Authored By: HARI TEJASREE DANDU
MAHATMA GANDHI LAW COLLEGE
Abstract
The regulatory landscape for Indian exporters has shifted dramatically. What once required basic quality certificates now demands comprehensive sustainability reporting, supply chain due diligence, and climate disclosures. This article examines the emerging legal framework particularly IFRS S1, IFRS S2, and SASB standards that’s reshaping export compliance for Indian natural products businesses. Drawing from recent case law, regulatory updates, and practical experience, we explore how these international standards create binding legal obligations through commercial contracts, financing agreements, and market access requirements. For legal practitioners advising exporters, understanding these frameworks is no longer optional it’s essential to protecting clients from significant liability exposure while helping them capitalize on new market opportunities.
Introduction
Last month, a Kerala-based spice exporter called our office in a panic. After fifteen years of smooth operations supplying cardamom to German buyers, they received an ultimatum: provide detailed sustainability metrics within ninety days or lose contracts worth ₹12 crore annually. The German buyers weren’t being difficult they were complying with mandatory due diligence laws that create legal liability if they source from non-compliant suppliers.
This scenario illustrates a fundamental shift in export law. The traditional legal framework focuses on product quality, customs compliance, and trade regulations. Today’s exporters must navigate an entirely new layer of legal requirements centered on sustainability reporting and supply chain accountability.
The International Financial Reporting Standards (IFRS) S1 and S2, issued by the International Sustainability Standards Board in June 2023, establish mandatory disclosure frameworks that are being rapidly adopted worldwide [3][6][9]. The Sustainability Accounting Standards Board (SASB) provides sector-specific metrics that complement these general requirements [7][10]. While these might appear to be accounting standards, they’re increasingly being incorporated into legally binding contracts, financing agreements, and regulatory requirements.
For Indian natural products exporters whether dealing in spices, tea, textiles, or agricultural commodities, these standards represent both a legal compliance challenge and a business opportunity. Companies that master these requirements can access premium markets and secure financing on favorable terms. Those that ignore them face contract termination, financing restrictions, and potential legal liability.
The New Legal Reality: How Accounting Standards Become Law
European Union’s Regulatory Revolution
The European Union’s Corporate Sustainability Reporting Directive (CSRD), effective from 2024, requires large EU companies to report detailed sustainability information using standards aligned with IFRS S1 and S2 [5][11]. This creates a cascade effect: EU companies subject to CSRD must collect sustainability data from their suppliers to meet their own reporting obligations.
The proposed Corporate Sustainability Due Diligence Directive goes further, creating legal liability for companies that fail to conduct adequate supply chain due diligence [5][8]. German companies already face similar obligations under the Supply Chain Due Diligence Act, effective since 2023 [11].
For Indian exporters, this means sustainability reporting isn’t voluntary it’s becoming a contractual prerequisite for accessing European markets. Failure to comply can result in contract termination, not just disappointed buyers.
Carbon Border Adjustments: The Coming Storm
The EU’s Carbon Border Adjustment Mechanism (CBAM), entering full force in 2026, will impose carbon tariffs on imports including steel, cement, aluminum, and fertilizers [24][27][30]. Indian exporters will need to demonstrate their carbon footprint using methodologies aligned with IFRS S2 requirements [24][27]. With Indian exports to the EU valued at approximately $8 billion annually for CBAM covered goods, the compliance costs are significant [30]. More importantly, the legal framework requires precise emissions measurement and verification areas where IFRS S2 provides the mandatory methodology.
Understanding the Indian Legal Foundation
Constitutional and Statutory Framework
Before examining international requirements, we must understand existing domestic obligations. Article 246 of the Indian Constitution grants the Union Government exclusive authority over interstate and international trade [2]. This means export regulations flow from central government legislation, not state laws.
The primary statutes governing natural products exports include:
Foreign Trade (Development and Regulation) Act, 1992: Provides broad regulatory authority over exports, including quality standards and reporting requirements [2].
Food Safety and Standards Act, 2006: Creates criminal liability for food safety violations, with penalties including imprisonment [2].
Export (Quality Control and Inspection) Act, 1963: Mandates quality certification for agricultural products, creating liability for non-compliance [2].
APEDA and Quality Control Requirements
For natural products exporters, the Agricultural and Processed Food Products Export Development Authority (APEDA) plays a crucial role [23][26][29]. APEDA registration is mandatory for exporting scheduled products, and recent updates have enhanced traceability requirements [23][26].
