Rise of ESG in India: A New Era of Responsible Business
Corporate Social Responsibility (CSR) is nothing more than an organisational structure that self-regulates and enables a business to be socially accountable to its employees, stakeholders, and the general public but in today’s globalized world, businesses are no longer judged solely on their financial performance. Investors, regulators, and consumers are increasingly scrutinizing how companies manage their environmental, social, and governance (ESG) responsibilities. ESG has evolved from a niche concept into a core strategy for long-term value creation and sustainability.
Environmental, Social, and Governance (ESG) principles are no longer just buzzwords—they are rapidly becoming integral to how businesses operate, grow, and are evaluated globally. In India, the ESG framework is witnessing a significant rise, driven by investor demands, regulatory reforms, and growing awareness of sustainable development. With India poised to become the third-largest economy in the coming years, integrating ESG into the corporate strategy is not only desirable but essential.
What is ESG?
Environmental, Social, and Governance (ESG) is a framework used to evaluate how responsibly a company operates in three key areas:
- Environmental – Focuses on a company’s impact on the planet. This includes: Carbon footprint and greenhouse gas emissions, Energy efficiency and renewable energy use, Waste management and water conservation, Climate change adaptation strategies, deforestation, biodiversity, climate change and pollution mitigation.
- Social – Deals with a company’s relationships with stakeholders such as employees, customers, and the community. Key aspects include: Employee rights and working conditions, Diversity, equity, and inclusion (DEI), Community engagement and human rights, Health and safety standards for labour/workman, wages and benefits, workplace and board diversity, racial justice, pay equity, privacy and data protection, supply-chain management, and other human capital and social justice issues.
- Governance – Refers to internal systems of leadership, accountability, and corporate ethics. This includes: Board diversity and independence, Executive compensation policies, Anti-corruption measures, Shareholder rights and transparent reporting, strategic sustainability oversight and compliance, CEO compensation, political contributions and lobbying, erosion of bribery and corruption
ESG in the Indian Context : Regulatory Developments
India has taken substantial steps to institutionalize ESG:
- SEBI’s BRSR Mandate: In 2021, the Securities and Exchange Board of India (SEBI) made it mandatory for the top 1,000 listed companies by market capitalization to file Business Responsibility and Sustainability Reports (BRSR) from FY 2022-23.
- Companies Act, 2013: Sections on Corporate Social Responsibility (CSR), board composition, and transparency lay the foundation for ESG governance.
- Green Finance and Taxonomy: The RBI is working on a green taxonomy to standardize sustainable investments in India.
ESG VS. CSR in Indian Context
- The basic difference that exists between ESG and CSR is that CSR is mainly used by companies as a framework for general sustainability whereas ESG is used by the investors that is used to measure the sustainability of the company.
- ESG standards make a company’s activities measurable, whereas CSR seeks to hold it accountable.
- While ESG focuses on assessing the effects of those efforts, CSR is sometimes seen as more of a compliance procedure and brand building tool.
- CSR is a concept introduced by the Companies Act, 2013 to encourage or oblige (in the case of India) commercial enterprises to dedicate a portion of their revenues to a social cause in order to give something back to society. The breadth of ESG, on the other hand, is somewhat different. Because of the nature of ESG, no firm can claim compliance by just engaging in some altruistic activity. Rather, businesses must demonstrate that their overall policies and operations actively promote environmental, social, and corporate welfare considerations, which is in the best interests of all stakeholders.
- One major issue with the CSR regime is that there is no standard method for calculating a company’s CSR score. However, this measurability issue does not applicable to ESG. Several private and government indices have been developed since the introduction of ESG in India to inform investors about the ESG compliance of various listed companies.
The Future of ESG
- Technology Integration: AI, blockchain, and big data will enhance ESG reporting, traceability, and impact analysis.
- Global Frameworks: Adoption of universal ESG standards (e.g., ISSB, GRI, SASB) is expected to grow.
- Mandatory Disclosures: More countries will make ESG disclosures compulsory, particularly for listed companies and large corporations.
- ESG Ratings: These will play a pivotal role in shaping investor behavior, similar to credit ratings today.
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HARMONIZATION OF ESG AND CSR
Going through all the differences, it can be seen that the companies are now becoming more inclined towards the ESG regime, we cannot say that ESG will succeed CSR rather they can harmonize together.
This is true because the foundation of ESG is the stakeholder theory of corporate governance, which seeks to maximise value for all parties involved in a company. Contrary to this wide goal of helping many different organisations, CSR only helps one particular stakeholder, namely NGO or society, by requiring corporate resources to be donated to socially significant concerns. ESG policies produce benefits for all parties involved, not just society.
Additionally, the entities connected to the company and society at large immediately benefit from the profits made via ESG policies. However, CSR makes it possible to generate value for society as a whole by ensuring that a portion of the company’s revenues go directly to the community. There is also a policy component, which mandates that the Indian corporate sector maintain its CSR policies despite the country’s successful adoption of ESG.
Since ESG is still in its initial stage in India, the evolving regulatory framework needed for its successful implementation.
The ESG ratings provided by various organisations vary. CSR is sufficiently well-regulated to handle the connection between corporations and society.
As we can see, ESG is dependent on CSR. ESG is a broader aspect whereas CSR is only for the benefit of the society at large. ESG is also important as CSR only focuses on the society whereas there was also a need for an aspect to focus on the other entities related to the company.
The guiding ideas and tools that make social commitments actionable and immediately advantageous to one’s firm, particularly over the long term, may be found in CSR and ESG, though, when they are effectively applied. It is unquestionably a win-win situation when you take into account the financial advantages and the significant societal changes we can bring about with such activities. Multinational organisations transparently display the risks, opportunities, goals, and achievements in the economic, social, and environmental areas through a variety of channels, including sustainability reports, in recognition of the significant impact of ESG factors on a company’s financial performance. Businesses that consistently seek sustainability management based on their mid- to long-term sustainability management goals and work to satisfy all significant stakeholders are particularly wanting to become global enterprises. Businesses must annually assess the extent of employee human rights knowledge and behaviour and provide regular feedback on areas that require improvement. Businesses should reaffirm their commitment to the ESG, Corporate Social Responsibility (CSR), and Sustainability as important members of the community and responsible corporate citizens with the aim of constructing a sustainable future of reciprocal growth for all of their stakeholders.
The Road Ahead : Long to go
India’s ESG journey is still evolving, but the trajectory is clear. With growing stakeholder expectations and a regulatory nudge, Indian companies are being called to demonstrate accountability, sustainability, and purpose. ESG integration is no longer optional—it’s a strategic imperative for long-term competitiveness and resilience.Top of Form
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Conclusion
ESG is not just a compliance requirement—it’s a strategic necessity. Businesses that embrace ESG are not only safeguarding the environment and society but also ensuring long-term profitability and stakeholder trust. The shift from profit to purpose is underway, and ESG is the compass guiding that journey. India’s ESG revolution is at the crossroads of policy reform, market demand, and societal need. Businesses that embrace ESG today will be tomorrow’s leaders—respected by investors, loved by consumers, and resilient in the face of global challenges. As India aims to achieve its Net Zero goals and inclusive growth, ESG will play a critical role in shaping a sustainable and equitable future.