ESG Compliance in India: Applicability, Checklist & Requirements

In recent years, the concept of ESG (Environmental, Social and Governance) has evolved from being a voluntary corporate initiative to a regulatory and the investor-driven necessity. Globally, businesses are expected to operate responsibly, minimizing environmental impact, prioritizing social welfare and ensuring ethical governance. India, too, has been aligning its corporate regulations with these principles, bringing ESG compliance into sharper focus.

This blog explains what ESG compliance means in the Indian context, its applicability to different entities, the major requirements and a practical checklist for businesses to ensure smooth compliance.

What is ESG Compliance?

ESG compliance refers to a company’s adherence to standards and regulations related to environmental protection, social responsibility and governance ethics. It measures how responsibly a company operates and how transparent it is in disclosing its sustainability performance.

In India, ESG disclosures are primarily guided by:

• Securities and Exchange Board of India (SEBI) - through the Business Responsibility and Sustainability Report (BRSR) and BRSR Core (Circular No. SEBI/HO/CFD/CMD-2/P/CIR/2021/562 dated May 10, 2021 and Circular No. SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122 dated July 12, 2023).

• Ministry of Corporate Affairs (MCA) - through the National Guidelines on Responsible Business Conduct (NGRBC).

In short, ESG compliance ensures that businesses are accountable not just for profit, but also for the planet and people.

Applicability of ESG Compliance in India

1. Listed Companies – Mandatory BRSR

SEBI has made ESG reporting mandatory for the top 1,000 listed companies by market capitalization through the Business Responsibility and Sustainability Report (BRSR).

This replaced the older Business Responsibility Report (BRR), with the new framework demanding more details, data-based and measurable disclosures.

2. BRSR Core and Assurance Requirements

In July 2023, SEBI introduced the BRSR Core, focusing on key quantitative ESG performance indicators (KPIs) that require external assessment or assurance.

Phased implementation schedule:

• FY 2023–24 – Top 150 listed companies
• FY 2024–25 – Top 250 companies
• FY 2025–26 – Top 500 companies
• FY 2026–27 – Top 1,000 companies

These companies must get their BRSR Core data assessed or assured by an independent third party, as per SEBI’s guidelines.

3. CSR Applicability – Under the Companies Act, 2013

While BRSR focuses on ESG disclosures, the Corporate Social Responsibility (CSR) provisions under Section 135 of the Companies Act, 2013 add a mandatory “social” obligation.

A company must undertake CSR activities if it meets any of the following criteria during the preceding financial year:

• Net worth of ₹500 crore or more, or
• Turnover of ₹1,000 crore or more, or
• Net profit of ₹5 crore or more.

Such companies must:

• Constitute a CSR Committee and
• Spend at least 2% of the average net profits of the three immediately preceding financial years on activities listed in Schedule VII of the Act.

4. Voluntary ESG Adoption by Unlisted Companies

Many unlisted, private and multinational subsidiaries in India are also voluntarily adopting ESG reporting. This helps them meet global supply chain expectations, attract investors and enhance brand credibility.

Mandatory vs Voluntary ESG Compliance: At a Glance

Key Requirements Under ESG Compliance

1. Environmental Criteria

This aspect particularly focuses on how a company impacts the planet. It includes: - 

• Measurement of the carbon emissions (Scope 1 and 2).
• Energy efficiency and the renewable energy adoption.
• Water conservation and waste management.
• Biodiversity protection and pollution control measures.

2. Social Criteria

The “S” in ESG emphasizes human and social responsibility: -

• Employee welfare, diversity and inclusion policies.
• Health, safety and training initiatives.
• Human rights and various labour law compliance.
• Community development and CSR initiatives.
• Customer data privacy and product responsibility.

3. Governance Criteria

The “G” particularly focuses on ethical and transparent management:

• Board composition, independence and diversity
• Ethical conduct, transparency and anti-corruption policies
• Whistle-blower and grievance redressal mechanisms
• Disclosure of related-party transactions and various conflicts of interest

ESG Compliance Checklist for Indian Companies

A. Governance & Policy Setup

• Establish an ESG policy approved by the Board Form an ESG or Sustainability Committee Identify ESG risks and conduct a materiality assessment Define ESG goals, KPIs and reporting responsibilities

B. Environmental Management

• Track energy, fuel and water consumption data
• Measure and report carbon emissions (Scope 1 & 2)
• Manage waste disposal and recycling
• Adopt renewable energy sources
• Implement sustainable procurement

C. Social Responsibility

• Maintain fair labour practices and safe workplaces
• Ensure diversity and inclusion in hiring
• Conduct employee training programs
• Undertake CSR projects as per Schedule VII
• Ensure human rights compliance in supply chains

D. Governance Controls

• Maintain transparent accounting and disclosures
• Conduct regular Board reviews and policy updates
• Implement code of ethics and anti-corruption policy
• Create internal audit and assurance systems
• Ensure whistle-blower protection

E. Reporting and Disclosure

• Prepare and submit the BRSR/BRSR Core Report
• Align disclosures with GRI, TCFD or ISSB frameworks
• Publish ESG data in the annual report and on the website
• Obtain assessment or assurance from independent third parties

Benefits of ESG Compliance

1. Investor Confidence: Transparent ESG reporting attracts responsible investors.
2. Reputation Management: It builds stakeholder trust, confidence and brand image.
3. Operational Efficiency: Sustainable resource use lowers costs.
4. Regulatory Readiness: It ensures preparedness for evolving compliance norms.
5. Long-Term Value Creation: It enhances the business resilience and innovation.

Common Challenges in ESG Compliance

• Lack of standardized or accurate data
• Limited internal ESG expertise
• Inconsistent sustainability metrics
• Weak board-level accountability
• Treating ESG as a marketing exercise instead of strategy

Overcoming these requires capacity building, data automation and integration of ESG principles into business strategy

Steps to Build a Robust ESG Framework

1. Leadership Commitment: Board and top management must drive ESG goals.
2. Materiality Assessment: Identify relevant ESG issues for your sector.
3. Goal Setting: Define the measurable, time-bound sustainability targets.
4. Data Systems: Build mechanisms for the accurate and proper ESG data collection.
5. Reporting: Disclose ESG performance transparently and consistently.
6. Review & Assurance: Obtain third-party verification for credibility.

Conclusion

ESG compliance is not merely a regulatory formality, it is an opportunity for Indian businesses to build sustainable, ethical and future-ready operations.

With SEBI’s BRSR framework, CSR obligations and growing investor scrutiny, ESG has become an integral part of corporate governance in India. For any professional help related to ESG compliances, contact CRSPL Business Consultants.

For businesses, the major key is to start early, build robust systems and integrate ESG thinking into their core strategy. Companies that do so not only stay compliant but also unlock long-term growth, resilience and reputation benefits in an increasingly sustainability-driven world.

Note: Companies should refer to the latest SEBI and MCA circulars for updated reporting requirements applicable to their financial year.