The Spices Board of India has similarly revised quality protocols, and APEDA has strengthened organic certification procedures [2]. These changes create new legal obligations that complement international sustainability requirements.
Traditional Knowledge and Geographical Indications
The Geographical Indications of Goods (Registration and Protection) Act, 1999, provides legal protection for traditional products like Darjeeling tea and Basmati rice [25][28][31]. Proper use of geographical indications can command premium prices while providing legal protection against counterfeit products [25][37]. The Traditional Knowledge Digital Library documents traditional Indian knowledge, creating both opportunities and obligations for exporters using traditional formulations or agricultural practices [28][31].
IFRS S1: General Sustainability Requirements
Materiality and Risk Assessment
IFRS S1 requires disclosure of sustainability-related risks and opportunities that could affect cash flows, access to finance, or cost of capital [3][9][12]. For natural products exporters, material risks might include:
- Climate risks affecting agricultural suppliers
- Water scarcity disrupting production
- Regulatory changes affecting organic certifications
- Social risks creating reputational damage
The legal significance lies in the materiality assessment. If you make statements about sustainability performance in contracts, marketing materials, or financing applications, and those statements prove materially misleading, you face potential legal liability.
Governance Requirements
IFRS S1 mandates disclosure of governance processes for sustainability risk management [3][9]. This creates a legal obligation to maintain documented procedures and decision-making frameworks. For smaller exporters, this doesn’t require a formal board of directors, but it does require clear responsibility assignments and audit trails.
Implementation for Indian Exporters
Many international buyers now require supplier information that complies with IFRS S1, making it a contractual obligation even for companies not directly subject to the standard [3]. Export contracts increasingly include sustainability performance warranties, creating potential liability for misrepresentation.
IFRS S2: Climate-Related Disclosures
Scenario Analysis and Physical Risk Assessment
IFRS S2 requires analysis of different climate scenarios and their business impact [6][9]. For agricultural exporters, this means evaluating how temperature changes, precipitation patterns, and extreme weather events affect operations.
This isn’t theoretical it creates legal liability if your analysis proves materially inadequate. If you tell lenders that climate change won’t affect your spice sourcing, and drought subsequently disrupts supply chains, you may face claims for inadequate disclosure.
Greenhouse Gas Emissions Reporting
IFRS S2 mandates disclosure of Scope 1 and 2 emissions, with Scope 3 reporting when material [6]. For most natural products exporters, supply chain emissions (Scope 3) are likely material, creating obligations to measure and report supplier emissions.
This requires robust data collection systems and supplier engagement programs. Manual estimates aren’t sufficient the standard demands defensible methodologies and verification procedures.
SASB Standards: Sector Specific Requirements
Food and Beverage Sector Standards
The SASB Food & Beverage standard (FB-PF) establishes specific disclosure requirements for food exporters [4][7]. Key areas include:
Environmental Impact: Energy management, water management, food safety, and packaging environmental impacts [4].
Supply Chain Management: Supplier assessment practices, traceability systems, and remediation procedures [4].
Agricultural Products Standards
The SASB Agricultural Products standard (FB-AG) covers primary agricultural production [7][10]:
Environmental Management: Greenhouse gas emissions, water management, land use impacts, and biodiversity conservation [7].
Food Security: Strategies for managing food security risks, including climate adaptation measures [7].
Practical Implementation
For Indian exporters working with thousands of small farmers, SASB requirements create significant operational challenges. You need documented supplier assessment procedures, regular monitoring systems, and corrective action processes. These aren’t aspirational goals they’re becoming contractual requirements for accessing international markets.
Legal Risk Exposure and Liability
Contract Law Implications
Export contracts increasingly include sustainability performance warranties and ESG compliance representations. Breach of these obligations can result in contract termination, damages claims, or payment refusal for delivered goods.
Courts are treating sustainability commitments as material contract terms, not aspirational statements. Recent arbitral awards have enforced ESG performance clauses and awarded damages for breaches [2].
Securities and Financial Reporting Risks
For companies accessing international capital markets, misleading sustainability disclosures can create securities law liability. The U.S. SEC has proposed treating climate-related misstatements with the same severity as financial statement fraud.
Supply Chain Due Diligence Laws
European supply chain due diligence laws create mandatory monitoring obligations that flow down to Indian suppliers. German companies must assess and monitor supplier labor and environmental practices under the Supply Chain Due Diligence Act [11]. EU companies face similar obligations under the proposed CSDDD.
If you’re supplying German or EU companies, you’re subject to these monitoring requirements whether you realize it or not. Non-compliance can result in contract termination or legal action.
