporting, climate-related financial disclosures, and stewardship obligations. Its approach combines market discipline, investor pressure, and statutory reporting. The UK model shows how ESG accountability can be strengthened through investor engagement and board-level oversight.
United States
The United States has witnessed intense debate over ESG regulation. While the Securities and Exchange Commission has attempted to strengthen climate-related disclosures, ESG has also become politically contested. The US experience shows that ESG regulation must be legally precise. Vague or ideologically framed ESG rules can face resistance. India should therefore adopt a balanced model rooted in statutory duties, investor protection, environmental law, and constitutional principles.
Reform Suggestions for India
Define ESG Accountability in Indian Corporate Law
India should consider defining ESG accountability through amendments or explanatory guidance under company law and securities regulation. The law need not create a single ESG statute immediately. However, it should clarify that ESG compliance includes environmental risk management, social responsibility, human rights respect, ethical governance, and accurate sustainability disclosure.
Link ESG Disclosure with Board Responsibility
BRSR should not remain only a reporting function handled by compliance departments. Boards should be required to review and approve material ESG disclosures. Directors should certify that ESG disclosures are accurate to the best of their knowledge, similar to financial disclosures. This would improve seriousness and reduce greenwashing.
Strengthen Liability for Misleading ESG Claims
India should create clearer penalties for false, misleading, or unverifiable ESG claims. This should include misleading net-zero claims, false sustainability labels, selective disclosure, and misrepresentation in green finance instruments. Liability should apply not only to companies, but also to responsible officers where intentional or reckless misstatement is proved.
Build a Practical Value-Chain Framework
Value-chain disclosures should be implemented in a phased manner. Large companies should be required to identify material ESG risks in their supply chains. However, smaller suppliers should be supported through standardised templates, capacity-building, and digital reporting tools. The objective should be accountability, not compliance overload.
Harmonise ESG Regulation Across Regulators
SEBI, MCA, RBI, environmental authorities, and labour regulators should coordinate ESG compliance requirements. A common taxonomy of ESG indicators would reduce duplication and improve comparability. India should also develop sector-specific ESG guidance for high-impact sectors such as mining, textiles, energy, infrastructure, finance, agriculture, and manufacturing.
Encourage ESG Assurance and Independent Verification
Independent assurance should be strengthened. Assurance providers must be qualified, independent, and subject to professional standards. ESG assurance should not become a ceremonial certificate. It should test data quality, methodology, internal controls, and consistency between claims and performance.
Integrate Climate Risk into Corporate Governance
Climate risk is no longer only an environmental issue; it is a financial and governance issue. Boards should be required to assess physical risks, transition risks, regulatory risks, and reputational risks arising from climate change. RBI’s draft climate-related financial disclosure framework for regulated entities indicates that climate risk is increasingly being understood as a financial stability issue.⁷ This logic should gradually inform broader corporate governance expectations.
VII. Conclusion
ESG compliance in India is at a decisive stage. The country has moved beyond voluntary sustainability and has begun constructing a regulatory framework through company law, CSR obligations, SEBI’s BRSR framework, NGRBC principles, environmental jurisprudence, and emerging climate-risk regulation. These developments show that corporate accountability is no longer confined to financial performance. Companies are increasingly expected to account for their environmental footprint, social impact, governance quality, and value-chain responsibilities.
However, India’s ESG framework remains incomplete. It is still fragmented across regulators, largely disclosure-oriented, vulnerable to greenwashing, and uncertain on liability standards. The next phase must therefore focus on enforceability. ESG should not become another compliance formality. It should operate as a legal and governance mechanism that changes corporate behaviour.
This article has argued that India should strengthen ESG accountability by linking disclosures to board responsibility, creating liability for misleading ESG claims, improving value-chain reporting, harmonising regulatory standards, and building credible assurance mechanisms. Such reforms would balance business growth with environmental protection, investor confidence, worker welfare, and democratic accountability.
The central challenge is not whether Indian companies should adopt ESG. That question has already been answered by law, markets, and society. The real question is whether ESG in India will remain a language of aspiration or become a discipline of enforceable responsibility.
References and Bibliography
Cases
M.C. Mehta v. Union of India, (1987) 1 SCC 395.
Vellore Citizens Welfare Forum v. Union of India, (1996) 5 SCC 647.
Indian Council for Enviro-Legal Action v. Union of India, (1996) 3 SCC 212. M.C. Mehta v. Kamal Nath, (1997) 1 SCC 388.
Tata Consultancy Services Ltd. v. Cyrus Investments Pvt. Ltd., (2021) 9 SCC 449.
Legislation and Regulations
Companies Act, 2013.
Companies (Corporate Social Responsibility Policy) Rules, 2014.
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Environment Protection Act, 1986.
Water Prevention and Control of Pollution Act, 1974.
Air Prevention and Control of Pollution Act, 1981.
Regulatory Materials
Securities and Exchange Board of India, Circular on Business Responsibility and Sustainability Reporting by Listed Entities, SEBI/HO/CFD/CMD-2/P/CIR/2021/562, May 10, 2021.
Securities and Exchange Board of India, BRSR Core: Framework for Assurance and ESG Disclosures for Value Chain, SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122, July 12, 2023.
Ministry of Corporate Affairs, National Guidelines on Responsible Business Conduct, 2019.
Reserve Bank of India, Draft Disclosure Framework on Climate-related Financial Risks, 2024.
Footnotes
Securities and Exchange Board of India, Circular on Business Responsibility and Sustainability Reporting by Listed Entities, SEBI/HO/CFD/CMD-2/P/CIR/2021/562, May 10, 2021; Securities and Exchange Board of India, BRSR Core: Framework for Assurance and ESG Disclosures for Value Chain, SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122, July 12, 2023.
Ministry of Corporate Affairs, National Guidelines on Responsible Business Conduct, 2019.
Companies Act, 2013, Section 166.
Companies Act, 2013, Section 135.
SEBI, Circular on Business Responsibility and Sustainability Reporting by Listed Entities, May 10, 2021.
SEBI’s BRSR framework applies to the top 1,000 listed entities by market capitalisation from financial year 2022–23 onwards.
SEBI issued the BRSR Core framework for assurance and ESG disclosures for value chain through Circular No. SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122 dated July 12, 2023.
The Ministry of Corporate Affairs’ NGRBC sets out nine principles, including ethical governance, sustainability, employee well-being, stakeholder responsiveness, human rights, environmental protection, responsible policy engagement, inclusive growth, and consumer responsibility.
M.C. Mehta v. Union of India, (1987) 1 SCC 395.
Vellore Citizens Welfare Forum v. Union of India, (1996) 5 SCC 647.
Indian Council for Enviro-Legal Action v. Union of India, (1996) 3 SCC 212.
Tata Consultancy Services Ltd. v. Cyrus Investments Pvt. Ltd., (2021) 9 SCC 449. 13. M.C. Mehta v. Kamal Nath, (1997) 1 SCC 388.
