ESG Standards And Corporate Governance In India: Between Enforceable Accountability And Superficial Signalling
- IJLLR Journal
- Apr 13
- 2 min read
Yagna Priya, LLM (Business Law), Amity Institute of Advanced Legal Studies, Amity University, Uttar Pradesh
I. INTRODUCTION
Corporate governance in India is undergoing a period of rapid change. For a considerable time, governance was primarily understood as a matter of legal compliance—a set of statutory duties imposed on boards and directors to ensure financial probity and protect shareholder interests. This traditional view is now being questioned and broadened by the emergence of Environmental, Social, and Governance (ESG) standards. This framework compels companies to be accountable not only for their financial performance but also for their environmental footprint, their societal conduct, and the robustness of their internal governance mechanisms.
The Securities and Exchange Board of India introduced the Business Responsibility and Sustainability Reporting (BRSR) framework, making it compulsory for the top 1,000 listed companies starting from the financial year 2022–23. This represents the most significant regulatory step towards integrating ESG principles into mainstream Indian corporate law. The BRSR requires detailed, quantitative disclosures across nine principles, covering areas from ethical business conduct and human rights to environmental protection and stakeholder engagement. In 2023, SEBI expanded this by introducing the BRSR Core, a set of key performance indicators considered high priority that require independent assurance.
Yet a critical question remains: does this expanding system of ESG disclosure genuinely lead to improved corporate governance, reducing misuse in related-party transactions, strengthening the independence of audit committees, and preventing fraud? Or does it primarily create a new form of detailed regulatory paperwork, allowing companies to signal responsibility without substantive change?
Three specific legal and practical tensions drive this inquiry. First, Section 166 of the Companies Act, 2013, outlines directors' fiduciary duties. While this section mentions the interests of employees, the community, and the environment, it does not explicitly require directors to identify, monitor, or manage material ESG risks. This creates a clear gap between the provision's intent and what can be enforced as a legal duty. Second, SEBI's BRSR framework mandates disclosure but does not, in its current form, link failures in disclosure to clear accountability for directors. Third, the structure of Indian corporate ownership, characterised by high promoter concentration and boards often controlled by families, creates conditions where ESG reporting can become more about managing reputation than about genuine governance reform.
