Abstract
ESG reporting is becoming even more important as a part of corporate governance across the globe. Corporations are under increasing pressure from investors, regulators, consumers and stakeholders to be more transparent about how they manage environmental impacts, social responsibilities and governance processes. In India, ESG reporting has been removed from a voluntary disclosure framework to a mandatory compliance regime for certain classes of listed corporates. The SEBI adoption of the Business Responsibility and Sustainability Report (BRSR) is an important step forward in improving corporate accountability and sustainable business practices. This article looks at the legal ecosystem of ESG Reporting in India, SEBI’s role, BRSR framework, major challenges and future outlook for ESG compliance in the Indian corporate sector.
Introduction: India’s biggest companies are no longer in the age of voluntary environmental promises. Over the last few years, India has developed one of the most ambitious required environmental, Social, Governance (ESG reporting systems among rising countries, and it is still a work in progress. At its core is a regulatory framework led by the SEBI, the Ministry of Corporate Affairs (MCA), and the Reserve Bank of India that is adding layers of obligation and changing the way Indian companies disclose their impact on the world around them.
For firms, investors and governments, comprehending these norms is no longer optional. This article takes a look at the trajectory of ESG reporting in India, delves into the present mandated standards, outlines the compliance roadmap going forward, and discusses the ongoing problems to be faced by regulators and enterprise skills.
A brief History:-
ESG Reporting in India has evolved from voluntary corporate social responsibility guidelines into a strict, mandatory framework enforced by the SEBI. The cornerstone of this framework is the Business Responsibility and Sustainability Reports (BRSR). The moderate ESG regime operates primarily through SEBI and the Ministry of Corporate Affairs (MCA). The BRSR mandates the disclosure of comprehensive ESG data aligned with the nine principles of the National Guidelines on Responsible Business Conduct (NGRBC). The BSR mandates 1,000 listed companies by market capitalisation. The top listed must disclose ESG data for their upstream and downstream value chains. In the year 2009 (voluntary CSR), 2012 (BRR implementation), 2019 (NGRBC upgrade), 2021 (Introduction of BRSR), 2023 (Mandatory BRSR Rollout), 2024-2026 (value chain expansion)
Legal Framework Governing ESG Reporting
(a) Securities and Exchange Board of India
The legal framework governing Environmental, Social and Governance (ESG) reporting by the Securities and Exchange Board of India (SEBI) is primarily anchored in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, operationalised through the mandatory Business Responsibility and Sustainability Reporting (BRSR) framework.
The SEBI ESG reporting is highly structured, relying on key mechanisms to ensure standardisation and transparency.
Applicability: Mandatory BRSR reporting applies to the top 1,000 listed companies. The company must disclose this as part of its annual reports.
The BRSR Core Framework- To enhance data reliability, SEBI integrated the BRSR Core, such as the performance indicators covering areas such as greenhouse gas emissions, water footprints, and employee diversity.
The Value Chain Disclosure- The SEBI regulations mandate the listed companies to disclose ESG metrics not just for their direct operations, but also for their value chains.
(b) The Companies Act, 2013
The Companies Act mandates fundamental disclosures regarding environmental impact, stakeholder responsibility, and corporate governance, which act as the statutory basis for comprehensive corporate sustainability reporting.
In Companies Act Section 134(3)(m): The Board’s report must include specific disclosures regarding the conservation of energy, technology absorption, and alternative energy initiatives.
Under Section 166(2), it legally requires directors to act in the best interests of the company.
Section 135: Mandates companies meeting specified thresholds of net worth, turnover, or net profit must spend at least 2% of their average net profits on CSR activities.
Section 149: Requires specific classes of companies (all listed companies and large public companies) to appoint at least one female director.
Sections 177 and 178: Mandate the establishment of an Audit Committee (with a majority of independent directors) and a Nomination and Remuneration Committee.
(c) Business Responsibility and Sustainability Report (BRSR)
The BRSR is a mandatory ESG disclosure framework mandated by SEBI. It requires India’s top 1,000 listed companies (by market capitalisation) to transparently report their performance across quantitative and qualitative standards.
