ESG Integration In India - Challenges, Progress, And Future Directions
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Category: General Law
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ESG INTEGRATION IN INDIA: CHALLENGES, PROGRESS,
AND FUTURE DIRECTIONS
Kavya Agrawal, Jindal Global Law School, Sonipat
ABSTRACT
Environmental, social, and governance (ESG) is becoming an important aspect of corporate governance and responsible investing. Emergent ESG regulations have placed new demands on companies, investors and regulators alike. Corporations are now expected to abide by these obligations and consider their environmental impact, social responsibilities, and governance frameworks. Due to this global traction, it is important to look at the importance of ESG in India. Prevalent corporate governance debates shed light on the need for prioritizing long-term sustainable value rather than the pursuit of profits merely for shareholder’s benefit. We are witnessing a departure from the traditional shareholder- centric approach that Corporate Social Responsibility (CSR) initiatives carry.
Owing to its largely philanthropic tilt, the CSR regime in India fails to focus on the negative externalities generated by the operations of companies. Given the conceptual dissatisfaction surrounding CSR in India, the emerging trend of ESG takes on great importance. Unlike CSR, ESG comes up with a more holistic focus on all stakeholders. The scope of ESG is wide enough to include the CSR policies of companies within it. The transition from CSR to ESG is not merely a regulatory evolution but a fundamental change in how companies operate and are held accountable. While the Companies Act, 2013 addresses certain aspects of environmental and social responsibility, a comprehensive ESG framework remains absent. However, SEBI's mandate for top 1000 listed companies to disclose ESG information signifies a step forward.
This paper seeks to analyse the current state of ESG implementation in India, identifying the challenges and opportunities it presents, and mainly focus on overlapping jurisdiction between NGT and NCLT. By understanding the interplay between ESG and corporate governance, policymakers, investors, and businesses can work together to create a more sustainable and responsible corporate India. As India ascends on the global stage, the systematic regulation of ESG principles will be crucial for long-term value creation and ethical business conduct. Keywords: ESG, CSR, jurisdiction, NGT, NCLT, value creation, sustainability, directors’ duty
Introduction
ESG can be understood as a one data source which consists of three important non-financial metrics - environment, social and corporate governance. 1 ESG integration is the process of methodically incorporating key ESG factors into financial analysis and decision-making in order to meet investor value or accomplish targeted social and environmental outcomes. 2 ESG embraces the holistic perspective that sustainability is not limited to environmental issues. The environmental criterion takes into account a company's environmental management. Social criteria are used to analyze how a business manages its relationships with its clients, workers, suppliers, and the communities in which it operates. Governance include issues such as shareholder rights, internal controls, audits and leadership.
3 Additionally, businesses with gender-diverse boards have been found to outperform other businesses on the ESG index. 4 ESG investors are increasingly screening businesses as they work to become more sustainable. 5 ESG consideration is now a crucial factor in investment decisions. These considerations are increasingly viewed as a strategic instrument to obtain a sustainable competitive advantage 6and an efficient strategy to reduce risk and increase returns. 7 On the other hand, due to the increased degree of environmental and social consciousness, customers expect firms to devote time and resources to such sustainable activities. 8 ESG integration also conveys to stakeholders that the business is not simply focused on generating profits at the expense of the environment, the health and safety of its workers, and the trust of its shareholders.
9 Due to expectations from investors and global sustainability movements, corporate governance in India are quickly evolving to incorporate ESG regulations. This change is having a profound impact on how 1 Eccles, R. G. , Lee, L. -E. and Stroehle, J. C. (2019) The social origins of ESG? : An analysis of innovest and KLD, SSRN. Available at: https://papers. ssrn. com/sol3/papers. cfm? abstract_id=3318225 (Accessed: 18 October 2024). 2 Sharma, P. et al. (2022) Measurement of ESG Performance: A Study of Indian companies, SSRN. Available at: https://papers. ssrn. com/sol3/papers. cfm? abstract_id=4153779 (Accessed: 18 October 2024). 3 Pareek, M. (2022) Making ESG work: Examining the changing ESG regulations in India, SSRN. Available at: https://papers. ssrn. com/sol3/papers. cfm? abstract_id=4258206 (Accessed: 18 October 2024).
