A prominent parliamentary committee has urged a comprehensive overhaul of India’s Companies Act, 2013, to legally embed Environmental, Social, and Governance (ESG) principles into corporate governance frameworks. The panel’s recommendations include making ESG responsibilities a mandatory part of the fiduciary duties of company directors, transforming what has traditionally been voluntary disclosure into enforceable compliance obligations. This shift reflects growing recognition among lawmakers of the critical role sustainable business practices play in driving long-term economic and social development.

The committee also proposed the establishment of a dedicated statutory oversight body tasked with monitoring ESG compliance and ensuring consistent enforcement across sectors. Such an authority would provide a centralized mechanism for reporting, auditing, and accountability, aligning Indian corporate governance with evolving global standards. The panel highlighted that embedding ESG considerations into legal frameworks is essential not only for environmental sustainability but also for enhancing investor confidence and protecting stakeholder interests. This legislative push comes as India seeks to position itself as a leader in sustainable finance and responsible business conduct amid increasing scrutiny from international investors and rating agencies.

Experts believe that the proposed changes will incentivize companies to adopt more rigorous sustainability policies and improve transparency on social and governance issues. However, the transition may pose challenges for businesses, especially smaller firms, in adapting to expanded reporting requirements and regulatory oversight. Stakeholders emphasize the need for phased implementation and capacity-building initiatives to support compliance. The parliamentary panel’s recommendations are expected to catalyze debate and eventual amendments to the Companies Act, marking a critical step towards integrating ESG into India’s corporate legal architecture. This move could have significant implications for listed companies, investors, and regulators, fostering a culture of accountability and sustainability that aligns with global best practices.