Industries in India have undergone a profound shift over the past decades. Historically, businesses prioritized efficiency, production, and profits, often overlooking the environmental and social consequences of their operations. Environmental damage, poor labor conditions, and governance issues were either sidelined or considered secondary concerns. 

However, today’s world is different. Climate change, social inequality, and corporate misconduct have captured global attention. Governments, investors, consumers, and even employees now demand accountability and transparency. ESG, short for Environmental, Social, and Governance, has moved from being a nice-to-have add-on to a core component of business strategy and survival. No longer can industries afford to treat ESG as a mere regulatory checkbox. It is now deeply tied to a company’s resilience, brand strength, and long-term profitability.

ESG in India: A New Chapter with Evolving Regulations 

India’s regulatory landscape for ESG has significantly evolved. The Securities and Exchange Board of India (SEBI) has moved beyond the initial Business Responsibility and Sustainability Report (BRSR) framework to introduce more granular and comprehensive regulations. These updates are a clear signal that ESG is transitioning from a voluntary practice to a strategic imperative. 

Here are some of the key updates that you should be aware of: 

1. The Evolution of BRSR Core 

SEBI has continued to refine the BRSR framework, which mandates the top 1,000 listed entities to disclose their sustainability performance. Recent updates to the BRSR Core framework reflect a more mature regulatory approach: 

• Voluntary Value Chain Disclosures: The mandatory ESG disclosures for value chain partners have been deferred by one year and are now applicable from the financial year (FY) 2025–26. Furthermore, these disclosures will now be on a voluntary basis, rather than “comply-or-explain,” offering companies greater flexibility. 

• Green Credits and New Indicators: A new leadership indicator has been introduced under Principle 6 of the BRSR. Companies are now required to disclose green credits generated or procured by themselves and their top ten value chain partners. 

• “Assessment or Assurance”: The term “assurance” has been replaced with “assessment or assurance” for BRSR Core disclosures. This change aims to provide companies with more flexibility in their reporting process. 

2. Regulation of ESG Rating Providers (ERPs) 

Recognizing the growing importance of ESG ratings for investors, SEBI has implemented a comprehensive regulatory framework for ESG Rating Providers (ERPs). The new framework ensures transparency, accountability, and quality assurance in the ESG rating industry. 

• Master Circular for ERPs: SEBI has issued a Master Circular that consolidates all regulatory guidelines for ERPs, which are now required to register through SEBI’s Intermediary Portal. 

• Operational Guidelines: The framework includes detailed guidelines for rating operations, disclosures, and governance. It also specifies how ratings can be withdrawn and what information needs to be disclosed, especially for those with a “subscriber-pays” business model. 

3. New Framework for ESG Debt Securities 

SEBI has also introduced a framework for Environment, Social, and Governance (ESG) Debt Securities, which expands the scope beyond green bonds to include social bonds, sustainability bonds, and sustainability-linked bonds. 

• Preventing “Purpose-Washing”: The framework mandates strict disclosure, governance, and monitoring requirements to prevent “purpose-washing”—making false or misleading claims about the use of funds. 

• Third-Party Assurance: Issuers are required to appoint independent third-party reviewers or certifiers to verify compliance and the accuracy of their ESG claims. 

• Alignment with Global Standards: The new framework aligns with recognized international standards, such as the International Capital Market Association (ICMA) Principles, ensuring credibility and consistency.

Why ESG Compliance Matters in 2025 and Beyond 

The shift towards a more regulated and strategic ESG landscape in India is driven by several key factors that will define the business environment for years to come. Compliance is no longer just about avoiding penalties; it is about building a future-proof business. 

• Attracting Capital and Investors: A company’s commitment to ESG is increasingly a key consideration for global and domestic investors. Funds and asset managers are now integrating ESG criteria into their investment decisions, and a strong ESG profile can lead to a lower cost of capital and access to a wider pool of investors, including those focused on sustainable finance. The new SEBI regulations on ESG debt securities, for instance, are designed to attract more investment into sustainable projects. 

• Enhancing Corporate Reputation and Brand Value: In an age of heightened consumer awareness, a company’s ESG performance directly impacts its brand reputation. Customers, employees, and the public are more likely to support businesses that demonstrate a genuine commitment to environmental protection and social welfare. Conversely, a poor ESG track record can lead to reputational damage, consumer boycotts, and loss of trust. 

• Mitigating Risks: ESG factors represent tangible business risks that must be managed. Environmental risks include climate change, resource scarcity, and pollution, which can disrupt supply chains and increase operational costs. Social risks, such as labor disputes or human rights issues in the value chain, can lead to legal and financial liabilities. Governance risks, like a lack of transparency or ethical lapses, can result in regulatory fines and loss of investor confidence. Proactive ESG compliance helps companies identify and mitigate these risks before they escalate. 

