Bridging The ESG Enforcement Gap: A Legal Analysis Of India’s BRSR Framework
- IJLLR Journal
- 6 hours ago
- 10 min read
By Diksha Sharma, Gitarattan International Business School
INTRODUCTION
Several major global brands have been exposed for making misleading claims about their environmental practices in recent years. One good example is the fast-fashion brand, H&M. As reported by Quartz, H&M—one of the world’s largest clothing retailers was found to be displaying deceptive "environmental scorecards" on its products, implying that certain clothing items were eco-friendly when, in fact, they were not. Following the exposé, the company quietly removed these labels from its website, facing considerable backlash over its “Conscious Collection.”[1]
This incident raises a critical legal question: How do we hold companies accountable for the ESG claims they make? In the Indian context, the Securities and Exchange Board of India (SEBI) has taken a significant step by introducing the Business Responsibility and Sustainability Report (BRSR) framework. From the financial year 2022–23 onwards, the top 1000 listed companies are required to file BRSR disclosures.[2] The primary objective of this reporting mandate is to encourage companies to integrate environmental and social considerations into their core operations, promoting transparency and ethical governance.
However, the rollout of this framework gives rise to key legal challenges:
- Is SEBI’s ESG mandate legally enforceable in its current form?
- Does the Indian framework have adequate checks to prevent greenwashing?
- How does India’s ESG regulation compare with global standards?
This article explores these questions by tracing the development of ESG regulation in India, critically assessing the legal force of the BRSR framework, and examining its implications for corporate accountability.
Birth of CSR in India
India was one of the first countries to legally mandate Corporate Social Responsibility (CSR); hence, the concept was well established in India.
The Companies Act 2013 is the legal instrument that makes CSR an obligatory provision for companies under section 135. This provision requires the qualifying companies to spend at least 2 percent of their average net profit on socially beneficial projects.[3] It primarily emphasized charitable spending rather than integrating social or environmental concerns into the core business strategy.
Any shift in the regulatory framework naturally invites scrutiny, and CSR was no exception.
1) Some people believe that corporate social responsibility is simply a way for companies to do greenwashing. Businesses use it as a superficial veneer to improve their public image without making any subsequent changes. To assuage critics, business organisations must be transparent and authentic regarding their CSR initiatives.
2) It is also contended that CSR was not enough alone to address structural flaws in our society, such as income inequality, climate change, or human rights violations.
The aforementioned points raised the question about the effectiveness of CSR, and in response to these criticisms, the ESG framework emerged as a more accountable and comprehensive approach to sustainable corporate governance. Unlike CSR, which primarily focuses on social welfare, ESG integrates environmental, social, and governance concerns directly into business strategy. It moves beyond writing cheques to NGO’s, instead requiring them to think critically about how their operation would affect the environment, how they treat their workforce, and whether their internal governance practices are transparent and ethical.
The introduction of SEBI’s Business Responsibility and Sustainability Reporting (BRSR) is a reflection of this shift, which attempts to bring more consistency and accountability to what companies disclose and are seriously initiating in sustainable growth. While it's still a work in progress, the BRSR offers a promising legal tool to ensure that ESG is not merely aspirational, but increasingly institutionalised.
Can ESG Be Legally Enforced in India? A Look at the BRSR Requirement
The introduction of SEBI’s Business Responsibility and Sustainability Reporting (BRSR) framework marked a significant step toward formalising ESG disclosures in India. However, one of the most debated aspects of this regulatory shift is whether the current ESG framework is enforceable in any meaningful legal sense.
At its core, BRSR is designed to improve transparency. From FY 2022–23, the top 1000 listed companies are required to disclose detailed information across environmental, social, and governance indicators.
While it looks good in theory, a closer look reveals that there are no legal consequences for poor ESG performance, which creates an awkward gap in the framework's enforceability.
Therefore, a company could admit to very harmful practices in its reports, but as long as it discloses them, it still follows SEBI's rules. SEBI’s enforcement powers are mainly focused on investor protection and market conduct under the SEBI Act, 1992, and related laws.
Another challenge that lies in the potential is greenwashing. The whole point of ESG is lost if companies merely pretend to be responsible without actually doing much. At present, BRSR reports are largely self-declared, and although some disclosures may be subject to third-party assurance, this is not mandatory. Without a proper audit mechanism or verification framework in place, misleading or selective disclosures could easily slip through the cracks.
