India's ESG Revolution: Pioneering Sustainable Growth in 2025

Introduction

India, one of the world’s fastest-growing economies, is at a pivotal juncture in its journey toward sustainable development. Environmental, Social, and Governance (ESG) principles have emerged as critical drivers of economic policy, corporate strategy, and societal progress. As global attention intensifies on climate change, social equity, and ethical governance, India is aligning its ambitious growth agenda with ESG frameworks to meet national and international commitments, such as achieving net-zero emissions by 2070. The year 2025 marks a significant milestone, with regulatory advancements, corporate initiatives, and innovative financing mechanisms shaping India’s ESG landscape. This article explores the latest developments in India’s ESG ecosystem, highlighting key trends, challenges, and opportunities that position the country as a global leader in sustainable growth.

The Evolution of ESG in India

Historical Context

India’s ESG journey began gaining traction in the early 2010s with the introduction of the National Voluntary Guidelines on Social, Environmental, and Economic Responsibilities of Business (NVGs) by the Ministry of Corporate Affairs in 2011. These guidelines laid the foundation for responsible business conduct, emphasizing ethical governance, environmental stewardship, and social inclusivity. In 2012, the Securities and Exchange Board of India (SEBI) mandated Business Responsibility Reports (BRRs) for the top 100 listed companies by market capitalization, expanding this requirement to the top 500 by 2015.

The most transformative step came in 2021 when SEBI replaced BRRs with the more comprehensive Business Responsibility and Sustainability Report (BRSR). Effective from FY 2022-23, the BRSR mandates the top 1,000 listed entities to disclose performance against the nine principles of the National Guidelines on Responsible Business Conduct (NGRBCs). These principles cover ethical business practices, environmental protection, and stakeholder inclusivity, aligning India’s corporate sector with global ESG standards.

Regulatory Momentum in 2025

In 2025, India’s regulatory framework for ESG continues to evolve, driven by the need to balance economic growth with sustainability goals. SEBI has introduced revisions to ESG rating norms, easing withdrawal rules for companies while tightening disclosure requirements to enhance transparency. These changes aim to address inconsistencies in ESG reporting, a persistent challenge due to non-uniform data sources and varying reporting standards.

The government is also advancing the Indian Carbon Market, a key initiative to decarbonize the economy. Announced in 2024, this market is expected to gain traction in 2025 with pilot programs for carbon pricing and fiscal measures to internalize carbon costs. Additionally, the Ministry of Environment, Forest and Climate Change, along with Central and State Pollution Control Boards, is strengthening enforcement of environmental and labor laws to ensure ESG compliance.

A notable development is the exploration of a carbon credit trading scheme, aligning with India’s Paris Agreement commitments. This market-driven approach incentivizes emission reductions and supports the net-zero target by 2070. Furthermore, draft regulations for mandatory emissions intensity targets for high-emitting sectors like steel, cement, and paper signal a shift from voluntary pledges to enforceable accountability.

Environmental Developments: Greening India’s Economy

Renewable Energy and Green Infrastructure

India’s environmental strategy in 2025 is anchored in its ambitious renewable energy goals. The Union Budget 2025 is expected to allocate significant funds to expand solar, wind, and hydropower capacities, alongside advancements in green hydrogen. The National Green Hydrogen Mission, launched in 2023, is gaining momentum, with investments aimed at positioning India as a global hub for green hydrogen production.

The government is also promoting electric vehicle (EV) adoption through tax incentives and the development of charging infrastructure, targeting 30% EV penetration by 2030. Posts on X highlight India’s clean energy manufacturing push, including subsidized renewable projects and locally produced solar cells and batteries, with a goal of 27 million rooftop solar installations by 2030.

Green infrastructure projects, such as the Mangrove Initiative for Shoreline Habitats & Tangible Incomes (MISHTI), underscore India’s commitment to biodiversity and coastal resilience. Ghaziabad’s launch of India’s first certified green municipal bond to fund a ₹150 crore sustainable sewage treatment project exemplifies innovative financing for environmental goals.

Circular Economy and Waste Management

The 2025 Budget is expected to prioritize circular economy principles, supporting recycling infrastructure and resource-efficient practices to address urban waste challenges. The Plastic Waste Management Rules, introduced in 2018, continue to drive reductions in single-use plastics, with companies like Dr. Reddy’s achieving 100% waste neutrality in plastic by FY23.

