Introduction:
Environmental, Social, and Governance (ESG) factors have gained prominence worldwide as essential elements of corporate responsibility and sustainability. In India, the evolution of ESG disclosure requirements is closely tied to statutory provisions aimed at fostering corporate accountability and responsible business practices. This article explores the journey of ESG disclosures in India and the key statutory provisions and sections that have shaped this evolution.
The Genesis of ESG Disclosures in India:
In its early stages, ESG disclosures in India were primarily voluntary. Companies recognized the importance of addressing ESG factors, but there were no legal obligations to disclose their performance in these areas. Instead, industry-specific guidelines and best practices often guided ESG reporting.
Companies Act, 2013 - Section 135 (CSR Provisions):
A pivotal moment in the evolution of ESG disclosures in India was the enactment of Section 135 of the Companies Act, 2013. This section mandated that certain qualifying companies spend a specified portion of their profits on Corporate Social Responsibility (CSR) initiatives. The Companies Act, 2013, and its associated CSR provisions, have been instrumental in shaping the ESG landscape in India. The relevant statutory section is as follows:
- Section 135 of the Companies Act, 2013: This section outlines the requirements and obligations for CSR spending by qualifying companies.
SEBI's Active Role in ESG Disclosures:
The Securities and Exchange Board of India (SEBI) has played a proactive role in promoting ESG disclosures within the capital markets. In line with its commitment to enhance corporate governance, transparency, and accountability, SEBI has issued various circulars and guidelines for listed entities.
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015:
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, has been a significant milestone in the development of ESG disclosures. These regulations made it mandatory for listed companies to include business responsibility reports as part of their annual reports. Section 34 of these regulations is particularly relevant in this context, as it lays down the disclosure requirements for business responsibility reports.
- Section 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015: This section outlines the requirements for business responsibility reporting by listed entities.
SEBI Business Responsibility and Sustainability Reporting (BRSR) Framework:
In 2020, SEBI introduced the Business Responsibility and Sustainability Reporting (BRSR) framework. This framework aligns with the SEBI guidelines and is designed to standardize ESG disclosures by top 1,000 listed entities. It covers various aspects of ESG, including environmental performance, social initiatives, and governance practices.
Global Reporting Standards Adoption:
Many Indian companies have also adopted global ESG reporting standards, such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) standards, to enhance the quality and comparability of their disclosures. While these standards are not statutory provisions, they have been influential in shaping ESG reporting practices in India.
Conclusion:
The evolution of ESG disclosures in India has been significantly influenced by statutory provisions, such as the Companies Act, 2013, and SEBI regulations, including the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and the introduction of the BRSR framework. These regulations and frameworks reflect a commitment to fostering corporate responsibility, sustainability, and transparency. As ESG reporting continues to gain momentum, statutory provisions and global standards will continue to shape the landscape of responsible corporate practices in India.
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