4 Dwivedi, D.N., Tadoori, Dr.G. and Batra, S. (2023) ESG ratings and impact of women leadership in
organizations: A case study from India, SSRN. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4432918 (Accessed: 18 October 2024).
5 Ibid.
6 J.P. Morgan Asset Management (2023) ESG integration at J.P. Morgan Asset Management: Building more
resilient portfolios for the long term. Available at: https://am.jpmorgan.com/content/dam/jpm-amaem/emea/regional/de/investment-themes/esg-integration-approach.pdf. (Accessed: 18 October 2024).
7 Id.
8 Id.
9 Id.
corporations’ function, report, and are held responsible. Companies are finally recognizing the value of making long-term sustainability investments. They are evolving from just companies for profit to social organizations that prioritize development and sustainability for the advancement of both the economy and society. 10 Further study shows that ESG reporting is directly related to a company's competitive advantage, financial success, employee and customer loyalty, and reputation. 11 Current Regulation ESG in India is not regulated by a single legislation but it comes under statues such as the Companies Act 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) etc.
12 Although ESG reporting is not legally required yet, SEBI regulates it through the required Business Responsibility and Sustainability Report (BRSR). However, the fact that only the top 1000 listed businesses are required to report in this way shows that state engagement in the application of ESG is still in its early phases. Although the implementation of the BRSR reporting and the new SEBI mandate are positive steps, their efficacy has not yet been determined. 13 The Companies Act lays down the foundation for ESG by some of its provisions such as Section 135 covering Corporate Social Responsibility (CSR), Section 149 of requires certain classes of companies to have a female director. 14 Moreover, Section 166(2) is compatible with ESG since it mandates that directors take the company's long-term interests into account rather than just its immediate requirements ones.
They must recognize and manage ESG risks, such as climate change, and appropriately manages with them. The explicit language of the clause and the statutory enactment procedure both suggest that the directors have a positive duty to take into account the interests of different stakeholders. 15 10 Aggarwal, A. (2024) ‘Corporate Responsibility (CSR), ESG Goals and Sustainable Development in India -An Analysis. ’, Research Gate . Available at: https://www. researchgate. net/publication/378592652_Corporate_Responsibility_CSR_ESG_Goals_and_Sustain able_Development_in_India_-An_Analysis (Accessed: 18 October 2024). 11 Joaquin Sanchez‐Planelles, J. and Marival Segarra‐Oña, M.
(2021) Identifying different sustainable practices to help companies to contribute to the sustainable development: Holistic sustainability, sustainable business and operations models, Corporate Social Responsibility and Environmental Management. Available at: https://ideas. repec. org/a/wly/corsem/v29y2022i4p904-917. html (Accessed: 18 October 2024). 12 Singh, A. (2024) Unraveling ESG regulations: A closer look at India’s approach, Live Law. Available at: https://www. livelaw. in/lawschool/articles/unraveling-esg-regulations-a-closer-look-at-indias-approach- 250448? fromIpLogin=76925. 65156784908 (Accessed: 18 October 2024).
13 Id.
14 Id.
15 Varottil, U. (2023) The legal and regulatory impetus towards ESG in India, NUS Law. Available at:
https://law.nus.edu.sg/wp-content/uploads/2023/01/03_UmakanthVarottil.pdf (Accessed: 18 October 2024).
