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THE RISE OF ESG COMPLIANCE IN INDIAN CORPORATE  GOVERNANCE : A LEGAL INSIGHT

Authored By: Sayali Talegaonkar

Abstract:

This article explores the growing significance of Environmental, Social, and  Governance (ESG) compliance in the context of Indian corporate governance. With a  global shift toward responsible business practices, ESG has emerged as both a strategic  and legal concern for Indian companies. The piece analyses the legal framework driving  ESG adoption, evaluates corporate responses, and highlights key challenges in effective

implementation. Special focus is given to the evolving role of legal professionals in shaping  ESG governance. Through a structured, analytical approach, the article concludes that ESG  is no longer a voluntary ideal, but a legal and strategic necessity in India’s corporate  landscape.

Introduction:

Can a company still be called successful if it’s profitable, but pollutes rivers,  mistreats workers, or hides critical decisions from shareholders? This question lies at the heart of the growing push for Environmental, Social, and  Governance (ESG) compliance in India’s corporate world.

As global and domestic expectations shift, Indian businesses are being asked to do more  than just meet financial targets—they’re being held accountable for their impact on society and the environment. This article investigates whether ESG in India is still a matter of  corporate ethics, or if it’s fast becoming a legal necessity.

Through this piece, we explore ESG’s rising importance, the legal framework behind it,  company responses, implementation gaps, and the expanding role of legal professionals in  shaping ESG governance.

Background:

Environmental, Social, and Governance (ESG) as a concept developed from global  efforts to hold corporations accountable for more than just profits. Initially voluntary and  values-based, ESG reporting gained traction as concerns about climate change, labour  rights, and corporate transparency grew. Over time, ESG matured into a structured  framework to evaluate how companies impact the environment, society, and internal  governance systems.

In India, the ESG journey began through public conversations around responsible business  conduct and sustainability. While Corporate Social Responsibility (CSR), introduced under  the Companies Act, 2013, was a first step, it focused more on philanthropic activities than  integrated reporting. ESG, on the other hand, emphasizes measurable, long-term corporate  accountability.

This context helps explain why ESG is now at the center of boardroom discussions — and  why its legal and strategic relevance is rapidly increasing in Indian corporate governance.

The Strategic Importance of ESG in Modern Corporate Governance :

In the past, corporate performance was primarily judged through financial  outcomes. However, in today’s global economy, this view is rapidly evolving. ESG— Environmental, Social, and Governance—has emerged as a key metric to evaluate whether  a business is not only profitable but also ethical, sustainable, and responsible in its  operations.

The accelerated pace of economic development, especially in emerging economies like  India, has brought with it a surge in climate-related risks, social inequalities, and  governance failures. These challenges have made it clear that unchecked growth can no  longer be the sole focus of corporate strategy. As a result, businesses are now expected to  actively manage their environmental impact, uphold social responsibility, and maintain  transparent internal processes.

Globally, investors are demanding ESG accountability before making decisions.1 ESG compliant companies are perceived as future-ready, lower-risk, and more resilient. In fact,  several global investment funds now include ESG ratings as a criterion for capital  allocation. This shift in investor behaviour has made ESG a strategic—not optional— priority for companies.

In practical terms, ESG adds value at multiple levels:

∙ It improves a company’s brand image and stakeholder trust

∙ Helps manage legal and reputational risks

∙ Encourages long-term sustainability planning

∙ Strengthens internal governance and board accountability

∙ Opens access to green finance and ESG-linked investments

In India, this global momentum has translated into a push for measurable, transparent  sustainability efforts,2rather than the older model of loosely defined CSR activities. ESG  is no longer a box to tick—it is a long-term strategy for survival, credibility, and growth. The following section analyses how Indian law and policy are reinforcing this shift.

The Regulatory Backbone: Legal Framework Governing ESG in India :

While ESG started as a voluntary concept rooted in ethical business practices, it is  now steadily finding a place within the framework of Indian corporate law and policy. The  shift from moral obligation to regulatory expectation is being driven by multiple legal and  institutional developments.

The most significant push has come from the Securities and Exchange Board of India  (SEBI). Initially, listed companies were required to file Business Responsibility Reports  (BRR). However, recognising the need for more measurable and standardised disclosures,  SEBI introduced the Business Responsibility and Sustainability Reporting (BRSR) framework in 20213. This reporting structure, now mandatory for the top 1,000 listed  entities, focuses on quantifiable ESG metrics such as greenhouse gas emissions, gender  diversity, water usage, and supply chain transparency.

