ESG Oversight in India | 11 Aug 2025

Source: TH 

Why in News?

A Parliamentary Standing Committee on Finance has recommended that the Ministry of Corporate Affairs (MCA) establish a dedicated ESG (Environmental, Social, and Governance) oversight body. The push comes amid rising concerns over greenwashing. 

What is ESG (Environmental, Social, and Governance)? 

• About: ESG refers to standards for assessing an organisation’s environmental and social impact. 
• Importance of ESG for India: 
  • Climate: India is prone to floods, heatwaves, and sea-level rise ( according to the Centre for Science and Environment (CSE), in 2024, India experienced extreme weather events on 322 out of 366 days).  
    • Companies with strong environmental practices, using clean energy and cutting emissions can reduce these risks. 
  • Social: India faces social challenges such as poverty, inequality, and lack of basic needs. 
    • Companies that prioritize social responsibility can drive positive societal change, creating a more inclusive economy. 
  • Governance: Strong corporate governance built on transparency and ethical conduct helps rebuild trust, draw investments, and support stable, sustainable economic growth. 
• Parliamentary Standing Committee Recommendations: The committee has recommended creating an ESG oversight body within the MCA to ensure companies make genuine sustainability claims. 
  • This body should have forensic experts to detect fraud, set sector-specific ESG guidelines, and help Micro, Small, and Medium Enterprises (MSMEs) adopt ESG practices. 
  • It proposes amending the Companies Act, 2013 to make ESG a core duty of directors, embedding sustainability into business strategy with stronger rules for accurate and meaningful ESG actions. 
    • It also calls for stricter, faster penalties for false ESG claims to deter greenwashing. 
  • Additionally, the panel has urged to develop strategies for addressing financial crimes early on and strengthen the Serious Fraud Investigation Office (SFIO) and the National Financial Reporting Authority (NFRA).  
    • It also emphasized improving the transparency and effectiveness of the Corporate Social Responsibility (CSR) oversight system. 
• India’s Initiative Related to ESG: The Securities and Exchange Board of India (SEBI) has mandated the top 1,000 listed companies to disclose their ESG performance through the Business Responsibility and Sustainability Reporting (BRSR) Framework. 
  • This framework aligns with global standards like the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB).  

What is Greenwashing? 

• About: Greenwashing refers to the deceptive practice where companies make false or exaggerated environmental claims about their products to create a misleading impression of being environmentally friendly.  
  • This tactic is used to attract consumers who prefer sustainable and eco-friendly products.  
  • It involves false advertising, vague labels, or confusing messaging regarding product recyclability, eco-friendly materials, and sustainability practices. 
• Factors Contribute to the Prevalence of Greenwashing: 
  • Rising Eco-Consumerism: Growing awareness about climate change and pollution, especially among younger Indians, has led to a surge in demand for sustainable products.  
    • To exploit this trend, some brands use vague terms like eco-friendly or natural without certification or real sustainable practices. 
  • Weak Regulatory Enforcement: Bureau of Indian Standards (BIS) Eco-Mark certification helps consumers identify eco-friendly products, though its adoption is not mandatory, and many products still lack this certification. 
    • Plastic Waste Management Rules aim to reduce plastic waste but don't fully tackle greenwashing related to plastic reduction claims. 
    • ESG-related requirements are spread across multiple laws and guidelines without a unified compliance framework.  
      • Absence of strict penalties for false ESG claims reduces deterrence against greenwashing. 
  • Cultural Exploitation:  Some companies in India exploit traditional systems like Ayurveda or organic farming to market their products as eco-friendly.  
    • They use labels like "natural" or "Ayurvedic" to appeal to consumers, even when their sourcing or production methods are unsustainable and environmentally harmful. 
  • CSR and Marketing: Companies often highlight token CSR activities like tree planting, while continuing environmentally harmful operations, especially in sectors like fossil fuels or heavy manufacturing. 
• India’s Initiatives Related to Greenwashing: 
  • Consumer Protection Act, 2019: Central Consumer Protection Authority (CCPA)  regulates misleading environmental claims. 
  • Green Rating Project: Under the Centre for Science and Environment (CSE), it rates industries on environmental performance. 
  • Advertising Standards Council of India Guidelines: Advertisements with green claims must be specific, accurate, and not misleading.