In M. K. Ranjitsinh v. Union of India, the Court affirmed that the director has the duty to consider ‘the protection of the environment’ and treat it to be on par with duties to other stakeholders. 16 A "decision taken seemingly in the financial interest of the company and its shareholders, but which is detrimental to the environment, may transgress section 166," according to scholars. As a result, directors have more substantial statutory obligations to take ESG factors into account. 17 The Court noted that "the history of evolution of the corporate world shows that it has moved from the familial to a regime of social accountability and responsibility" in the context of section 166(2) in Tata Consultancy Services v. Cyrus Investments Private Limited. 18Even though ESG is still fairly new in India, companies like Asian Paints and TCS have implemented policies for it.
These include Asian Paints' commitment to employ environmentally friendly materials for manufacture and TCS implementing an Adult Literacy Program to promote education among adults in rural India. 19 ESG and CSR While both CSR and ESG continue to coexist in India. Recently, the focus has shifted more towards ESG. 20The announcement of voluntary corporate social responsibility in 2009 by the Ministry of Corporate Affairs (MCA), set the tone for the ESG journey in India. 21 The Companies Act, 2013 formalized CSR under Section 135, which mandates certain companies meeting specific financial threshold to spend a minimum of 2% of their net profit over the preceding three years as CSR. 22 This provision is primarily concerned with companies contributing a minimum amount of money towards social activities, which thereby equates CSR with corporate philanthropy’.
23 The 2% rule in the section reflects that the government is keen on regulating sustainability and social practices. The companies act provides evidence that no jurisdiction has given CSR a more prescriptive status than India. The Act goes into great detail regarding corporations' duty to act in a way that benefits helps the society at large rather
16 M.K. Ranjitsinh v. Union of India 2021 SccOnline SC 326.
17 Divan, S., Yadav, S. and Singh, R. (2021) Directors’ obligations to consider clmate chnage related risk in India, ccli. Available at: https://ccli.ubc.ca/wpcontent/uploads/2021/09/CCLI_Legal_Opinion_India_Directors_Duties.pdf (Accessed: 18 October 2024).
18 Tata Consultancy Services Limited vs Cyrus Investments Pvt Ltd (2021) 9 SCC 449.
19 Id.
20 Id.
21 Chaudhary, P. (2024) The evolution of ESG goals in India, Dr. Reddy’s Foundation. Available at:
https://drreddysfoundation.org/the-evolution-of-esg-goals-in-india/ (Accessed: 18 October 2024). 22 Acharya, J. (2024) Corporate Social Responsibility under Section 135 of Companies Act 2013, cleartax. Available at: https://cleartax.in/s/corporate-social-responsibility (Accessed: 18 October 2024).
23 Id.
than solely focusing on their shareholders. 24 However, this does not meet the global sustainability reporting standards. India will require a more elaborated framework to fill in the information asymmetry along with the CSR rule to accommodate the ESG Goals. 25 Moreover, the CSR model in India has limited scope due to its overemphasis on a corporate expenditure mechanism akin to a tax rather than the broader accountability towards all stakeholders. This has left the concept of CSR mired in a theoretical quagmire and has constrained it from bringing out real change in the society. 26 Due to its predominantly philanthropic orientation, the CSR framework in India overlooks the detrimental consequences and negative externalities resulting from companies' operations, an aspect that has historically been included in the CSR purview in other regions.
In light of the fundamental discontent with CSR that exists in India, the new ESG trend takes on immense significance. 27 The Issue of Jurisdiction With the rising adoption and implementation of ESG norms in India, raises a crucial question of jurisdiction, especially when corporate decisions have adverse effects on the environment. A jurisdictional gray area arises as to where will the ESG matters be adjudicated particularly when there’s an environmental issue involved along with an intersecting corporate governance issue. Which tribunal will have primary jurisdiction- NGT or NCLT? Could both tribunals have simultaneous proceedings? If so, how would disputes over decisions be decided? Before diving into this issue of overlapping jurisdiction, let us first see what the scope and jurisdiction of both of these bodies is.