• Building Resilience and Innovation: The process of becoming ESG-compliant often drives innovation. Companies that embed sustainability into their operations are more likely to develop new, efficient technologies, optimize resource use, and create innovative products and services that cater to the evolving market. This strategic approach enhances long-term resilience and creates a competitive advantage.

Global ESG Regulations and Their Impact on Businesses 

While India’s regulations are rapidly evolving, multinational corporations and domestic firms with global aspirations must also navigate a complex web of international ESG requirements. The global regulatory landscape is converging, making proactive alignment with international standards essential for market access, investor relations, and risk management. 

• EU Corporate Sustainability Reporting Directive (CSRD): The CSRD is a landmark EU regulation that significantly expands the scope of sustainability reporting. It requires a vast number of companies operating in the EU—including non-EU firms with substantial EU-based operations—to publish detailed, audited reports on their environmental and social impacts. The CSRD operates on a “double materiality” principle, meaning companies must report not only on how ESG issues affect their business (financial materiality) but also on how their business activities impact people and the planet (impact materiality). 

• International Sustainability Standards Board (ISSB): The ISSB, under the IFRS Foundation, has developed two foundational standards, IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures). These standards are designed to create a globally consistent and comparable baseline for sustainability reporting, focusing on information that is useful to investors. IFRS S2, for instance, requires companies to disclose their climate-related risks and opportunities, including their Scope 1, 2, and 3 greenhouse gas (GHG) emissions. 

• U.S. Securities and Exchange Commission (SEC) Climate Disclosure Rule: The SEC has adopted a rule requiring U.S.-listed companies to disclose climate-related risks and their potential impact on their business strategy, operations, and financial performance. This includes reporting on material GHG emissions and the use of scenario analysis. The rule aims to provide investors with consistent, comparable, and reliable climate-related information to inform their investment decisions. 

These global regulations demonstrate a clear shift toward mandatory, standardized, and financially material ESG disclosures. For companies, this means that a robust ESG strategy is no longer a localized effort but a global imperative. 

How to Design and Implement ESG Strategies to Future-Proof Your Business 

The steps you take to develop and implement your ESG strategy are not only about meeting local requirements but also about preparing for this global reality. By following the roadmap below, you will build a framework that is flexible, scalable, and aligned with international best practices. 

1. Conduct a Materiality Assessment: The foundational step of identifying the most significant ESG issues for your company and its stakeholders is crucial for both domestic and global compliance. A double materiality assessment, as required by the EU’s CSRD, helps you understand your impact on society and the environment, which is increasingly a global reporting expectation. 

2. Establish a Governance Framework: Global regulations, such as the ISSB standards, emphasize the importance of board oversight and management’s role in addressing climate-related risks. Creating a strong governance structure ensures that your ESG strategy is championed from the top and integrated across all departments, which is a core requirement for credible global reporting. 

3. Set Measurable Goals and a Strategic Roadmap: Setting clear, time-bound goals for your ESG strategy is vital for demonstrating progress to global stakeholders. Aligning these goals with international frameworks like the UN Sustainable Development Goals (SDGs) or the Science Based Targets initiative (SBTi) ensures that your efforts are recognized and credible on the world stage. 

4. Integrate ESG into Operations and Supply Chain: Global regulations increasingly focus on the entire value chain. The EU’s CSRD, for example, requires reporting on value chain impacts. By strengthening your sustainable sourcing and labor practices, you not only improve your domestic standing but also build the necessary data and processes to meet global due diligence requirements. 

5. Measure, Report, and Communicate Progress: Transparent and credible reporting is the cornerstone of global ESG alignment. By using recognized international reporting frameworks like the Global Reporting Initiative (GRI) or the ISSB standards, you can ensure that your disclosures are comparable, credible, and meet the high expectations of global investors and regulators. This proactive approach helps you stay ahead of the curve and avoid the reputational and financial risks associated with non-compliance.

Embrace ESG as a Strategic Imperative 

Embracing ESG principles is essential for organizations seeking to drive innovation, enhance operational efficiency, and build lasting stakeholder trust. Integrating ESG into core business strategies goes beyond mere compliance—it fosters resilience, unlocks new growth avenues, and secures sustainable profitability in an increasingly ethical and sustainability-driven global market. Achieving success requires more than policies; it demands strategic planning, continuous education, and a deep, ongoing commitment, supported by well-equipped teams trained to navigate the evolving ESG landscape effectively. 

Chola MS Risk Services leverages nearly 30 years of experience and global best practices to help organizations seamlessly integrate ESG strategies. Through expert consulting, environmental risk assessments, and specialized training, Chola MS empowers businesses to not only meet regulatory requirements but also achieve leadership in ESG performance.

Also Read – What is Environmental Impact Assessment? Meaning, Process, and Importance in India