In May 2018, Thoothukudi, a port city in Tamil Nadu, erupted in protests over pollution caused by the Sterlite Copper factory, a unit of mining giant Vedanta. The protests turned violent and 13 lives were lost to police bullets. The plant was shuttered by the courts, but the incident raised questions about how a London- and Mumbai-listed conglomerate, which had good environmental, social and governance (ESG) ratings and glossy sustainability reports failed so miserably on the ground.
It was not an isolated event, nor was it about just one irresponsible company. In June 2023, a toxic gas leak at a chemical plant in Gujarat hospitalized 24 people and triggered panic in Dahej, an industrial town. Deepak Nitrite, a Mumbai-listed firm, was flagged by residents and activists for air and water pollution. Despite a robust ESG policy on paper, a board-level sustainability committee and positive analyst coverage, its actual practices failed the reality check.
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Such incidents point to a widening gap between ESG proclamations and actual practices. India Inc’s ESG adoption has grown rapidly in visibility but seems to be out of sync with climate and social realities. India is the world’s fastest-growing major economy, with GDP likely to reach $5 trillion by 2027. But this expansion has climate consequences. India is the world’s third-largest carbon emitter, accounting for nearly 7% of global emissions in 2022.
Carbon emissions are likely to rise further, energy demand is expected to surge and environmental degradation will accelerate. Yet, many corporations continue to present green credentials on paper that do not hold up under scrutiny. Sustainability reports often highlight LED lighting, rooftop solar panels or plantations, but fail to disclose carbon-heavy supply chains, hazardous waste generation or groundwater extraction. ESG reports seem to have become a tool for optics rather than credible documents.
Regulatory environment: Policymakers are not blind to the situation. The ministry of corporate affairs issued national guidelines on responsible business conduct in 2019. The Securities and Exchange Board of India (Sebi) followed in 2021 with the Business Responsibility and Sustainability Report (BRSR) framework to boost transparency and comparability. It has been mandatory for the top 1,000 listed firms since 2022-23.
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The BRSR framework can only be called a baby step, since it is seen more as a tick-box compliance exercise than one driven by any climate urgency. Mandated firms approach ESG as a checklist, which typically means disclosing some (mostly) unverifiable data, releasing a document and moving on. The regulator’s initiative represents progress but lacks an enforcement mechanism. Corporations can file misleading data without any fear of penalty. Independent audits of ESG disclosures aren’t required, hurting the credibility of the reports and making greenwashing easy.
Sebi’s framework also ignores a vital part of India’s economic engine, which is driven by small and medium enterprises. They lack the resources or knowledge to track emissions, set targets or report ESG data, but form a critical part of supply chains. A leaky ESG framework thus largely disappoints foreign and domestic investors who are increasingly looking for climate-aligned and ethical portfolios. Over time, this would erode trust, undermine capital flows and hamstring competitiveness.
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Across the globe, governments and investors are tightening the screws on emissions. The EU’s Corporate Sustainability Reporting Directive will soon require even non-European companies to meet tough ESG disclosure norms. The US Securities and Exchange Commission is moving towards mandatory climate disclosures. If Indian companies don’t align with global expectations, they risk losing market access, funding and credibility.
Corrective fixes: A few corrective measures are needed to fix the scenario. The first step would be to mandate third-party verification. There is no reason why ESG disclosures should not be audited like financial statements. The BRSR framework should align with science-based climate targets and the market regulator should push firms to publish decarbonization roadmaps with interim milestones, not just distant ‘net-zero by 2070’ pledges.
The framework also suffers from the one-size-fits-all malaise. It needs to be tailored to specific industries, starting with high-emission and resource-intensive sectors. The government and industry groups could work together to craft easy-to-use ESG toolkits for small and medium enterprises and offer them support to track and report sustainability data.
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The climate crisis is no longer tomorrow’s problem. It’s disrupting weather patterns, harming agriculture, alternately roasting and flooding cities, and harming the poor and marginalized. If ESG remains merely performative, there is a clear and present danger of India’s economy growing in a way that is socially unstable, environmentally irreversible and globally uncompetitive.
It is not too soon for a hard climate reset for corporations. The country’s economic ambitions and environmental responsibilities are intertwined. We need to devise an ESG ecosystem that places truth over image, social and environmental impact over optics, and long-term survival over short-term compliance. ESG done wrong isn’t just a missed opportunity. It doesn’t make good business sense either.
The author is an independent expert based in New Delhi, Kolkata and Odisha. Twitter: @scurve Instagram: @soumya.scurve.
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