Jurisdiction and Scope The National Green Tribunal The importance of protecting the environment has never been bigger than it is now. In the case of Virender Gaur v State of Haryana, the court affirmed that a healthy environment is a crucial facet of the right to life. 28 However, the judges do not have the adequate knowledge of the scientific and technical aspects which concern environmental matters, like determining pollution levels in an area, whether it’s within the permissible limits or not. Therefore, the
24 Id.
25 Dutta, M. (2024) A cross-sectional study of ESG practices and Greenwashing Companies of India, SSRN. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4695552 (Accessed: 18 October 2024).
26 Id.
27 Id.
28 Virender Gaur and Ors. vs. State of Haryana and Ors., (1995) 2 SCC 577
courts in the case of AP Pollution Control Board realized the need for environmental courts which would have experts, environmental scientists and other qualified persons, as part of the judiciary, so that they can make an informed decision. 29 In 2010 under The National Green Tribunal Act, the NGT was established for effective and expeditious disposal of cases relating to environmental protection and conservation of forests and natural resources. This includes enforcing any environmental legal rights and providing relief and compensation for damages to people and property as well as matters related to or incidental to these rights. It is a specialized body with the aim to deliver swift justice and reduce the volume of litigation. It is fully equipped with the requisite expertise to handle environmental disputes including multidisciplinary challenges.
30 Section 14 of the NGT Act states that for the NGT to be able to hear a matter: there must be a civil case; which substantially concerns the environment; and involves the implementation of environmental legislations. the NGT may exercise jurisdiction if these three requirements are met. 31 In the case of Ankita Sinha, the Supreme Court affirmed the NGT's wide powers to take cognizance of environmental issues. The NGT’s broad mandate of securing environmental protection included the power to identify and intervene in cases at their own initiative, suo moto cognizance. This power cannot be restricted by procedural requirements of a complainant or a formal petition. 32 The NGT is being known as a fast-track court with a broad jurisdiction, makes it a crucial component of reforming environmental governance.
Intergenerational equality, the polluter pays, precautionary principles, and the public trust doctrine are among the various principles it employs. 33 Moreover, the timelimitation provisions have been interpreted strictly by the NGT. If the application is not filed within six months of the date the cause of action originally arose, they will not consider it; if it is not filed within thirty days of the day the appellant received the order, decision, or direction, they will not be able to appeal. 34 The tribunal has both original and appellate jurisdiction. The original jurisdiction cases in relation to a substantial question relating to the environment. 35 Section 2(m) of the NGT Act defines "substantial environmental question" as either a
29 A.P. Pollution Control Board v. Prof. M.V. Nayudu (Retd.) & Ors. 1994 (3) SCC 1
30 Gill, G. (2013) Access to environmental justice in India with special reference to national green tribunal: A step in the right direction, SSRN. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2372921 (Accessed: 18 October 2024).
31 Section 14, The Nation Green Tribunal Act, 2010.
32 Kashyap, G. (2023) Suo Moto Powers of the NGT
Judgment summary, Supreme Court Observer. Available at: https://www.scobserver.in/reports/municipal-corporation-of-bombay-v-ankita-sinha-suo-moto-powers-of-thenational-green-tribunal/ (Accessed: 18 October 2024).
33 Id.
34 Section 14(3), The Nation Green Tribunal Act, 2010.
35 Section 16, The Nation Green Tribunal Act, 2010.
significant statutory/environmental duty violation affecting the community or measurable environmental/public health damage from specific activities or pollution sources. However, the legal meaning and scope of 'substantial question on the environment’ remains ambiguous. 36 The NGT In Jeet Singh Kanwar v. Union of India, emphasized that balancing company operations with environmental preservation is imperative. This delicate balancing act necessitates a thorough assessment of both factors, specifically the potential level of environmental deterioration brought on by industrial activity and the desired level of economic growth. This illustrates the NGT's dedication to pursue a mutually beneficial relationship between the environment and development. 37 The National Company Law Tribunal In S. V. Sampath Kumar v.