Building a Compliance Framework
Documentation and Governance
The most critical legal protection is comprehensive documentation. You need written procedures for sustainability risk management, supplier assessment, quality control, and environmental monitoring. In legal disputes, your documentation determines whether you can defend your practices.
Even small companies need documented governance procedures for ESG decision making. This means clear responsibility assignments and decision-making procedures that can withstand legal scrutiny.
Supplier Relationship Management
Update supplier contracts to include specific sustainability performance requirements, monitoring rights, and remediation obligations. Generic quality clauses are insufficient you need detailed ESG performance specifications.
Implement regular supplier audit procedures and monitoring activities. The legal standard is shifting toward continuous monitoring rather than periodic assessments.
Maintain comprehensive traceability records. Full supply chain traceability is becoming legally mandatory, not just best practice.
Data Management and Verification
Invest in robust data collection systems that support third-party verification. Manual record-keeping cannot withstand the scrutiny these disclosures receive.
Engage qualified sustainability consultants and legal advisors who understand both technical requirements and legal implications. ESG reporting requires specialized expertise to avoid liability exposure.
Insurance and Risk Mitigation
ESG related liability exposure is real and growing. Obtain insurance coverage that addresses sustainability related claims and regulatory penalties.
Consider directors and officers insurance that covers ESG related liability, particularly if you’re making sustainability commitments in contracts or public statements.
International Trade Law Considerations
WTO Framework
The WTO Agreement on Technical Barriers to Trade requires sustainability standards to be transparent, non-discriminatory, and based on legitimate policy objectives [2]. This provides some protection against arbitrary requirements but also validates legitimate sustainability standards.
The Agreement on Sanitary and Phytosanitary Measures governs food safety regulations that increasingly incorporate sustainability elements, such as organic certification standards and pesticide residue limits.
Enforcement Mechanisms
Understanding enforcement helps assess legal risks and plan compliance strategies. The National Green Tribunal has jurisdiction over environmental compliance issues affecting natural products production [2]. The Ministry of Corporate Affairs can impose penalties for sustainability reporting violations under the Companies Act [2].
International commercial arbitration is developing specialized procedures for ESG related disputes, with expert panels and streamlined processes for sustainability performance conflicts.
Strategic Implementation Approach
Risk-Based Prioritization
Start with the highest-risk legal exposures:
- Direct regulatory compliance obligations in export markets
- Contractual commitments to major buyers
- Financial reporting requirements for lenders or investors
Then expand to broader ESG requirements as systems develop.
Cost-Effective Solutions
Join industry cooperatives that provide shared compliance infrastructure, such as common auditing services or data management systems. Individual compliance is expensive—shared solutions reduce costs while maintaining legal protection.
Invest in technology systems that automate data collection and reporting rather than relying on manual processes that are expensive and error-prone.
Develop relationships with qualified legal and sustainability professionals who understand practical implementation challenges, not just theoretical requirements.
Looking Forward: The Evolving Legal Landscape
Emerging Trends
Climate litigation is expanding to include supply chain liability, creating new legal risks throughout international value chains. Environmental justice claims increasingly target companies based on global operations, not just domestic activities.
Carbon border adjustments are being implemented in major markets, creating new legal obligations for emissions measurement and reporting. These affect Indian exporters within the next few years, not in some distant future.
Future Preparation
Build compliance systems that can adapt to changing requirements rather than just meeting current minimums. This means investing in robust data collection systems, establishing strong supplier relationships, and developing internal expertise that can evolve with the legal landscape.
Legal requirements will only become more complex and demanding. Companies investing now in strong compliance capabilities will have significant competitive advantages as requirements become more widespread and stringent.
Conclusion
The legal framework for natural products exports has fundamentally changed. Today’s exporters must navigate complex sustainability reporting requirements, supply chain due diligence obligations, and environmental compliance standards. This isn’t about corporate social responsibility it’s about managing serious legal risks that can threaten business survival.
But legal compliance also creates competitive advantages. Companies that master IFRS and SASB requirements, implement robust supply chain monitoring, and build strong governance procedures will differentiate themselves in increasingly competitive international markets.
The legal requirements discussed here are current obligations affecting businesses today. Indian exporters who ignore these developments risk exclusion from lucrative markets or serious legal liability for non-compliance.
Investment in legal compliance often aligns with operational improvements that enhance efficiency, reduce risks, and strengthen customer relationships. Viewing legal compliance as a business strategy component, not an additional burden, will determine long-term success.
