ESG Compliance & Corporate Governance: Regulatory Shift In 2024-25

INTRODUCTION

The Indian corporate sector is experiencing a significant transformation in 2024-25 in regards to Environmental, Social, and Governance (ESG) compliance. There was a big shift towards corporate accountability and structuring sustainability reporting. The Securities and Exchange Board of India (SEBI), who was once a cautious regulator, has become a stringent and proactive authority that introduces mandates that require large companies to adhere to rigorous ESG norms. This has brought ESG to the central regulatory focus from being secondary or voluntary. This shift reimagines corporate responsibility in our developing economy and its position globally, along with the increased compliance demands.

SEBI'S SHIFT TO ENHANCED BSBR FRAMEWORK

Initially introduced as a voluntary framework, the Business Responsibility and Sustainability Reporting (BRSR) framework has become the flagship of Indian ESG regulatory efforts. An unprecedented ESG disclosure norm of such scale and seriousness has been enforced upon the top 1000 listed companies by market capitalization.

In December 2024, SEBI, to deepen the scope and quality of ESG disclosures, introduced the BSBR Core, which requires companies to report on nine key performance indicators whose emphasis varies from environmental impacts such as GHG emissions, water, or energy consumption to social and governance aspects such as gender diversity, board independence, and circular economy activities. By requiring third-party evaluation or assurances of these disclosures, SEBI hopes to increase transparency and dependability.

The framework of BRSR includes the Green Credit Program to promote companies involved in restoration undertakings of national importance on environmental grounds. India takes a situational approach to ESG by compelling the entities to divulge and account for any green credits they generate; this thus makes a linkage between the ESG performance of firms and more general policy objectives.

SEBI is attempting to standardize disclosure on various industries through the Industry Standards Forum, which is a collective of top trade associations, including ASSOCHAM, FICCI, and CII. These guidelines reduce inconsistencies and increase transparency with instruments of comparability and standard metrics, which the previous voluntary ESG disclosure lacked. Besides, the law also mandates disclosures for value chains, thereby requiring the company to take ESG measures on its suppliers and customers, extending the concept of corporate responsibility to ecosystems with which regulators have traditionally had little involvement.

By ensuring broad applicability, the regulation drives Indian corporations toward sustainable practices, positioning them more strongly in international markets.

CORPORATE GOVERNANCE FAILURES AND RECENT CONTROVERSIES

Even with such new sophistications in the regulatory frameworks and disclosures, the shortcomings of Indian corporate governance can be seen through several high-profile scandals.

One of the most significant corporate fraud cases of 2025 came from the Gensol Engineering scandal, a company that has dealings with electric vehicles. The fund of approximately Rs. 262 crores, set to procure electric vehicles, was used by its promoters to buy high-end real estate in Delhi. This misappropriation of funds not only jilted fiduciary roles but also proved a systematic lapse in Indian corporate governance. Independent directors and auditing committees failed to prevent and monitor such dubious financial moves.

This scandal reignited a long-standing issue in the Indian corporate structure. Promoter dominance, where founding families or individuals hold more control over management and the board, weakens board independence and causes conflicts of interest. Corporate governance protections are less effective in family-controlled businesses, as independent directors lack decision-making power. Such a corporate structure results in the failure of checks and balances designed to prevent the misuse of company resources.

The IndusInd Bank case showed irregularities in the bank's derivative portfolio lasting 5-7 years before detection. This management significantly damaged the bank's reputation in the market, lowering its credit rating and shareholder value. The case has led to major discussions on internal audit and risk management systems in other banks and financial institutions, something that could adversely affect the stability of the economy.

ESG disclosures are important, but they are not enough to guarantee good governance, as these scandals have shown. For the matters involving actual detection, prevention, and deterrence of wrongdoing, improved regulatory frameworks, tightened whistleblower protection systems, and sharper internal controls are foreshadowed.

IMPLEMENTATION & ENFORCEMENT CHALLENGES

In contrast, if there is a lot of incompleteness in the ESG integration application and if the refurbishment of upgrading ESG remains incomplete or not implemented after fearless patenting, many obstacles still impede the effectiveness of the method.

Data quality and consistency remain a major concern. Collection of standardized, reliable data is still a logical and technical hurdle. Many companies find it hard to track and note data across complex supply chains and lack technology to measure comparable social impact indicators to be utilized in the reports.

India also faces a shortage of qualified ESG professionals. There is a shortage of such professionals in mid-tier companies which makes the reports and audits crude. Law and business schools have only recently included ESG and sustainability modules, highlighting the slow progression in nurturing skilled professionals.

The cost of implementing ESG regulations also remains a major strain, particularly on smaller listed companies. The expenses involved in data collection, external audit, and the reporting framework can become a burden if implemented without subsidies and incentives. Large companies often see ESG norms as long-term investments that they are ready to make, while smaller companies will have to rely on illegal greenwashing or minimal compliance as its hard to justify sudden financial outlay.

Moreover, ESG enforcement is still in its nascent stage. While SEBI has started penalizing and market banning for violations, the pre-emptive auditing and monitoring mechanisms are still completely working. The risk of superficial adherence without true commitment, often referring it to as "checklist compliance." Protection of whistleblowers should be enhanced, regular audits of ESG processes, and public disclosure of audit results should be made to ensure added credibility and trust.

CONCLUSION

India has chosen an ambitious path to integrate corporate governance and sustainability into the foundation of business operations. The much-needed balancing between regulatory rigour and the Indian economic and social realities may arguably be best signified by this monumental development of amending the BRSR framework and making ESG disclosures mandatory. But as recent scandals have shown, strong regulations require investments into capacity-building, enforcement strategy, and in sincere cultural shifts away from the traditional level of accountability and transparency.

India still may find itself emerging as the shining light amongst emerging economies in ESG compliance as the framework evolves. Collective and continued efforts would ensure that reporting is not merely a tick-the-box exercise but that ethical, sustainable and responsible business practices are in essence.

References

• International Journal of Legal Studies and Social Sciences, 'Gensol Engineering Scandal: Unravelling Corporate Governance Failures in India' (2025).
• India Briefing, 'BRSR Reporting in India: Key Changes to ESG Disclosures Introduced by SEBI' (2025).
• Mongabay India, 'Latest ESG reporting rules redefine key suppliers and customers of listed companies' (2025).
• KPMG India, 'SEBI introduces certain key changes in BRSR reporting' (2024).
• Write Canvas, 'Five challenges hindering ESG adoption in India' (2023).
• IMPRI India, 'A Comparison Of The ESG Frameworks Of Europe And India' (2025).