Beyond Money-making

The latest buzzword is ESG. It stands for Environmental, Social, and Governance. ESG represents a paradigm shift in how businesses now define success. No longer is profitability the sole measure; rather, it’s ethics. Companies are now expected to demonstrate responsibility towards the environment, society, and governance. Modern consumers, especially Millennials and Gen Z, prefer brands that align with their values, ethical standards, and issues they care about.

ESG, if read and executed carefully, can be a game changer for our daily lives. In simple words, it is a corporate’s contribution and positioning on factors that influence our everyday lives. There are three pillars of ESG—Environmental: the environmental pillar measures a company’s impact on the planet; Social: the social pillar focuses on how a company treats people within and outside the organisation, its community contributions, and various other societal issues; Governance: this addresses the structure and processes that ensure corporate accountability, fairness, and transparency. It’s a framework used to evaluate how responsibly and sustainably an organisation operates.

The Securities and Exchange Board of India (SEBI) first introduced ESG-related reporting in 2012 through the Business Responsibility Report (BRR). Initially, this was mandatory for the top 100 listed companies. Over the next few years, SEBI progressively expanded the scope, covering more companies. In 2021, BRR was replaced by the Business Responsibility and Sustainability Report (BRSR), which became mandatory for the top 1,000 listed entities from FY 2022–23. This new framework has been more comprehensive and aligns with leading global ESG standards. Post-2021 developments have further strengthened India’s ESG regime.

Greenwashing—when companies exaggerate or misrepresent their ESG efforts for marketing purposes without substantial actions—and anti-greenwashing trends are now actively addressed as per regulations. In 2023, SEBI introduced BRSR Core, a smaller set of Key Performance Indicators subject to reasonable assurance by third-party auditors, to improve the credibility of ESG data and reduce greenwashing risks. The new SEBI ESG bond framework was introduced on June 5, 2025. These are some of the important developments over the last couple of years. ESG is, inter alia, regulated by SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

ESG is especially relevant in investment, corporate governance, and public policy. The areas include environmental and climate impact, and the natural world. It covers topics like carbon emissions, resource use, biodiversity, pollution management, labour practices, human rights, customers, communities, overall community impact, diversity, data ethics, board structure, transparency, compliance, shareholder rights, decision-making, and digital accountability. ESG disclosure has been formalised through SEBI functions as a multi-stakeholder framework that influences everything from risk management to brand reputation. In fact, not just companies, but even a nation’s reputation depends on how it deals with these issues, and corporates are a key part of a country’s economics.

It may also be mentioned that, in parallel, the Companies Act, 2013 mandates activities and policies of companies related to Corporate Social Responsibility (CSR). Apart from SEBI (LODR), India also has a robust Factories Act, 1948 framework governing workplace safety and welfare; BOCW for construction; Shops and Establishments Acts; statutes for mines and plantations; Environment Protection laws; Air and Water Acts; and many other promulgations.

A strong ESG performance can enhance resilience, improve financial returns, and build lasting trust with stakeholders, apart from attracting foreign investments. Institutional investors increasingly factor ESG performance into decision-making and investing. Governments worldwide are introducing ESG-related disclosure requirements. The European Union’s Corporate Sustainability Reporting Directive and the U.S. SEC’s proposed climate disclosure rules are prime examples.

Companies have not only strengthened their reputations but have also achieved strong financial performance, illustrating that ESG can be both ethical and profitable. Employees are now increasingly seeking purpose-driven workplaces. A strong ESG strategy can help companies attract and retain top talent. Studies indicate that companies with strong ESG credentials often outperform their peers financially over the long term.

The momentum behind ESG is likely to grow. Key trends shaping its future include mandatory ESG reporting, with more countries requiring companies to disclose ESG metrics.

World economics is now largely driven by ethics. In a world facing climate change, socio-economic inequalities, and governance issues, ESG offers a path toward sustainable and inclusive growth. Organisations that embrace ESG wholeheartedly will be best positioned in the global economy.

The writer is a practising Advocate in the Supreme Court and High Court of Delhi. Views expressed are personal