Union of India, the court highlighted how the "population explosion" and increase in litigation cases since independence have overloaded the courts. In order to facilitate the swift resolution of cases, a single-window institution had to be established. Therefore, "negating the fatal delay involved in company law proceedings" will be facilitated by the establishment of exclusive tribunals, National Company Law Tribunal and NCLAT. 38 The intention behind it was upholding the tenacity of preserving shareholders' and stakeholders' rights and interests vested in a company. The setting up of NCLT and NCLAT from the effect of June 01, 2016, by the MCA was for the determination of delivering corporate justice on the recommendations of the Justice Eradi Committee. 39 The corporate law mechanism's institutional framework is anchored on NCLTs.
Although the tribunals were initially viewed with skepticism and given a small position in the corporate world's legal system, their importance could not be overlooked for very long. Due to the rise in insolvency conflicts, the NCLTs were even granted the authority to hear corporate matters. 40 The Government constituted NCLT under section 408 of the Companies Act, 2013. 41 NCLTs across the country were established recently in 2016. NCLT is a quasi-judicial body with adjudicating authority
36 Section 2(m), The Nation Green Tribunal Act, 2010.
37 Jeet Singh Kanwar v. Union of India 2013 SCC OnLine NGT 1.
38 S.V. Sampath Kumar v. Union of India (1987) 1 SCC 124.
39 Kaushik, S. and Symbiosis Law School, Pune (no date) NATIONAL COMPANY LAW TRIBUNAL (NCLT)
UNDER THE INDIAN COMPANY LAW REGIME, SUPREMO AMICUS. journal-article, pp. 1–
4. https://supremoamicus.org/wp-content/uploads/2020/11/SAARANG-KAUSHIK.pdf. (Accessed: 18 October
2024). 40 Thakkar, H., Agarwal, P. and Shah, U. (2023) Efficacy of adjudication process of Corporate Insolvency Resolution Process (CIRP): Law and economics of national company law tribunal (NCLT), De Gruyter. Available at: https://www.degruyter.com/document/doi/10.1515/ajle-2023-0015/html (Accessed: 18 October 2024).
41 Section 408, The Companies Act, 2013.
relating to Indian companies including proceedings relating to arbitration, compromise, arrangements, reconstructions and the winding up of companies, insolvency resolution process of companies and limited liability partnerships under the Insolvency and Bankruptcy Code,
2016.42 NCLT reduces the multiplicity of litigation before various forums. NCLT & NCLAT
have exclusive jurisdiction, hence no civil court has the jurisdiction to consider any suit about any matter which the Tribunal is empowered to decide. 43 Although, the NCLT rules remain silent on a number of procedural aspects which can create ambiguity in operations. The Civil Procedure Code is referred to for guidance to fill this void, as stipulated in Section 424 of the Companies Act, 2013. 44 Overlapping jurisdiction Let’s consider the following scenario, there’s a mining company which breaks environmental norms and causes significant damage in pursuit of profit maximization by expanding their operations in an environmentally sensitive area. This expansion decision was taken by the company’s board. This scenario raises two main issues, one of corporate governance which is NCLT’s domain and the second being of environment which primarily falls under NGT’s domain.
So now there’s an overlap in jurisdiction of NGT and NCLT. It can be argued on one hand that the NCLT has primary jurisdiction over this matter, since the problem stemmed from the board members decision making, which is directly NCLT’s jurisdiction, following Section
280 of The Companies Act. 45 On the other hand, it can be contended that NGT has primary
jurisdiction since this tribunal is better equipped with and is a specialized body established to deal with such matters and also require speedy disposal. This grey area in jurisdiction in ESG matters and lack of clear legislation can be misused and open doors to forum shopping. Litigants can cherry pick jurisdiction which they believe best supports their case or would give them a certain advantage than the other. This could lead to inconsistency in rulings in ESG matters as distinct tribunals may come to differing conclusions over the same matters. The NGT may advocate for more punitive actions in cases of environmental non-compliance, whilst the NCLT may prioritize corporate restructuring. These jurisdictional issues can result in prolonged litigation and delayed justice. These hindrances 42 About NCLT | National Company Law Tribunal (no date). https://nclt. gov. in/about-nclt.