A good example of this issue comes from the case of Reckitt Benckiser v. Hindustan Unilever (2013)[4]. Hindustan Unilever was taken to court for supposedly making false claims about their environmental practices in ads. While the case was mainly about competition between brands, it showed how companies might use eco-friendly messages more as a marketing tool rather than for genuine change, which is a classic case of greenwashing. This points out the need for better scrutiny of ESG disclosures in India.
When we compare this to international trends, the difference becomes more pronounced. For example, the European Union’s Corporate Sustainability Reporting Directive (CSRD) makes third-party audits and assurance a key requirement. In the United States, the Securities and Exchange Commission (SEC) is moving toward climate-related disclosures that will impose liability for false or misleading ESG statements. These systems aim to go beyond box-ticking; they treat ESG failures as legal risks, not only reputational ones.
India, while certainly moving in the right direction, still lacks that regulatory sharpness.
Indian courts, however, haven't hesitated to hold business organizations accountable for environmental damage, even in the absence of ESG laws. In a key case, M.C. Mehta v. Union of India[5]The Supreme Court made it clear that industries causing pollution in the Ganga River are responsible for their actions. They reinforced the ideas that the polluter should pay and that precautions should be taken to protect the environment. Although this wasn't discussed using ESG terms, it shows that Indian law already backs strong environmental protections that could complement future ESG regulations.
The BRSR is a good beginning, but if ESG is to be more than a reporting exercise, there is a need for stronger oversight, clear liability for misleading disclosures, Also, it's really important for SEBI to work together with other governing bodies, like the Ministry of Environment and the Ministry of Corporate Affairs.
How India’s ESG Mandate Compares: A Global Snapshot
While India’s Business Responsibility and Sustainability Reporting (BRSR) framework is a step in the right direction, a broader look at global trends suggests that many jurisdictions have already moved well beyond the stage of voluntary or disclosure-based frameworks. A comparison with a few leading global models helps put India’s approach in perspective.
European Union: From Disclosure to Due Diligence
The European Union has taken a much more robust and proactive stance on ESG. [6]The Corporate Sustainability Reporting Directive (CSRD), which builds on the older Non-Financial Reporting Directive, requires companies to publish detailed reports on their environmental and social impacts.[7] Importantly, these reports must be audited by independent third parties, which adds an extra layer of accountability.
The EU is also in the process of adopting the Corporate Sustainability Due Diligence Directive (CSDDD). This will impose a legal obligation on large companies to identify and mitigate human rights and environmental risks in their supply chains. Essentially, companies may be held liable for harms linked to their operations, even when caused by external partners. This is a significant departure from India’s approach, where ESG disclosures are mostly confined to the company’s performance and not legally enforced.
United States: ESG as a Matter of Financial Risk
In the U.S., the Securities and Exchange Commission (SEC) has begun treating ESG as a component of investor protection. Proposed rules require listed companies to disclose climate-related risks, including data on emissions and the financial implications of climate change. What sets the U.S. approach apart is that inaccurate or misleading ESG disclosures could trigger securities fraud investigations — something that Indian regulators are not yet empowered to pursue in the ESG context.
The American perspective is grounded in the idea that ESG is not only about values, but about material risk to shareholders. This creates a direct legal incentive for companies to be honest and detailed in their disclosures.
Singapore: Principle-Based and Board-Focused
Singapore has adopted a more gradual model, but with a strong emphasis on board oversight. Companies listed on the Singapore Stock Exchange are required to provide ESG reports, and the government is pushing for alignment with international frameworks like the TCFD (Task Force on Climate-related Financial Disclosures).
What’s notable about Singapore’s model is the emphasis on corporate governance — boards are expected to understand and manage sustainability risks. This type of direct responsibility at the board level is still lacking in India’s ESG structure.
Where India Stands
Compared to the EU, the U.S., and Singapore, India’s BRSR framework is still very much in a development phase. While it mandates disclosure, it does not yet impose penalties for poor ESG performance, nor does it require external verification or board-level accountability.
That said, BRSR does lay important groundwork. With time, India could move toward stronger reforms, such as:
Requiring third-party audits for ESG reports,
Making misleading ESG claims subject to legal liability, and
Integrating ESG oversight into directors’ statutory duties.
As ESG evolves from a voluntary commitment to a legal standard worldwide, India will need to decide whether its framework is merely a reporting tool or a serious regulatory mechanism to drive long-term sustainable corporate behavior.
Directors and ESG: Shifting Duties in a Changing Landscape
With ESG becoming a larger part of corporate strategy and public conversation, an important question arises: How responsible are company directors for ensuring real progress, not simply reporting numbers? In India, this isn’t entirely clear yet, but legal and business circles are beginning to take notice.