The BRSR is rooted in the Ministry of Corporate Affairs’ National Guidelines for Responsible Business Conduct (NGRBC), encompassing nine core principles:(a) Ethical conduct, (b) Safety & sustainability, (c) Employee well-being(d) Stakeholder interests (e) Human rights, (f) Environmental protection (g) Public policy (h) Inclusive growth (i) Customer value
Objectives of BRSR
(a) Enhance Transparency and Accountability
The BRSR moves beyond qualitative reporting to provide rigorous, standardised, and quantifiable metrics on a company’s sustainability performance.
(b) Standardise ESG Disclosures
The BRSR provides a common, comparable framework to help investors and stakeholders evaluate and benchmark companies across different sectors and time periods.
(c) Promote Responsible Business Conduct
The BRSR ensures businesses actively adhere to the nine core principles of the National Guidelines on Responsible Business Conduct (NGRBC), covering human rights, employee well-being, and environmental safety
Structure of BRSR
The BRSR framework consists of three categories of disclosures:
(1) General Disclosures (A)
General disclosures of BRSR capture foundational company data—such as size, location, and operations—establishing the reporting boundaries and providing the baseline profile required for evaluating a company’s ESG. It includes (a) a corporate profile, (b) Business activities, (c) Employee details, (d) Subsidiaries and associate companies. (e) Corporate governance structure
(2) Management and Process Disclosures
The BRSR is Section B of the SEBI framework. It evaluates a company’s policies, governance, and processes relating to the nine principles of NGRBC.
The companies are required to disclose: (a) Policies relating to sustainability, (b) Governance and mechanisms, (c) Risk management processes, (d) Stakeholder engagement practices
(3) Principle-Wise Performance Disclosures of BRSR
Principle-wise performance disclosures form the core of the Business Responsibility and Sustainability Report (BRSR). They require India’s top 1,000 listed companies to disclose quantitative KPIs and qualitative practices across the nine pillars of NGRBC.
It includes the Nine Principles of the NGRBC: Ethical and transparent governance, Sustainable products and services, Employee well-being, stakeholder responsiveness, Human rights protection, environmental sustainability, Responsible public policy advocacy, Inclusive growth and development, Customer value and responsibility
Environmental Reporting Requirements
The environmental component of ESG focuses on how businesses interact with natural resources and environmental systems. It requires companies to transparently disclose their ecological footprint and sustainability strategies.
The greenhouse gas emissions are the bedrock of environmental reporting, divided into three scopes:
Scope 1: Direct emissions (e.g., company vehicles, boilers).
Scope 2: Indirect emissions from the generation of purchased electricity, steam, or cooling.
Scope 3: All other indirect emissions occurring in the value chain (e.g., employee commuting, purchased goods, transportation).
The Energy Management: Which discloses total energy consumption, reliance on renewable energy, and energy efficiency targets.
Water & Wastewater: Tracking total water withdrawal, water consumption in water-stressed regions, and wastewater treatment and recycling.
Waste & Resource Management: Policies and data on hazardous waste generation, recycling rates, and circular economy efforts.
Social Reporting Requirements in ESG
Social Reporting in ESG requires companies to transparently disclose how their operations impact human rights, human capital, and local communities across their value chains. The disclosures are governed by global frameworks and regional mandates that demand measurable, auditable data on workforce diversity, fair labour practices, and supply chain ethics.
Benefits of Mandatory ESG Reporting
Mandatory ESG reporting transforms sustainability from a voluntary marketing exercise into standardised, actionable data. It yields five core benefits: Minimising regulatory exposure, lowering the cost of capital, increasing operational efficiency, and reducing greenwashing.
Standardising investor benchmarking
The ESG reporting enhances risk management and compliance, improves access to capital, operational efficiency and innovation, and builds trust and brand reputation.
Conclusion
The mandatory ESG reporting represents a transformative development in India’s corporate regulatory landscape. Through the implementation of the Business Responsibility and Sustainability Report (BRSR) framework, SEBI has established a robust mechanism for promoting transparency, accountability, and sustainable business conduct among listed companies.
Incorporating environmental, social, and governance issues in corporate reporting is part of a larger trend towards responsible capitalism and stakeholder governance. While there are still challenges around data quality, compliance costs, and standardisation, in the end, mandatory ESG reporting is not just a regulatory requirement but a strategic imperative for building resilient and responsible businesses in the twenty-first century.
Author: Priya Bharati
2nd Year BBA.LLB student