(Accessed: 18 October 2024).
43 Id.
44 Section 424, The Companies Act, 2013.
45 Section 280, The Companies Act, 2013.
can slow down the growth of ESG. Call for reassessment This calls for a need to reassess the traditional boundaries of jurisdiction with a change in the Indian corporate landscape where the lines between environmental stewardship and corporate governance which are increasingly blurring. This is primarily due to the increasing prominence of ESG. Companies have started considering environmental impact as a part of their core business strategy rather than a separate thing. The concept of fiduciary duty has also evolved and extends to considering long term sustainable goals. Another important factor contributing towards this is shareholder activism, as they become more aware of environmental issues. Insurance of the efficient and comprehensive adjudication of ESG matters will take center stage in India.
The apparent paradox of how to strike and preserve equilibrium between business operations, achieving environmentally sustainable goals, and economic development? is reflected in the social and economic affairs of a rapidly developing country like India. The judiciary's inventiveness has played and will continue to play an essential role in overcoming this challenge. Suggestions to overcome the issue In order to overcome the issue of jurisdiction in ESG matters. The following suggestions can be incorporated-
1. Tribunals can collaborate or form a special bench for such matters where there are
overlapping issues. This will in turn help achieve better outcomes, since both tribunals are equipped with the required expertise and can leverage their respective expertise. Cooperation and information sharing between the two tribunals. This multi-disciplinary approach will enhance the effectiveness of our judicial system.
2. The courts can also determine a hierarchy or define the threshold for each tribunal's
jurisdiction.
3. Alternative dispute resolution (ADR) could be promoted for ESG disputes, which
would essentially bypass this issue of jurisdiction. This can be better owing to its procedural flexibility, neutrality, party autonomy and usage of experts. This allows for the fair, efficient, and economical resolution of ESG issues. 46 46 S, A. , Aiyappa, T. , and Students at National University of Advanced Legal Studies, Kochi (2024) ESG AND ARBITRATION: A CASE FOR THE SETTLEMENT OF ESG CLAUSE-RELATED DISPUTES BY Other Issues ESG adoption in India faces certain hurdles beyond the ambiguity in jurisdiction and lack of a proper regulatory framework. Firstly, the discrepancies and inadequacies arising from variations in ESG data in the context of countries frequently weaken investors' evaluations and assessment of ESG performance since corporations use different measuring standards for ESG reporting.
47 It is noted that the BRSR framework is "minimal, generic, a boilerplate arrangement for disclosures, and is silent on specific sectoral requirements," indicating that, despite its global inspiration from the GRI framework, it still lacks comprehensiveness in comparison to international standards. 48 India’s ESG issues are further exacerbated by its population, socioeconomic diversity, and desire for economic growth. 49 For instance, in India, social norms and traditional business practices can occasionally thwart reforms pertaining to things like employee wellness, labor rights, and gender diversity. It is challenging to change the corporate mindset towards sustainable value creation in India since many companies still place more importance on short-term financial benefits than long-term sustainability.
Additionally, there is the risk of "greenwashing," in which corporations overstate their ESG initiatives without taking meaningful action, which could harm their brand value and wasted resources. 50 Potential Solutions Despite these obstacles, Indian companies are beginning to realize the value of ESG. The advantages of enhanced credibility, risk reduction, and green finance accessibility are becoming more and more prominent. These obstacles will begin to diminish as ESG awareness in India rises. For it to speed up, companies, stakeholders, and regulators need to collaborate to improve the corporate governance landscape so that ESG integration is more conceivable. Recognizing that ESG issues may differ between industries and geographical areas, companies should begin developing their ESG strategy by identifying the material issues that are most important to their stakeholders.
51 This requires a holistic approach, which could include ARBITRATION IN INDIA. Available at: journal-article. https://adrjournal. nalsar. ac. in/wpcontent/uploads/2024/02/05_aishwary-theertha. pdf. (Accessed: 18 October 2024).