The companies that succeed will treat legal compliance not as regulatory overhead but as fundamental competitive capability. Your ability to navigate complex legal requirements while building trust with sophisticated international buyers increasingly determines success in global natural products markets.
Reference(S):
Primary Sources
International Standards and Frameworks
International Financial Reporting Standards Foundation, ‘IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information’ (2023)
International Financial Reporting Standards Foundation, ‘IFRS S2 Climate-related Disclosures’ (2023)
Sustainability Accounting Standards Board, ‘Agricultural Products Standard’ (SASB 2017) Sustainability Accounting Standards Board, ‘Food & Beverage Standard’ (SASB 2017)
European Union Legislation
Directive 2022/2464/EU of the European Parliament and of the Council of 14 December 2022 amending Regulation (EU) No 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU, as regards corporate sustainability reporting [2022] OJ L322/15 (Corporate Sustainability Reporting Directive)
Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism [2023] OJ L130/52
German Legislation
Gesetz über die unternehmerischen Sorgfaltspflichten zur Vermeidung von Menschenrechtsverletzungen in Lieferketten [2021] BGBl I S 2959 (German Supply Chain Due Diligence Act)
Indian Legislation
Constitution of India 1950, art 246
Foreign Trade (Development and Regulation) Act 1992
Export (Quality Control and Inspection) Act 1963
Food Safety and Standards Act 2006
Geographical Indications of Goods (Registration and Protection) Act 1999
Secondary Sources
Books and Articles
Diger, Sedat, ‘The Protection of Geographical Indications in India: Issues and Challenges’
Official Reports and Publications
Agricultural and Processed Food Products Export Development Authority, ‘Annual Report 2023-24’ (APEDA 2024)
European Commission, ‘Carbon Border Adjustment Mechanism’ (2024)
Professional Guidance and Analysis
BDO Global, ‘ISSB issues IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures’ (2023)
ERM, ‘ISSB’s IFRS S1/S2: Laying the foundation for global mandatory disclosures’ (14 February 2024)
EY, ‘ISSB issues inaugural IFRS Sustainability Disclosure Standards’ (25 June 2023)
KPMG, ‘Timing of sustainability reporting’ (30 August 2023)
News Articles and Industry Publications
Dataverse Inc, ‘Top Export Commodities from India to the EU in 2024’ (4 November 2024)
EcoManager, ‘CSRD Timeline | CSRD from 2024 to 2028’ (5 August 2025)
EuroMetal, ‘EU confirms CBAM to begin in January 2026 despite market rumors’ (25 August 2025)
Import Globals, ‘Spices Export of India in 2024: All You Need to Know Regarding the Latest Shipments and Trade Strategies’ (11 June 2025)
India Today, ‘What is CBAM and its impact on Indian exports and sustainability’ (16 January 2025)
Net0, ‘Corporate Sustainability Reporting Directive (CSRD) 2024’ (15 September 2025)
Raag Consultants, ‘Does spices come under APEDA?’ (30 March 2023)
Government and Regulatory Websites
Agricultural and Processed Food Products Export Development Authority
Centre for Social Responsibility in Germany, ‘Supply Chain Act’ (17 April 2023)
European Commission, ‘Corporate sustainability reporting’ (30 July 2025)
Spices Board of India
Professional Services Guidance
Bajaj Finserv, ‘APEDA Registration – Process, Documents required, Benefits’ (15 December 2024)
ClearTax, ‘APEDA Registration – Process, Documents Required’ (20 April 2025)
EcoVadis, ‘Carbon Border Adjustment Mechanism (CBAM) | EU Import Requirements’ (10 June 2025)
EcoVadis, ‘German Supply Chain Due Diligence Act (LkSG)’ (19 March 2025)
ShipRocket, ‘APEDA Registration Guide: Process & Key Benefits for Exporters’ (13 November 2024)
TrustTrace, ‘German Supply Chain Due Diligence Act (SCDDA or LkSG)’ (24 January 2022)
Online Resources
Regulatory and Standards Bodies
IFRS Foundation
International Sustainability Standards Board
Sustainability Accounting Standards Board
Industry and Trade Bodies
Centre for Biodiversity and Indigenous Knowledge, ‘What is the demand for spices and herbs on the European market?’ (6 March 2025)
Indian Spices Board, ‘Trade Information and Statistics’
Statistical Sources
Statista, ‘Export value of spices from India FY 2011-2024’ (26 June 2025)
TradeImex, ‘Top Spice Importers & Global Spice Imports Data 2024-25’ (3 August 2025)