More recently, SEBI introduced the BRSR Core, a stricter version requiring assured,  verifiable data on critical ESG indicators. While currently applicable only to large entities,  its ripple effect is likely to influence smaller firms indirectly—especially those involved in  the value chains of listed companies.

Another important legal step was the inclusion of Corporate Social Responsibility (CSR)  under Section 135 of the Companies Act, 20134. This made India one of the first countries  to mandate CSR spending. Although CSR focuses primarily on the “Social” component of  ESG, it laid the groundwork for embedding ethical and social responsibility into statutory  corporate obligations.

Complementing these efforts are the National Guidelines on Responsible Business  Conduct (NGRBC) issued by the Ministry of Corporate Affairs (MCA)5. Though not  legally binding, they provide a set of nine guiding principles that promote responsible  business behaviour across sectors. These guidelines are widely referenced in sustainability  frameworks and have shaped SEBI’s expectations under the BRSR format.

Together, these instruments reveal a clear trend: while India does not yet have a single,  codified ESG law, it is increasingly using existing legislation and regulatory powers to  weave ESG compliance into mainstream governance. For legal professionals, this presents  a dynamic opportunity to engage with ESG not just as a concept, but as an evolving area  of corporate regulation that blends policy, compliance, and ethics.

 Adoption of ESG Practices :

The growing regulatory push and global investor expectations have led many Indian  companies to take proactive steps toward adopting ESG principles in practice—not just on paper. These steps go beyond mandatory reporting and reflect a shift in how corporates  view long-term sustainability.

Several listed entities have established board-level ESG committees tasked with  supervising sustainability strategies, overseeing risk disclosures, and integrating ESG  objectives with overall business goals. This shows that ESG is no longer being handled as  a part-time CSR obligation, but as a strategic governance issue.

In addition, many corporates are hiring specialised ESG consultants or building in-house  sustainability teams to develop actionable roadmaps and ensure alignment with  frameworks like SEBI’s BRSR or international benchmarks such as the GRI and TCFD.  For instance, Infosys has issued integrated ESG reports for years6, and Tata Group  companies often lead voluntary disclosures across sectors7.

Another important trend is the extension of ESG expectations to supply chains and vendors.  Large firms are now requiring their partners and third-party vendors to follow ESG-related  protocols on waste management, labour standards, and energy use—essentially embedding  sustainability throughout their business ecosystem.

Despite these developments, the level of adoption remains uneven. While large companies  are making measurable progress, small and mid-sized firms often struggle with capacity  and awareness, setting the stage for the next challenge: closing the ESG compliance gap  across sectors.

 Barriers to ESG Compliance :

Despite growing awareness and regulatory encouragement, ESG compliance in  India faces several challenges—both systemic and operational. These barriers are especially visible among small and mid-sized enterprises, who often lack the capacity to  adapt quickly to evolving expectations.

One major hurdle is the awareness and knowledge gap. While large corporations may  have ESG officers or legal teams, many smaller businesses remain unfamiliar with ESG  terminology, global frameworks, or the purpose behind sustainability reporting. Without  training or guidance, these companies struggle to engage meaningfully with ESG goals.

A second issue is the cost of ESG implementation. Preparing BRSR reports, hiring  consultants, ensuring data accuracy, and improving internal systems all require significant  financial investment. For companies already under budget pressure, ESG becomes a “nice to-have” rather than a strategic must.

Greenwashing—presenting a false or exaggerated image of sustainability—adds another  layer of complexity. Several companies adopt surface-level initiatives, such as using eco friendly branding without genuine operational change. This not only misleads stakeholders  but also reduces trust in ESG as a whole.

Furthermore, the lack of a single codified ESG law in India makes enforcement difficult.  While SEBI and the Ministry of Corporate Affairs have issued important frameworks, the  current regime is fragmented. There are limited legal consequences for non-compliance,  which often leads to ESG being treated as a low-priority formality.

Technical barriers also persist. Many businesses face challenges in collecting reliable,  auditable ESG data, especially when required under newer mandates like BRSR Core.  Without proper systems in place, fulfilling these requirements becomes burdensome.

Lastly, ESG adoption often faces internal resistance, particularly from senior  management unfamiliar with sustainability concepts. ESG is sometimes dismissed as a  Western ideal rather than a competitive necessity.