Corporate initiatives are also advancing circularity. For instance, Tata Group entities have committed to 100% recyclable, reusable, and compostable packaging by 2025, reflecting a broader trend among Indian corporates to integrate sustainability into their operations.

Climate Resilience and Adaptation

India’s vulnerability to climate change, evidenced by rising temperatures, erratic monsoons, and extreme weather events, has spurred investments in climate resilience. The International Energy Agency estimates that India requires $1.4 trillion to develop clean energy infrastructure and meet global climate targets. Green finance frameworks, including green bonds, are gaining traction to fund these efforts, with the 2025 Budget expected to bolster the green bond market.

The government-backed Jalaj project, linking river conservation with livelihoods, and the Namami Gange initiative, restoring biodiversity along the Ganges, highlight India’s holistic approach to environmental stewardship. These projects not only address ecological challenges but also create economic opportunities for local communities.

Social Developments: Fostering Inclusivity and Equity

Workforce Diversity and Social Welfare

The social pillar of ESG in India focuses on inclusive growth, workforce diversity, and social welfare. The 2025 Budget is expected to emphasize human capital development through education, skill development, and healthcare initiatives. Companies are increasingly adopting targeted recruitment and inclusion programs to enhance representation of marginalized groups, such as People with Disabilities (PwD).

However, challenges persist. Workforce diversity efforts often lack a holistic approach, with gaps in equal representation across sectors. To address this, organizations are encouraged to implement standardized reporting practices to ensure transparency and comparability in social impact disclosures.

Community Engagement and Human Rights

Indian corporates are prioritizing community engagement to foster positive societal impact. For example, Infosys and TCS have committed to carbon neutrality while supporting local communities through education and healthcare programs. The Supreme Court’s pioneering public interest litigation (PIL) framework continues to empower citizens and social organizations to address human rights and environmental concerns, reinforcing India’s commitment to social justice.

Labor law reforms, including the 2020 labor codes, aim to modernize regulations, ensuring fair wages, safe working conditions, and social security. However, enforcement remains a challenge, particularly in addressing issues like discrimination and human rights abuses in supply chains.

Governance Developments: Building Trust and Accountability

Corporate Governance and Transparency

Governance is a cornerstone of India’s ESG framework, with increasing scrutiny on corporate practices. SEBI’s BRSR mandate has driven greater accountability, requiring companies to disclose governance structures, anti-corruption measures, and stakeholder engagement. Studies indicate a negative correlation between corporate governance scores and stock price volatility, underscoring the financial benefits of strong governance.

In 2025, SEBI’s revised ESG rating norms aim to enhance governance by clarifying withdrawal rules and tightening disclosure requirements. However, non-uniform reporting practices and limited data availability continue to hinder comparability, prompting calls for standardized metrics and external assurance.

Anti-Corruption and Ethical Practices

India’s complex regulatory environment poses challenges related to corruption and compliance. Companies with robust governance frameworks are better positioned to mitigate these risks, attracting investor confidence. For instance, Larsen & Toubro’s transition of a $150 million term loan into a sustainability-linked loan in 2023 demonstrates how governance aligns with ESG goals, with interest rates tied to sustainability targets.

The role of boards and management in overseeing ESG issues is also evolving. Large companies are proactively adapting to BRSR requirements and investor expectations, integrating ESG into strategic decision-making.

Corporate Initiatives: Leading by Example

Indian corporates are at the forefront of ESG adoption, driven by regulatory mandates and investor pressure. Notable examples include:

• Infosys and TCS: Committed to carbon neutrality by 2030, with initiatives to reduce carbon footprints and support community development.

• Wipro: Aims to use 100% renewable energy by 2030 and achieve net-zero greenhouse gas emissions by 2040.

• Larsen & Toubro: Pledged water neutrality by 2035 and carbon neutrality by 2040, leveraging sustainability-linked financing.

• Dr. Reddy’s: Achieved 100% plastic waste neutrality and aims to be water-positive by 2025.

• Tata Group: Prioritizes sustainability across its entities, with a focus on recyclable packaging and support for ESG-focused startups.

• 
  

Startups like Breathe ESG, which raised $160,000 in seed funding, are also driving innovation by offering SaaS platforms for sustainability measurement and reporting.

