Sustainability Reporting in India:

From Regulatory Compliance to Value Creation

Protect. Transform. Sustain.

As ESG and sustainability
gain paramount
importance globally,
Indian enterprises are
increasingly recognizing
the imperative of
sustainability reporting
and its potential to drive
positive impact, enhance
transparency, and foster
value creation.
The roots of non-financial reporting can be
traced back to 1973 when the International
Financial Reporting Standards (IFRS)
introduced the concept in response to the
increasing demand for comprehensive
insights into external factors such as
the economy, environment, society, and
stakeholders’ interests.
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Since then, the landscape has evolved dramatically with current
market trends primarily fuelled by such factors as heightened
investor scrutiny, societal expectations, and a fast-emerging
and sometimes international regulatory landscape. Notably, this
trajectory has been significantly influenced by India’s growing
commitment to sustainable development driven by regulation,
including local 2070 net zero targets, domestic societal expectation,
and exporters’ need to align with their overseas clients’
requirements.
In this context, the role of sustainability reporting has amplified.
Indian enterprises are compelled to bolster their focus on
sustainability issues, intensify monitoring, and enhance reporting
efforts.
However, this push isn’t devoid of challenges. While the pressure
to report on sustainability increases, many companies struggle to
turn this compulsory, compliance-driven reporting requirement,
into authentic and meaningful disclosures - thereby foregoing the
opportunity to leverage these metrics for growth.
Navigating the Indian Regulatory Terrain
Sustainability reporting in India finds its foundation in a dynamic
regulatory landscape. As the country acknowledges its responsibility
in achieving global climate targets and fulfilling its commitment to
the Paris Agreement, the regulatory journey has gained momentum.
Entities like the Securities and Exchange Board of India (SEBI) have
made significant strides in mandating sustainability disclosures
by listed companies, recognizing that non-financial factors wield
substantial influence over a company’s long-term success.
The Companies Act of 2013 was a pioneering move, introducing
early ESG disclosure mandates. Section 134(m) of the Act
necessitates firms to include a Board of Directors report on energy
conservation alongside annual financial statements. Detailed
by Rule 8(3)(A) of the Companies (Accounts) Rules, 2014, this
requirement seeks extensive energy conservation information.
Furthermore, Regulation 34(3) of the SEBI (Listing Obligation
and Disclosure Requirements - LODR) Regulation, 2015, compels
companies to reveal opportunities, risks, threats, and concerns in
annual reports. Yet, these disclosures lack specifics on identifying
such prospects or risks and fail to require progress tracking.
In 2017, SEBI issued a circular on “Disclosure
Requirements for Issuance and Listing of
Green Debt Securities,” supplementing
the 2008 SEBI (Issue and Listing of Debt
Securities) Regulation. This aims to
establish green debt securities’ regulatory
framework, attracting funding for ESG-
aligned projects, spanning sustainable
energy, clean transportation, water and
waste management, climate adaptation,
and biodiversity conservation. The Indian
Banks’ Association (IBA) has also released
the National Voluntary Guidelines for
Responsible Financing, laying down broad
and general principles towards ‘integrating
ESG risk management into Financial
Institution’s (FIs) business strategy,
decision-making process and operations.
The Companies Act, 2013, underwent a
pivotal amendment in 2021, launching the
Business Responsibility and Sustainability
Reporting (BRSR) making it mandatory
for the top 1000 listed companies to
disclose their ESG performance under nine
specific pillars. This legislative impetus
underscores India’s ambition to align
with international reporting practices
while tailoring them to its unique context.
Prior to BRSR, the Ministry of Corporate
Affairs (MCA) had introduced the Business
Responsibility Reporting (BRR) guidelines
in 2009. Serving as a foundational step,
BRR provided the basis for expanding into
a more comprehensive ESG framework.
Over the course of a decade, this evolution
refined and expanded into BRSR, aligning
it with ESG disclosure mandates and
international standards that characterise
the contemporary landscape of sustainable
reporting.
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The BRSR framework was developed as a result of years
of evolution of the ESG landscape in India
SEBI mandates top
100 listed companies
to file BRR based
on NVGs
2009 2012 2014
MCA issues CSR mandated
National Voluntary and CSR rules come
Guidelines (NVGs) into force
on CSR
Evolving Regulatory Landscape in India
Companies operating in India must contend with the following requirements and developments
• BSRS
• Energy Conservation & Reporting
• Listing Obligation and Disclosure
Requirements – LODR Regulation, 2015
Disclosures
• Disclosure Requirements for Issuance and
Listing of Green Debt Securities
• National Voluntary Guidelines for
Responsible Financing.
India has also started considering
product labelling with environmental and
sustainability considerations. The Bureau of
Indian Standards (BIS) has been working on
Product developing standards for eco-labelling and
green products. These standards would help
labelling
consumers make informed choices based on
the environmental impact of products.
Products manufactured for the specific
intent of export will have to contend with
varying overseas regulations, the most
stringent usually in the European Union.
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BRR extended by SEBI introduces
SEBI to the top 500 BRSR in
listed companies May 2021
2015 2019 2021
BRR extended
by SEBI to the
top 1000 listed
companies
SEBI’s BRSR framework essentially requires
companies to provide non-financial
disclosure in their annual reports. These
Non-financial disclosures cover a wide range of non-
reporting financial aspects, including environmental
impact, social initiatives, employee welfare,
and governance practices. This reporting
helps investors and stakeholders understand
the holistic performance of a company
beyond financial metrics.
The concept of an ESG taxonomy has gained
attention globally, and India is also moving in
this direction. This could help investors and
Taxonomy stakeholders identify investments aligned
with sustainability goals.
The Reserve Bank of India (RBI) has shown
interest in integrating ESG factors into the
banking and financial sector to ensure a
more sustainable and responsible approach
Other
to lending and investment.
developments
The Dynamics of Sustainability
Reporting in India