These challenges highlight why ESG in India needs more than policy—it needs practical  tools, legal clarity, and capacity building. In this evolving space, legal professionals and

compliance experts are poised to play a key role in bridging the gap between regulation  and execution.

The Emerging Role of Legal Professionals in ESG Governance :

As ESG evolves from a values-based concept into a compliance-driven expectation, the  demand for legal involvement is rising. Regulations like SEBI’s BRSR and CSR  requirements under the Companies Act, 2013, have introduced structured reporting and  disclosure norms that companies must now legally adhere to. This shift has made ESG a  space where lawyers are not just observers but essential advisors.

  1. Why Legal Involvement Is Rising

Legal expertise is needed to interpret and apply complex regulations issued by bodies such  as SEBI and the Ministry of Corporate Affairs. From understanding the nuances of  Business Responsibility and Sustainability Reporting (BRSR) to navigating the  implications of CSR mandates or voluntary guidelines like the NGRBC, legal  professionals help ensure that companies are compliant, transparent, and risk-aware.

  1. What Roles Legal Professionals Are Playing

Lawyers today are:

Advising boards on ESG policy drafting

∙ Ensuring accurate and lawful ESG disclosures

∙ Drafting ESG-linked clauses in contracts, especially in finance and supply chain  deals

∙ Helping companies avoid greenwashing liability

∙ Conducting due diligence during mergers and investments with ESG benchmarks in mind

Their work ensures that ESG strategies are not only ethically sound but also legally  defensible.

  1. Why Law Graduates Should Care

ESG is emerging as one of the most dynamic and interdisciplinary legal fields today. It  merges elements of corporate law, environmental regulation, labour rights, and financial  compliance. As companies increasingly embed ESG into core governance, the need for  lawyers who understand both sustainability and regulation is growing fast. For law  graduates, this is an opportunity to lead in shaping responsible business from the legal  front.

 Conclusion: ESG as a Legal Mandate, Not a Voluntary Dream :

This article explored whether ESG remains a voluntary value or has become a legal  necessity in Indian corporate governance. Based on current trends, the answer is evident:  ESG is no longer optional—it is transforming into a structured, compliance-driven  requirement.

We examined ESG’s rising global and domestic relevance, the legal frameworks  reinforcing it, corporate adoption strategies, and the practical barriers to implementation.  Special attention was given to the expanding role of legal professionals in shaping this shift  through policy, advisory, and enforcement work.

The growing involvement of regulators, evolving investor expectations, and the movement  toward measurable disclosures all indicate that ESG is now central to how businesses are  expected to operate.

ESG in India is no longer optional. It’s the path toward a responsible and ethical  business ecosystem that benefits companies, society, and the planet. Legal  professionals are uniquely positioned to ensure that ESG goes beyond intention—toward  genuine, enforceable, and impactful governance.

Reference(S):

[1] The Hindu, ‘Why ESG norms are reshaping Indian markets’ (22 April 2023)  https://www.thehindu.com/business/why-esg-norms-are-reshaping-indian markets/article66762367.ece accessed 6 June 2025.

[2] Ayushi Jain, ‘India Inc is warming up to ESG disclosures’ LiveMint (28 March  2022) https://www.livemint.com/news/india-india-inc-warming-up-to-esg disclosures-11646486212956.html accessed 6 June 2025.

[3] Securities and Exchange Board of India, ‘Business Responsibility and  Sustainability Reporting by Listed Entities’ (10 May 2021)  https://www.sebi.gov.in/legal/circulars/may-2021/business-responsibility-and sustainability-reporting-by-listed-entities_50096.html accessed 6 June 2025.

[4] Companies Act 2013, s 135  https://www.mca.gov.in/Ministry/pdf/CompaniesAct2013.pdf accessed 6 June  2025.

[5] Ministry of Corporate Affairs, ‘National Guidelines on Responsible Business  Conduct’ (March 2019)  https://www.mca.gov.in/Ministry/pdf/NationalGuidelines_15032019.pdf accessed 6 June 2025.

[6] Infosys, ‘ESG Report 2022–2023’ (Infosys Ltd, March 2023)  https://www.infosys.com/investors/reports-filings/annual-report/2022-23/esg report.html accessed 6 June 2025.

[7] Tata Motors, ‘Sustainability Report 2021–22’ (Tata Group, June  2022) https://www.tatamotors.com/wp-content/uploads/2022/06/tml sustainability-report-2022.pdf accessed 6 June 2025.

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