Environmental, Social, and Governance (ESG)

What does Environmental, Social, and Governance (ESG) mean?

It serves as a structure for assessing a company's performance regarding non-financial aspects. It has turned into an important factor for investors, consumers, and other parties interested in a company's effects on society and the environment.

Ecological

Main Suggestions of the Parliamentary Committee

Formation of a Specialized ESG Oversight Authority: The panel recommended that the Ministry of Corporate Affairs (MCA) set up a dedicated authority to oversee ESG matters. This body must possess forensic expertise to actively identify, examine, and prevent greenwashing while creating sector-specific ESG guidelines.

Enhancing Legal Authority: The committee contended that existing regulations within the Companies Act, 2013 (especially Section 166(2)) are overly vague and do not provide the strong framework needed for reliable and meaningful ESG disclosures and actions.

Enhancing MSME Assistance: The suggested regulatory body should provide specialized support and direction to Micro, Small, and Medium Enterprises (MSMEs) for ESG adherence, considering their specific capacity limitations.

Additional Efforts Pertaining to Environmental, Social, and Governance (ESG)

Companies Act, 2013: Requires specific companies to allocate at least 2% of their average net profits toward CSR initiatives.

Business Responsibility and Sustainability Reporting (BRSR): SEBI has implemented BRSR for the largest 1,000 listed firms, mandating the reporting of ESG metrics.

Global Coordination: India's policy strategy is adapting to worldwide ESG developments, seeking alignment with international best practices like those from the EU and the International Sustainability Standards Board (ISSB).