ESG refers to a set of standards to measure a company’s environmental and social impact.
Key Observations on ESG
- Legal Backing: Companies Act, 2013 does not mention ESG explicitly, it is implied through aspects like Energy Conservation, POSH Act, Maternity Benefit, Corporate Social Responsibility (CSR) framework, etc.
- Existing Risks: Greenwashing, inconsistent implementation across sectors, and the difficulties faced by small businesses in adopting robust ESG practices.
Key Recommendations
- Dedicated ESG Oversight Body: Under Ministry of Corporate Affairs (MCA) for monitoring disclosures, ensuring compliance, and introducing penalties for greenwashing.
- Amendment to Companies Act, 2013: Providing a clear legal basis for integrating ESG into core business strategies.
- Formulating Sector-Specific Guidelines: Providing targeted support to Micro, Small, and Medium Enterprises (MSMEs).
- Independent ESG Committees: Similar to audit committees, to ensure effective implementation and monitoring of ESG strategies.
- Documentation: Dedicating an ESG chapter in Ministry’s Annual Report from FY 2025-26 onwards.
Other Similar Initiatives
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