ESG (environmental, social, and governance) norms are binding on companies at the operational and corporate levels. The idea is becoming a business necessity rather than just a trendy term.
ESG frameworks push businesses to maintain accountable governance structures, promote social responsibility, and control environmental hazards.
The government of India promotes the implementation of ESG standards through legislative, regulatory, and policy measures, despite the lack of a unified ESG law. These consist of labor and environmental rules, corporation legislation, and securities directives.
In order to decarbonize the economy, lessen reliance on imports of fossil fuels, and establish the nation as a pioneer in green hydrogen markets and technology, the administration is pushing its Green Hydrogen Mission. There are phases to the program’s implementation.
Phase I, which runs from 2022 to 2026, is all about using incentives to generate demand. Through pilot projects, it focuses on the heavy-duty mobility and steel production industries. Subject to feasibility and market demand, Phase II, which runs from 2026 to 2030, expands the usage of green hydrogen to all industries, including aviation and railroads.
Through the promotion of afforestation, water conservation, and sustainable development, the Green Credit Program for 2023 seeks to go beyond simple regulatory compliance. It provides tradeable credits to promote voluntary environmentalism.
Under the auspices of the Ministry of Environment, Forests, and Climate Change, they enable constructive environmental activity. They enable the monetization of sustainability initiatives and balance environmental duties because they are bought and sold on a digital platform.
Through buyer incentives and ecosystem support, the Ministry of Heavy Industries’ flagship program, the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles, or FAME, plan, promotes electric transportation. Its goal is to accelerate the shift to sustainable transportation while lowering vehicle emissions, fuel consumption, and urban pollution.
The top 1,000 listed firms are required by the Securities and Exchange Board of India (SEBI) to publish sustainability and corporate responsibility reports. By requiring comprehensive disclosures, third-party verification, and conformity with acknowledged international standards, SEBI reinforced the ESG framework starting in June 2025.
This lowers the possibility of greenwashing and boosts investor confidence. Listed firms are required by SEBI to provide ESG data on important upstream and downstream value-chain partners. This requires responsibility for ESG risks that are not related to the company’s own activities.
These commercially sensible actions are intended to reduce the possibility of supply chain interruption and get ready for increased regulatory scrutiny.
Businesses typically conduct ESG gap analyses prior to implementing ESG policies. After that, they create policies that will control risk, satisfy growing investor and regulatory demands, and improve long-term financial and reputational results. Teams that monitor policy implementation keep an eye on it. In addition to being good PR, the procedure adds value and increases the company’s appeal to investors.
In addition to the standard legal, tax, and financial inquiries, investors and acquirers now perform crucial ESG due diligence before investing money in an organization. Advisors can spot issues to prevent operational inefficiencies, penalties from the government, and payments in the event that a deal falls through.
Nowadays, ESG risk assessment is crucial for deal structuring. Contractual safeguards for recognized risks, such as conditions precedent, particular representations, and indemnity, may be negotiated by buyers and investors.
Companies from Europe and portions of the US, which have strong ESG frameworks in place, expect comparable norms in India and local businesses to adhere to them. Contracts will be drafted appropriately.
Adherence to ESG frameworks enhances value and trust in addition to being required by law. Organizations that view ESG as a strategic value generator rather than just compliance jargon exhibit more resilience, more stable stakeholder relationships, and improved chances for long-term growth.
Better ESG measures indicate that a company is less risky and worthy of further investment. They might profit from reduced borrowing costs and easier access to money.
