A regional comparison of ESG regulations: India

    By Radhika M Dudhat, Shardul Amarchand Mangaldas & Co
    Copy link

    Environmental, social and governance (ESG) is synonymous with responsible action. In India, the essence and recognition of ESG has been around for some time, but regulation was fragmented and spread across various legislation.

    With ESG-related reporting requirements, it has now come under a focused and unified regulatory framework. ESG has formally established a direct correlation in measuring the growth, profitability and value of an enterprise with its sustainability, ethics and responsibility quotient.

    While the full implications of regulating ESG performance are yet to be seen, its impact is palpable in the assessment of value and credibility of an enterprise.


    Radhika M Dudhat, Shardul Amarchand Mangaldas & Co
    Radhika M Dudhat
    Shardul Amarchand Mangaldas & Co
    Tel: + 91 98 2012 3166
    Email: radhika.dudhat@amsshardul.com

    The Securities and Exchange Board of India (SEBI) prescribed the Business Responsibility and Sustainability Report (BRSR) as the new reporting format in 2021, replacing the previous Business Responsibility Report (BRR) format.

    As per regulation 34(2)(f) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, compliance with the BRSR framework is mandatory for India’s top 1,000 listed companies (by market capitalisation). They must submit the requested information in the prescribed format according to guidelines that may be issued by the SEBI from time to time.

    The SEBI also recently introduced a novel ESG reporting framework called the Business Responsibility and Sustainability Reporting Core (BRSR Core), which brings out critical elements of the BRSR and sets out specific parameters for ESG reporting. The disclosures will, over time, create transparency and accountability, enabling the regulators, investors, lenders and stakeholders to have deeper insights about a company.

    Other listed entities, including those listing their specified securities on the exchange for small and medium-sized enterprises (SMEs), or SME exchanges, may voluntarily file the BRSR or voluntarily obtain the assurance of the BRSR Core for themselves or for their value chain, as the case may be.

    The BRSR is currently divided into three parts, including general disclosures (mandatory); management and process disclosures (mandatory); and principle-wise performance disclosures, which are further segregated into essential (mandatory) and leadership (voluntary) indicators.

    While the essential indicators are expected to be disclosed by every entity mandated to file the BRSR, the leadership indicators may be voluntarily disclosed by entities aspiring to progress to a higher level in their quest to becoming environmentally, socially and ethically responsible.

    Additionally, a few of the key disclosures sought in the BRSR include:

    • Overview of an entity’s material ESG risks and opportunities, approach to mitigate or adapt to such risks, along with the financial implications;
    • Sustainability related goals, targets and performance;
    • Environment-related disclosures covering various aspects including resource consumption usage (energy and water), air pollutant emissions, greenhouse gases emissions, waste generated and management practices, transitioning to a circular economy and biodiversity; and
    • Social disclosures covering the workforce, communities and consumers, such as gender and social diversity, including measures for differently abled employees, turnover rates, maternity and paternity benefits, welfare benefits to permanent and contractual employees or workers, health and safety training, among others. Disclosures on social impact assessments, rehabilitation and resettlement, corporate social responsibility, as well as disclosures on product labelling, product recall, and consumer complaints in respect of data privacy and cybersecurity.

    Listed companies already preparing and disclosing sustainability reports based on internationally accepted reporting frameworks (such as the Global Reporting Initiative, the Sustainability Accounting Standards Board, the Task Force on Climate-related Financial Disclosures or Integrated Reporting) may cross-reference disclosures made under such frameworks to disclosures sought under the BRSR reporting framework.

    The SEBI has constituted an ESG advisory committee to assist with strategic advice on ESG-related matters, and recently notified a separate chapter on ESG rating providers (ERPs) under the Securities and Exchange Board of India (Credit Rating Agencies) Regulations, 1999 (CRA regulations).

    Pursuant to the CRA regulations, the ERPs are now required to register with the SEBI. In the event there are existing rating providers providing ratings in the ESG space, they may continue to do so for a period of six months from the date of enforcement of the CRA regulations, or other period specified by the SEBI.

