The principles of Environmental, Social, and Governance (“ESG”) have significantly transformed corporate governance, moving beyond financial profitability as the sole measure of success. Companies adhering to ESG standards often outperform traditional benchmarks, enjoy reduced capital costs due to transparent disclosures, and gain a 10–15% premium in mergers and acquisitions. As sustainability becomes a focal point for regulators and markets, the shift towards comprehensive disclosure is evident.
India’s ESG Regulatory Journey
India’s progression towards mandatory ESG reporting has been gradual yet resolute. Initially, regulations emphasized pollution control, culminating in the Environment Protection Act of 1986. Post-liberalization, corporate responsibility gained prominence, introducing the Environment Impact Assessment in 1994, later overhauled in 2006. The Companies Act of 2013 incorporated Corporate Social Responsibility (“CSR”), mandating directors to prioritize community and environmental protection. The Supreme Court linked this evolution to a broader corporate accountability framework.
The regulatory landscape now encourages market-driven rewards for ESG-conscious companies. Green finance has intertwined company valuations and profitability with ESG goals, demonstrated by green bonds and the Carbon Credit Trading Scheme.
ESG’s Evolution from Compliance to Differentiator
The Ministry of Corporate Affairs (MCA) introduced the National Voluntary Guidelines on Social, Environmental & Economic Responsibilities of Business (“NVGs”) in 2011. In 2012, the Securities and Exchange Board of India (SEBI) mandated Business Responsibility Reporting (“BRR”) for the top 100 listed entities, later expanding to the top 500 by 2015. The NVGs evolved into the National Guidelines on Responsible Business Conduct (“NGRBC”) in 2018, aligning with the Sustainable Development Goals (“SDGs”). A 2020 review highlighted inconsistencies in BRR disclosures, prompting the adoption of Business Responsibility and Sustainability Reporting (“BRSR”)—a more precise and internationally compatible framework.
The Introduction of BRSR Core
In 2023, SEBI launched ‘BRSR Core,’ comprising 49 Key Performance Indicators (KPIs) across nine ESG attributes, requiring mandatory assurance. The KPIs cover Greenhouse Gas Footprint, Water Footprint, Energy Footprint, Biodiversity, Supply Chain Disclosures, Gender and Diversity, Equal Opportunity Employment, Business Ethics, and Business Openness. By 2024, these were aligned with Industry Standards Forum’s guidelines, with detailed guidance issued in 2025.
Disclosure Milestones
- FY 2022–23: BRSR becomes mandatory for the top 1,000 listed entities, replacing BRR.
- FY 2025–26: Voluntary value chain disclosures for the top 250 entities, with BRSR mandates for the top 1,000 entities.
- FY 2026–27: Mandatory assurance for BRSR Core KPIs across the top 1,000 entities.
Objectives of BRSR
The BRSR framework shifts the focus from compliance to performance, using quantifiable metrics aligned with IFRS Sustainability Disclosure Standards and GRI Reporting Standards. This facilitates green finance and mitigates greenwashing risks. India’s requirements surpass those of several global counterparts, with more robust disclosures than the US or Japan. However, the European Union’s Corporate Sustainability Reporting Directive offers a more detailed narrative context.
Framework and Principles of BRSR
The BRSR framework is part of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”), complemented by the SEBI Master Circular and National Stock Exchange of India’s guidelines. The framework encompasses nine principles originally set in the NGRBC, covering aspects from ethical governance to consumer value.
Principles of Disclosure
- Principle 1 (Ethical Governance): Focuses on anti-corruption, conflict of interest, and ethics training.
- Principle 2 (Sustainable Product Lifecycle): Requires disclosures on research & development and sustainable sourcing.
- Principle 3 (Employee Well-being): Covers health benefits, remuneration, and gender diversity.
- Principle 4 (Stakeholder Engagement): Involves stakeholder identification and engagement.
- Principle 5 (Human Rights): Requires training coverage and grievance redressal mechanisms.
- Principle 6 (Environmental Stewardship): Demands detailed reporting on energy, water, and waste management.
- Principle 7 (Public Policy Advocacy): Reviews trade association memberships and policy positions.
- Principle 8 (Inclusive Growth): Assesses CSR impact and local development.
- Principle 9 (Consumer Value): Focuses on data privacy and product recalls.
Credibility and Challenges
SEBI has established a framework for ESG Rating Providers (“ERPs”) with the 2025 SEBI Master Circular, addressing registration and conflict management. ERPs must provide ‘Core ESG Ratings’ based on assured BRSR data.
Failure to comply with ESG disclosures may result in regulatory penalties under multiple sections of the Companies Act and SEBI regulations. Directors could face personal liability for unverified BRSR disclosures, and misleading claims might constitute ‘greenwashing,’ inviting further consequences.
Recommendations for Improvement
To bridge the gap between policy and practice, six recommendations are proposed:
- Introduce mandatory, time-bound ESG targets.
- Extend BRSR Core assurance requirements.
- Enhance accountability for non-permanent workers.
- Strengthen value chain and Scope 3 emissions disclosures.
- Integrate biodiversity and digital privacy disclosures.
- Revive and phase in ‘BRSR Lite’ for all listed companies.
As India aims for net-zero by 2070 and developed nation status by 2047, the integration of ESG as a core component of corporate strategy becomes crucial. ESG is increasingly recognized as the equivalent of an ECG for corporate health.
About the Authors: Harish Kumar is a Senior Partner and Deekhit Bhattacharya is an Associate with Luthra and Luthra Law Offices India.
Disclaimer: The views expressed are those of the authors and do not necessarily reflect those of Bar & Bench.
