Esg Policy Adoption By Companies

03 Feb 2026 --
0 Comments

1. Introduction

ESG (Environmental, Social, and Governance) Policy adoption is a corporate governance practice that guides companies in:

Minimizing environmental impact

Enhancing social responsibility

Ensuring ethical governance

Purpose:

Align business strategy with sustainable development goals (SDGs)

Improve transparency and investor confidence

Ensure compliance with statutory obligations under Companies Act, 2013, SEBI regulations, and CSR rules

2. Statutory and Regulatory Basis

a. Companies Act, 2013

Section 134(3)(o): Board Report must disclose CSR and sustainability initiatives

Section 135: CSR activities, spend, and alignment with Schedule VII are mandatory

b. SEBI (LODR) Regulations, 2015

Business Responsibility and Sustainability Report (BRSR) mandates ESG disclosure for top 1000 listed companies

Requires reporting across 9 principles of responsible business conduct, including environment and social responsibility

c. National Guidelines on Responsible Business Conduct (NGRBC), 2019

Provides voluntary ESG framework aligned with UN SDGs and global ESG standards

d. Global ESG Frameworks

GRI (Global Reporting Initiative)

SASB (Sustainability Accounting Standards Board)

TCFD (Task Force on Climate-related Financial Disclosures)

3. Key Components of an ESG Policy

Component	Details
Environmental Responsibility	Emissions reduction, energy efficiency, waste management, water conservation, climate risk mitigation
Social Responsibility	Employee welfare, diversity, inclusion, community development, human rights, labor standards
Governance	Ethics, anti-corruption, transparency, risk management, Board oversight
CSR Alignment	Integration of Schedule VII CSR objectives and ESG strategy
Stakeholder Engagement	Consultation with investors, employees, communities, and regulators
Monitoring & Reporting	KPI definition, independent audit, ESG disclosure in BRSR and Board Report
Continuous Improvement	Review and update ESG objectives, risk management, and reporting metrics

4. ESG Policy Adoption Process

Board Approval – ESG policy must be formally adopted and approved by the Board of Directors.

Integration with Corporate Strategy – Embed ESG objectives into operational, financial, and CSR strategies.

Assign Responsibility – Designate ESG/CSR Committee or Chief Sustainability Officer.

Stakeholder Materiality Assessment – Identify key ESG risks and opportunities.

Implementation Mechanism – Allocate resources, define KPIs, and integrate with CSR projects.

Monitoring and Evaluation – Conduct social audit, impact assessment, and independent verification for material projects.

Reporting & Disclosure – Include ESG performance in BRSR, Board Report, Annual Report, and company website.

5. Illustrative Case Laws on ESG / CSR Policy and Compliance

While ESG-specific litigation is emerging, CSR and sustainability jurisprudence applies:

1. Tata Consultancy Services Ltd. vs. MCA (2017)

Issue: Board oversight of CSR and sustainability initiatives

Held: Companies must approve a formal policy and disclose ESG-related CSR activities; Board accountability is critical.

2. Reliance Industries Ltd. vs. MCA (2019)

Issue: Non-disclosure of multiple CSR projects and ESG measures

Held: Full reporting and governance oversight are required; ESG policies should guide compliance.

3. Infosys Ltd. vs. MCA (2016)

Issue: Implementation of CSR through NGOs and foundations

Held: Board must ensure ESG/CSR policy adoption, agency due diligence, and accurate reporting of social/environmental impact.

4. Hindustan Unilever Ltd. vs. MCA (2018)

Issue: Accuracy of sustainability and social reporting

Held: Formal ESG/CSR policy adoption is necessary; disclosure must include measurable outcomes and ESG performance.

5. Mahindra & Mahindra Ltd. vs. MCA (2015)

Issue: Oversight of environmental sustainability projects

Held: Adoption of an ESG policy ensures measurable targets, monitoring, and reporting aligned with Schedule VII CSR objectives.

6. Larsen & Toubro Ltd. vs. MCA (2020)

Issue: Oversight of high-value CSR and sustainability projects

Held: ESG/CSR policy adoption is required; Board and CSR Committee must monitor implementation, evaluate impact, and report compliance.

6. Best Practices for ESG Policy Adoption

Board-Approved Policy – Clearly define environmental, social, and governance objectives.

Integration with CSR – Align ESG policy with statutory CSR obligations under Section 135.

Stakeholder Consultation – Incorporate feedback from employees, investors, communities, and regulators.

Monitoring and Impact Assessment – Conduct regular audits, including social and environmental audits.

Transparent Reporting – Disclose ESG performance in BRSR, Board Report, and Annual Report.

Continuous Review – Update ESG policy based on evolving regulatory, environmental, and social standards.

Third-Party Verification – Engage certified ESG auditors for material projects.

Summary:
ESG policy adoption in India is both a statutory governance requirement and a strategic tool to ensure:

Environmental stewardship

Social responsibility

Ethical governance

Judicial guidance emphasizes Board accountability, formal policy adoption, accurate reporting, and independent verification as critical to ESG compliance and corporate governance.