Financing ESG: The Rise of Green Finance

Green Bonds and Sustainable Financing

Sustainable financing is a critical enabler of India’s ESG ambitions. The green bond market is expanding, with issuances funding clean energy, sustainable infrastructure, and climate resilience projects. The 2025 Budget is expected to introduce measures to strengthen green finance, including incentives for green bond issuances.

Corporates are tapping into sustainable financing to improve their ESG quotient. For example, Larsen & Toubro’s sustainability-linked loan with Bank of America ties interest rates to environmental targets, reflecting a growing trend of aligning financial instruments with ESG outcomes.

ESG-Focused Investment Funds

The rise of ESG-focused investment funds is reshaping India’s financial markets. Investors are increasingly prioritizing companies with strong ESG performance, driven by India’s net-zero target and SEBI’s BRSR mandates. Exchange-Traded Funds (ETFs) and mutual funds focused on ESG-compliant stocks are gaining popularity, offering diversified portfolios that exclude sectors like tobacco and weapons.

Challenges in India’s ESG Journey

Despite significant progress, India faces several challenges in its ESG adoption:

1. Data Quality and Consistency: Inconsistent reporting practices and limited publicly available data hinder investor evaluations of ESG performance. Standardized reporting units and clear data sources are needed to improve comparability.

2. Limited Awareness: Many companies, particularly small and medium enterprises (SMEs), lack the resources or knowledge to integrate ESG practices.

3. Weak Regulatory Enforcement: While regulations are evolving, enforcement remains uneven, particularly in labor and environmental compliance.

4. Greenwashing Risks: Some companies adopt ESG language without substantive action, necessitating stronger oversight to prevent greenwashing.

5. Supply Chain Impacts: Assessing and mitigating environmental and social impacts across supply chains remains a gap for many organizations.

   
   

Opportunities for Growth

India’s ESG landscape is ripe with opportunities:

1. Innovation in Clean Tech: Startups and MSMEs are leveraging clean-tech and agro-tech to decarbonize industries, supported by venture capital and government incentives.

2. Global Leadership: India’s commitment to net-zero by 2070 and participation in frameworks like the Paris Agreement position it as a leader in sustainable development.

3. Inclusive Growth: ESG-driven policies can address social challenges like poverty and inequality, creating economic opportunities for marginalized communities.

4. Investor Confidence: Strong ESG performance attracts global investors, reducing stock volatility and enhancing long-term profitability.

   
   

The Role of Stakeholders

Government

The government plays a pivotal role in shaping India’s ESG agenda through policies, incentives, and enforcement. The 2025 Budget is expected to reinforce this commitment with investments in green infrastructure, social welfare, and governance reforms.

Corporates

Indian corporates are increasingly embedding ESG into their strategies, driven by regulatory mandates and investor expectations. Collaboration with suppliers and stakeholders is critical to improving ESG performance across value chains.

Investors

Investors are key catalysts, demanding greater transparency and accountability. The growth of ESG-focused funds and the negative correlation between governance scores and stock volatility underscore the financial rationale for ESG adoption.

Civil Society

Civil society, empowered by the Supreme Court’s PIL framework, continues to advocate for environmental and social justice, holding corporates and regulators accountable.

Global Context and India’s Position

Globally, ESG is at a crossroads, with political polarization and regulatory fragmentation creating uncertainty. In the U.S., anti-ESG sentiment and stalled federal climate disclosure rules contrast with state-level mandates in California and New York. In Europe, the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) set stringent standards, though proposed simplifications may ease compliance burdens.

India’s market-driven approach, balancing voluntary compliance with regulatory mandates, positions it uniquely. While multinational firms adopt international standards, broader adoption among SMEs requires policy support. India’s participation in global climate frameworks and its focus on adaptation and mitigation enhance its credibility as a sustainable investment destination.

Conclusion

India’s ESG revolution in 2025 reflects a dynamic interplay of regulatory advancements, corporate innovation, and societal engagement. From renewable energy expansion to inclusive social policies and robust governance frameworks, India is forging a path toward sustainable growth. While challenges like data inconsistencies and limited awareness persist, the opportunities for innovation, investor confidence, and global leadership are immense. As India approaches its Union Budget 2025, the integration of ESG principles into economic and corporate strategies will solidify its position as a pioneer in sustainable development, paving the way for a greener, more equitable future.