As India experiences rapid economic expansion driven by new industries, infrastructure growth, and global investment, Environmental, Social and Governance (ESG) principles are emerging as a defining force in shaping sustainable business practices. What began as a compliance measure is now a core element of corporate strategy, influencing investor confidence and long-term competitiveness.
In this article, Md. Sajid Khan, Director–India, ACCA (Association of Chartered Certified Accountants), examines why policy stability is the true catalyst for India’s ESG success. He discusses the evolution of India’s regulatory landscape—from SEBI’s Business Responsibility and Sustainability Reporting (BRSR) mandate to national net-zero commitments—and highlights how clarity and consistency can unlock greater corporate participation and investor trust. Drawing on sectoral insights, Khan argues that India’s ESG journey will depend not only on ambitious goals but also on sustained policy coherence to ensure meaningful, long-term impact.
India’s Steady ESG Path: Why Policy Stability Matters for Businesses and Investors
In India today, two powerful forces are shaping the business landscape. On one side, there is visible growth, including the establishment of new industries, expansion of infrastructure, and the influx of global capital into the country. On the other, there is a quieter but equally transformative shift, i.e., the rise of Environmental, Social and Governance (ESG) as a central pillar of corporate strategy. From renewable energy investments to transparent reporting on social impact, ESG is no longer a mere buzzword. It is increasingly becoming the measure of long-term business resilience.
Yet, while companies and investors are embracing ESG with seriousness, one factor determines whether these efforts succeed or notthe stability of policy. Without a consistent regulatory environment, good intentions risk becoming fragmented or short-lived. With it, ESG can unlock sustainable growth, investor confidence and global competitiveness for India.
The shape of India’s ESG landscape
Over the past few years, India has built one of the more structured ESG reporting frameworks in the world. The Securities and Exchange Board of India (SEBI) has made Business Responsibility and Sustainability Reporting (BRSR) mandatory for the top 1,000 listed companies by market capitalisation. Unlike the earlier, more limited disclosures, BRSR demands granular information, from emissions and water usage to diversity in leadership and ethical sourcing. This is an important step forward as it brings ESG into the mainstream of corporate compliance rather than leaving it as a voluntary add-on.
India’s international commitments reinforce this trajectory. The country has pledged to achieve net-zero greenhouse gas emissions by 2070, with interim targets to increase non-fossil fuel capacity to 500 GW and reduce the carbon intensity of GDP by 45% by 2030. These commitments, tied to the Paris Agreement and the United Nations Sustainable Development Goals (SDGs), place India among the largest economies setting long-term sustainability goals.
A few sectors are ahead of the curve. Renewable energy has seen remarkable momentum, with solar and wind capacities steadily expanding. IT services have embedded governance and workforce-related practices into their ESG strategies, aligning with global client expectations. Manufacturing, a traditionally resource-intensive sector, is beginning to experiment with greener supply chains and energy efficiency, though challenges remain in scaling such practices uniformly.
Why stability matters more than ambition
Ambitious commitments alone do not guarantee results. For businesses making large capital decisions, stability is the real enabler. Consider a company planning to invest in a green hydrogen facility or a large-scale solar project. If subsidies are uncertain, compliance metrics keep shifting or disclosure requirements keep changing, this can make long-term planning difficult. The risk is not just financial, but also reputational as companies are wary of promising outcomes they may later be unable to deliver due to evolving regulations.
Stable policy provides clarity. It helps companies to set realistic roadmaps for carbon reduction, employee welfare or governance reforms and integrate these into the overall business strategy. It also sends a message to global investors that India’s ESG path is credible and predictable. Foreign institutional investors, in particular, place high value on regulatory certainty. The absence of it often leads to higher risk premiums or even withdrawal of capital.
According to a recent report by the Indian Institute of Management Ahmedabad, only 17.7% of companies filing under BRSR explicitly mentioned net-zero or carbon neutrality targets, and just 5% set a clear timeline. This is not necessarily a lack of intent. It reflects hesitation to commit without knowing how regulations will evolve. Stability could unlock bolder commitments.
Businesses moving ahead
Despite uncertainty, many Indian companies are not waiting for the perfect framework. Several publish sustainability reports with greater detail than regulations demand. In industries such as textiles and automobiles, businesses are experimenting with ethical supply chains and utilising recycled materials. Technology companies are setting diversity and inclusion benchmarks and linking executive compensation to ESG outcomes.
The shift is also pragmatic. Companies that reduce energy consumption through efficiency measures or renewable adoption often see immediate cost benefits. Others have realised that strong ESG credentials improve customer loyalty and attract talent, particularly younger professionals who place a high value on corporate purpose. What distinguishes leaders is that they view ESG not as a compliance cost but as an investment in long-term competitiveness.
How investors read the signals
Investors are responding to this shift by giving greater weight to ESG factors in their decision-making. There is growing interest from both domestic and international institutional investors in companies with measurable ESG outcomes. Funds are increasingly screening investments based on environmental impact, social responsibility, and governance standards.
Large institutional investors are also sharpening their approach. A coalition of 15 major Indian institutions, managing over INR 101 trillion (US$1.2 trillion), now actively integrates climate risks and ESG considerations into their investment decisions. Companies that demonstrate consistent and transparent ESG performance are attracting patient, long-term capital. Investors value stability because it reduces the risk of sudden regulatory changes or misaligned reporting. The market is moving toward rewarding businesses that embed ESG into strategy and operations rather than those that adopt it superficially.
What policymakers can strengthen
India’s ESG policies have laid the foundation, but the next step is ensuring stability and predictability. Three priorities stand out.
First, transparency. Clear communication about new rules, well in advance of their enforcement, reduces uncertainty. For instance, SEBI’s move to introduce “BRSR Core” for value-chain disclosures is an important advance; however, detailed guidance and phased adoption will be key to its successful implementation.
Second, standardisation. ESG disclosures still vary widely across companies. Aligning with global frameworks such as the Global Reporting Initiative (GRI) or the Task Force on Climate-related Financial Disclosures (TCFD) will improve comparability, making Indian companies more attractive to international investors.
Third, support for smaller firms. While large corporations have the resources to adapt quickly, mid-sized and smaller companies often lack the expertise or capital. Incentives such as concessional financing for green projects, tax credits or government-backed training programmes could help broaden ESG adoption across the economy.
The bottom line
Stable ESG policies are not just about regulation. They are about shaping trust. For businesses, they provide the certainty needed to make long-term commitments. For investors, they reduce ambiguity and enable the responsible allocation of capital. For India, they represent the pathway to growth that is resilient, competitive and sustainable.
By keeping policy clear, consistent and forward-looking, India can ensure that its ESG journey is not just ambitious on paper but effective in practice.