1. What Directors Are Expected to Do on Paper
According to Section 166 of the Companies Act, 2013, directors are supposed to act in the best interest of the company, its employees, shareholders, and even the community. But what does that mean today? If a company’s poor environmental practices harm its reputation or finances, can it be said that directors have failed in their duties?
Although there’s no explicit mention of ESG duties in Indian law, the argument can be made that ignoring material ESG risks might count as a failure of duty. Other countries are beginning to move in that direction, too.
A good example of director responsibility comes from Australia in the case of Shafron v ASIC. Mr. Shafron was the General Counsel and Company Secretary at James Hardie Industries. He was held liable for not properly advising the board about misleading information regarding the company’s asbestos issues. The High Court of Australia decided that, because of his high-ranking position and legal background, he was obliged to ensure that the board and the public received accurate information.[8] This case shows that senior leaders and directors can face consequences if they don’t act responsibly, especially when it comes to maintaining trust and following the law.
In the domain of ESG, the message is clear: if companies give misleading info about sustainability or don’t adequately assess ESG risks, they could face similar legal issues in India as rules and awareness grow.
For example, in places like Australia and the UK, there have been increasing discussions about whether climate-related risks should be treated as part of directors’ fiduciary responsibilities.
2. What Happens in Practice
Globally, many companies have started involving their boards more directly in ESG matters. Some have even created ESG committees or added ESG responsibilities to audit or risk committees. However, in India, this level of involvement remains rare.
While SEBI’s BRSR framework does ask companies to disclose how their boards engage with ESG issues, most companies don’t go beyond broad, generic statements. Real oversight continues to be lacking in many cases. If ESG is to be taken seriously, boardrooms can’t treat it as a side topic—they need to start tracking ESG performance, asking questions, and ensuring their public claims are accurate and well-founded.
3. What Needs to Change
Since ESG risks become more linked to financial outcomes, the need for a stronger governance framework grows. One option is for Indian regulators to formally introduce ESG responsibilities into directors’ duties or corporate governance codes. Other steps could include requiring:
- Directors to undergo ESG training;
- Companies to include ESG performance in board evaluations;
- Making ESG discussions a standard part of board meetings and annual reports.
Implementing these changes would not only enhance transparency but also help protect companies from future backlash, whether from investors, regulators, or the public.
Conclusion
ESG is quickly becoming a big part of how companies operate today, but it also brings up important questions about responsibility. India has made some progress, especially with SEBI’s BRSR framework, but right now, the focus is more on reporting than on real enforcement. Plus, since there aren’t clear legal requirements for directors to oversee ESG issues, it creates a gap between what companies say they’re doing and what they really commit to.
If ESG is going to mean more than just a good PR, it needs to be supported by stronger governance and clearer laws. Indian companies and regulators can set a good example by matching sustainability goals with legal responsibilities and better governance practices. This means not merely improving data and reports but changing how companies run, how boards operate, and how decisions are made.
As climate issues, social inequalities, and corporate accountability get more attention worldwide, the future of ESG in India depends on whether businesses choose to comply or make real changes.
Endnotes:
[1] Shendruk, A. (2022) Quartz investigation: H&M showed bogus environmental scores for its clothing, Quartz. Available at: https://qz.com/2180075/hm-showed-bogus-environmental-higg-index-scores-for-its-clothing (Accessed: 21 May 2025).
[2] First notes - mandatory BRSR reporting for top 1000 listed ... (2021) KPMG. Available at: https://assets.kpmg.com/content/dam/kpmg/in/pdf/2021/06/firstnotes-sebi-business-responsibility-sustainability-reporting-listed-companies.pdf (Accessed: 21 May 2025).
[3] Section 135(5) (no date) India Code Section. Available at: https://www.indiacode.nic.in/show-data?actid=AC_CEN_22_29_00008_201318_1517807327856&orderno=139§ionId=1326§ionno=135 (Accessed: 21 May 2025).
[4] Reckitt Benkciser (India) Ltd. vs Hindustan Unilever Ltd. (2013).
[5] MC Mehta vs Union Of India (no date).
[6] ESG regulations between the EU and the US (2024) Datafisher. Available at: https://datafisher.com/news/esg-regulations-between-the-eu-and-the-us/ (Accessed: 21 May 2025).
[7] fenny, claire (2025) Corporate sustainability reporting directive (Csrd) 101, Corporate Sustainability Reporting Directive (CSRD) 101. Available at: https://auditboard.com/blog/csrd (Accessed: 21 May 2025).
[8] Peter James Shafron v Australian Securities and Investments Commission (2012).