In recent years, sustainability reporting in India has rapidly
evolved from a rudimentary disclosure of basic metrics to a
comprehensive picture of a company’s ESG (Environmental, Social,
and Governance) performance. Beyond the traditional financial
metrics, companies must now embrace Corporate Responsibility,
Sustainability & ESG Frameworks, and Integrated Reports to
communicate their commitment to addressing material ESG issues.
Typically, these frameworks establish key protocols and criteria
against which companies should disclose their performance. Such
disclosures may include:
• performance-based criteria like energy consumption, water or
carbon footprint, diversity in the workforce, attrition rate, etc.;
• strategic efforts taken towards being more sustainable, such as
resource efficiency and circular practices, employee welfare and
CSR efforts, development of essential non-financial KPI tracking
systems, etc. In particular, one defining trait of sustainability/
ESG frameworks developed over the last few decades is the
acknowledgement of the role decision-makers in companies
play in ensuring responsible and continued action towards
sustainability. This realisation is evident in many “Governance”
criteria, which focus on good traits such as transparent and
ethical behaviour, that all companies should instil across
their operations.
Indian companies may select to voluntary
reports based on additional ESG standards,
certifications, indices, or frameworks.
In addition to guiding the sustainability
journey internally, these internationally
recognised tools can act as a competitive
advantage for exporters, and increasingly
those companies which focus may seem
restricted to a local clientele, but which in
effect will most often be part of global value
chains with scope 3 considerations at play.
Businesses could consider well-established
frameworks like:
• GRI: The Global Reporting Initiative
(known as GRI) is an international
independent standards organization
that helps businesses, governments,
and other organizations understand and
communicate their impacts on issues
such as climate change, human rights,
and corruption.
• SASB: The Sustainability Accounting
Standards Board (SASB) is a nonprofit
organisation that helps businesses
and investors develop a common
language about the financial impacts
of sustainability. Available for 77
industries, the SASB Standards identify
the sustainability-related risks and
opportunities most likely to affect an
entity’s cash flows, access to finance
and cost of capital over the short,
medium or long term and the disclosure
topics and metrics that are most likely
to be useful to investors.
• TCFD: The Task Force on Climate-
related Financial Disclosures (TCFD)
was created by the Financial Stability
Board with the aim to improve and
increase reporting of climate-related
financial information.
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They could opt for recognised standards such as:
• ISO14001: ISO 14001 is an international standard for
Environmental Management Systems (EMS). It provides a
framework for organizations to identify potential environmental
impacts, implement measures to minimize them, and continually
improve their environmental performance. The standard
helps companies achieve sustainability goals, comply with
environmental regulations, and enhance their reputation.
• ISO26000: ISO 26000 is an international standard that offers
guidelines for organizations on how to operate in a socially
responsible manner, taking into consideration their impact on
society and the environment. The standard covers a wide range
of areas such as human rights, labor practices, fair operating
practices, consumer issues, community involvement, and the
environment.
• UN Global Compact (UNGC): The United Nations Global
Compact (UNGC) is a strategic initiative launched by the
United Nations to encourage businesses to adopt sustainable
and socially responsible practices. The compact consists of 10
principles in the areas of human rights, labour, environment,
and anti-corruption, to which companies can commit and work
towards implementing.
Certifications showcase commitment to specific ESG values –
for example:
• B-Corp: Developed by B-Lab, a nonprofit network, B Corp
certification is a rigorous, third-party verified standard for social
and environmental responsibility. It evaluates a company’s
impact on workers, customers, suppliers, community, and
environment.
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• CarbonNeutral: Carbon neutral
certification is a process that confirms
an organization’s or project’s net carbon
emissions are zero or below. It is achieved
by measuring emissions, implementing
emissions reduction measures, and
offsetting any remaining emissions
through purchasing carbon credits or
supporting carbon reduction projects.
ESG performance for investors is often
tracked through one of the following:
• FairTrade: Fair trade is a social
movement that aims to ensure that
producers in developing countries receive
fair prices for their products. It promotes
sustainable practices and fair working
conditions.
• Dow Jones Sustainability Index: DJSI
is a leading global sustainability index
that tracks the financial performance of
companies based on their sustainability
practices. The index is widely used by
investors, companies, and organizations
to measure sustainability performance
and make informed investment
decisions.
• FTSE4Good: FTSE4Good is a global
index series that tracks the performance
of companies that demonstrate strong
environmental, social, and governance
(ESG) practices. It is designed to provide
investors with a tool to invest in a
responsible and sustainable manner.
Selecting and applying the best
tool for your business, and then
leveraging the resulting metrics,
can be a powerful tool to drive
the progress of your ESG and
sustainability journey.
Charting the Course Ahead for
Corporate India
As corporate India continues its march towards comprehensive
sustainability reporting, businesses must remain attuned to the
evolving regulatory framework, understand their obligations, and
seize the range of opportunities it may present. The foundation of
effective sustainability reporting lies in the convergence of strategic
foresight, transparency, and tangible ESG outcomes.

Companies must not view reporting as a mere formality, but as

an instrument for enhancing their strategies, operations, and
stakeholder relationships. By developing and presenting compelling
narratives that connect their ESG performance with their journey
toward sustainable growth, Indian companies can use sustainability
reporting as a catalyst for broader positive impacts across society,
the environment, and the economy.

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Authors:

Ankit Kapasi,
Sustainability Lead
– India at dss+

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