    For the granting of a certificate or registration with the SEBI, the ERPs are required to fulfil certain stringent criteria.

    The substantial list includes: being a company under the Companies Act, 2013; specifying ESG rating activity as the main object in the memorandum of association; not being a credit rating agency or any other intermediary registered with the SEBI; appointing a compliance officer and employing technical and competent professionals to the satisfaction of the SEBI; maintaining positive net worth as specified in CRA regulations; during the past three years from filing the registration application has not been refused a certificate, or been deemed not fit and proper by the SEBI, or subject to any enforcement action for contravention of the Securities and Exchange Board of India Act, 1992 rules or regulations; and granting a certificate would be in the interest of investors.

    Every ERP is required to keep and maintain all such documents or information as may be requested by the SEBI from time to time, for at least five years. These include but are not limited to books of accounts, records, agreements, correspondence with clients, ESG notes and ESG audit reports of its clients as specified under the CRA regulations.

    In addition, the ERPs are required to abide by the code of conduct set out under the seventh schedule of the CRA regulations, ensuring adequate levels of confidentiality and transparency, and preventing any conflict of interest while providing the ERP ratings.


    There is an increasing focus of investors on sustainability investing, which may be reflected in an increase in total assets and inflows in sustainable funds. ESG-themed funds are also rapidly gaining momentum in India, indicating an increasing focus on, and appetite for, sustainability investing.

    The Reserve Bank of India also released a report on 3 May 2023, titled Towards a Cleaner Greener India, with a focus on overall sustainable growth and reduction in carbon emissions. The report addresses the four critical aspects of climate change, namely, the unprecedented scale and pace of climate change, its macroeconomic impacts, and financial stability implications and strategies to mitigate climate risks.

    Investors are now moving towards impact investment options, and in response regulators are creating and implementing new innovative strategies including the proposed Green Credit Programme Implementation Rules and Green Mutual Funds.

    The government and regulators are using ESG to actively implement responsible action that focuses not only on creating wealth for stakeholders but also safeguarding the interests of non-stakeholders who are otherwise impacted by the unchecked gusto of growth at any cost. The responsibility of an entity towards the planet, people and profit is now a clear requirement in any entity’s growth story.


    Monitoring the impact of growth and accountability is clearly the diktat of the SEBI. As a result, the ESG framework aims to bring sustainability reporting on par with financial reporting.

    ESG is rapidly becoming an essential ingredient for value creation in an organisation. But it does require inherent will, effort and means to educate all interested stakeholders in creating the necessary understanding of the essentials of ESG, the applicable regulatory framework, its rating criteria and industry trends.

    The actual impact of ESG can be seen when implemented in spirit. It brings value to an organisation way beyond its financial statements. Understanding the nuances of ESG beyond the letter of the law and financials is key in gaining insights into the sustainability aspects of an organisation.

    Through the BRSR and the ESG rating standards, the SEBI has created urgency in corporate India to create structures and adopt practices in an organisation to fulfil necessary requirements under a sustainability regime. It’s time to take a step back and understand the criticality of the disclosures, internal standards, processes and risk management capabilities. The ability of an organisation to respond to unforeseen events, risks and disruptions depends on its adversity quotient. The ESG quotient of an organisation forms an intrinsic aspect of its adversity quotient.

    Hence, the ESG quotient is a key measure of responsible action of any organisation, and the Indian regulators are looking to amplify its importance not only by enforcing it, but also encouraging stakeholders to invest and lend to enterprises and projects with a strong ESG quotient.

    In time, we will witness the impact of ESG regime, but one can already see the wave of change in the DNA of corporate India, and its awareness.

    Shardul Amarchand Mangaldas & Co

    Express Towers, 23rd Floor

    Nariman Point, Mumbai

    Maharashtra – 400 021, India

    Executive Chairman:
    Shardul Shroff

    Managing Partners:
    Pallavi Shroff and Akshay Chudasama

    Contact details:
    Tel: +91 22 4933 5555
    Email: Connect@AMSShardul.com


    Copy link