47 Id.
48 Id.
49 Id.
50 Basu, S. (2023) From Compliance to Commitment
ESG Challenges in India. Available at: https://www.linkedin.com/pulse/from-compliance-commitment-esg-challenges-india-saikat-basu/.(Accessed: 18 October 2024).
51 Ibid.
creating awareness about ESG since the concept is relatively new in the country. When a new concept gains prominence, there are stigmas around it. Like in the case of ESG, the investors might be hesitant about ESG expenditure, perhaps due to being unaware of long-term benefits and broader view of ESG implementation. The companies also need to better organize their data and improve reporting quality as ESG demands comprehensive data and reporting, they can perhaps leverage technology for data collection and analysis. 52 The directors of companies bear the responsibility to keep up with developments in the field and address possible ESG risks through appropriate mitigating mechanisms.
53 Thus, by offering rewards for ESG compliance, hiring skilled experts to effectively handle ESG requirements, encouraging a transparent and accountable corporate reporting culture, and linking executive compensation at companies to ESG results will help overcome these challenges. Future Trends Some anticipated trends in the ESG sector in India are social impact investing. Social impact investing is gaining prominence with various impact investment funds being set up to support these projects. This is also in line with India’s net zero target and SDG goals. 54 There is a movement towards reduction of emissions to net zero, mobbing towards a low carbon economy. Companies are increasingly investing in projects that have an impact on the society. 55 The increased focus on diversity and inclusion is another new trend.
Corporations are taking action to establish more inclusive workplaces as they grow increasingly conscious of the value of diversity. This includes programs to help individuals from underrepresented groups, encourage diversity in leadership positions, and broaden the gender diversity of the overall workforce. 56 ESG trends in India are also significantly influenced by technology. Although big data analytics and artificial intelligence (AI) are assisting businesses in recognizing and addressing ESG opportunities and risks, the rise of technology has also raised concerns about data privacy and security. 57
52 Id.
53 Id.
54 Venkatramani, R. (2024) 'Scaling impact investing in India
Unlocking capital for sustainable, inclusive growth,' ETGovernment.com, 13 October. Avaialble at: https://government.economictimes.indiatimes.com/blog/scaling-impact-investing-in-india-unlocking-capitalfor-sustainable-inclusive-growth/114181458. (Accessed: 18 October 2024).
55 Id.
56 Vohra, N., Sud, K. and Bhayana, C. (2024) 'Gender Diversity and Inclusion on Indian Boards: Post the Introduction of the Mandate in 2015 and 2019,' Business Perspectives and Research [Preprint]. Available at: https://doi.org/10.1177/22785337241249557. (Accessed: 18 October 2024).
57 Id.
Conclusion
Conclusively, the regulatory vacuum presents an opportunity to develop a progressive, integrated strategy that complements global standards and India's unique economic and social fabric. Having a clearly define legislation on ESG and resolving the issue of jurisdiction between NGT and NCLT becomes extremely important for India as India rises as a global economic power and a key player in climate change activism. This would further show its commitment to sustainable goals and sustainable economic government. In an effort to foster sustainable, ethical business practices, the objective should be to establish a synergistic relationship between corporate law and protecting the environment by taking advantage of the collective expertise of NCLT and NGT. It also offers an avenue to reinterpret corporate duties and governance frameworks so that ESG are seamlessly incorporated.
With its focus on CSR and the responsibilities of directors, the Companies Act already establishes certain foundations. This paradigm might be expanded, nevertheless, to more specifically address ESG issues. Section 166 of the act which describes the duties of directors, could potentially be changed to specifically mention ESG risk management and reporting as a component of fiduciary obligations. Likewise, expanding the definition of "shareholder value" would legally require companies to take social and environmental effects into account in addition to financial performance. It offers an opportunity to develop a more comprehensive corporate governance structure that combines social, environmental, and financial performance indicators into a holistic unit.