Corporate sustainability has evolved from a peripheral corporate social responsibility (CSR) initiative into a core component of business strategy and legal compliance. With the intensification of environmental crises such as climate change, pollution, biodiversity loss, and resource depletion, governments and regulatory bodies around the world are enforcing stricter frameworks to hold corporations accountable for their environmental footprints. India, in particular, has witnessed a marked shift in its regulatory approach towards environmental accountability in the corporate sector. This transition is largely shaped by the interplay between the Companies Act, 2013 and the evolving regulatory standards issued by the Securities and Exchange Board of India (SEBI). Together, these instruments provide the statutory and regulatory basis for embedding sustainability into corporate governance.

At its essence, corporate sustainability entails aligning business operations with the broader environmental, social, and governance (ESG) goals of society. It requires corporations not only to comply with environmental laws but to proactively minimize their ecological harm and contribute to sustainable development. As global conversations around the green economy and net-zero transitions gain momentum, environmental sustainability is no longer viewed merely as an ethical imperative; it is a legal, strategic, and financial necessity. Companies that fail to account for environmental risks now face reputational damage, loss of investor confidence, and potential regulatory penalties.

India’s Companies Act, 2013 represents a significant step toward integrating social and environmental considerations into corporate operations. With the introduction of a mandatory CSR framework under Section 135, Indian corporate law became one of the first in the world to require companies to spend a portion of their profits on CSR activities. Although the Act does not impose specific quotas on environmental spending, it explicitly includes environmental sustainability within the ambit of approved CSR activities under Schedule VII. This has encouraged many Indian companies to direct their CSR funds toward environmental initiatives, such as afforestation, renewable energy adoption, water conservation, and pollution mitigation. However, the Act’s implementation and enforcement mechanisms have raised important questions about the actual impact of such spending, especially in the absence of stringent performance audits and accountability structures.

Complementing the Companies Act, SEBI has played an increasingly important role in mainstreaming ESG considerations through its investor-focused disclosure regimes. SEBI’s Business Responsibility Reports (BRR), introduced in 2012 for the top listed companies, were a step in this direction. However, recognising the limitations of BRR in terms of scope and granularity, SEBI introduced the Business Responsibility and Sustainability Reporting (BRSR) framework in 2021. This framework requires the top 1000 listed entities to report on sustainability-related indicators across nine broad principles laid out in the National Guidelines on Responsible Business Conduct (NGRBC). Several of these principles directly target environmental issues, including efficient resource use, emissions reduction, and biodiversity preservation. Through the BRSR, SEBI has brought Indian ESG disclosures closer in line with global standards, such as those developed by the Global Reporting Initiative (GRI) and the Task Force on Climate-related Financial Disclosures (TCFD).

This article critically analyses the legal and regulatory mechanisms enforcing corporate environmental accountability in India. It focuses primarily on the Companies Act, 2013 and SEBI’s evolving sustainability disclosure frameworks, particularly the BRSR. It evaluates their effectiveness, identifies implementation gaps, and explores how India’s legal regime can be made more robust through improved enforcement, stakeholder participation, and the adoption of performance-based sustainability standards. By examining these developments within a comparative global context, the article offers recommendations for building a more cohesive and impactful legal framework for corporate environmental responsibility in India

The Evolution of Environmental Responsibility in Corporate Law

Environmental sustainability within the corporate domain was historically relegated to voluntary initiatives. However, growing global concern over climate change and biodiversity loss has led to the integration of environmental considerations into corporate governance. Indian law has responded with a progressive framework, notably through the Companies Act, 2013, and SEBI’s regulatory instruments, including the Business Responsibility and Sustainability Reporting (BRSR) framework.

Corporate Sustainability Under the Companies Act, 2013

Corporate Social Responsibility (CSR) and Environmental Mandates

Section 135 of the Companies Act, 2013 introduced a unique mandatory CSR regime, applicable to companies meeting specified financial thresholds. While CSR is broad, Schedule VII explicitly includes “ensuring environmental sustainability” as an area of investment. Companies are thus expected to spend at least 2% of their average net profits on qualifying CSR activities, many of which are environmentally focused.

Limitations of the CSR Framework

Despite its mandatory nature, the CSR provision operates on a “comply or explain” model, which often allows companies to escape substantive accountability. The law does not mandate implementation of environmental projects but only encourages such spending. Further, the lack of stringent monitoring mechanisms and definitional ambiguity regarding ‘sustainability’ often dilutes impact.

SEBI Regulations: Strengthening the ESG Framework

Business Responsibility and Sustainability Reporting (BRSR)

In 2021, SEBI mandated the top 1000 listed companies to submit BRSR reports, replacing the older Business Responsibility Report (BRR). BRSR aligns with global ESG (Environmental, Social, and Governance) benchmarks and requires granular disclosures across nine principles outlined in the National Guidelines on Responsible Business Conduct (NGRBC). Three of these principles directly concern environmental stewardship, including sustainable resource use, climate action, and environmental risk mitigations.

Role of SEBI in Environmental Accountability

SEBI plays a dual role of enforcer and facilitator. It requires disclosure but does not impose penalties for non-performance. While the BRSR mechanism fosters transparency, its success relies heavily on investor scrutiny and stakeholder activism rather than legal sanctions. Moreover, as these guidelines evolve, SEBI has signalled a move toward more substantive ESG compliance, indicating possible future mandatory performance-based requirements.

Judicial Interventions and Interpretation

Indian courts have increasingly recognised the importance of environmental governance. In MC Mehta v Union of India (1987 AIR 965), the Supreme Court established the ‘polluter pays’ principle, which now implicitly underpins corporate environmental liability. Further, in Tata Housing Development Co. v Goa Foundation [(2003) 11 SCC 714], the court emphasized corporate accountability in ecologically sensitive zones, suggesting that legal compliance must reflect sustainable development ideals.

Key Challenges in Enforcement

Fragmented Regulatory Landscape

The overlapping jurisdictions of the Ministry of Corporate Affairs, SEBI, and environmental regulators often result in diluted accountability. Coordination between these bodies is minimal, weakening enforcement efforts.

Lack of Performance-Based Metrics

While disclosure is essential, Indian regulatory focus still leans heavily on inputs rather than outcomes. Companies may disclose efforts without demonstrating actual environmental impact or improvements in sustainability metrics.

Limited Civil Society Participation

Despite provisions for stakeholder engagement, civil society and shareholders have limited power to enforce environmental norms. There is also a dearth of accessible grievance mechanisms for communities affected by corporate environmental negligence.

Comparative Insights: Lessons from Global Jurisdictions

Several jurisdictions offer models India might consider:

• European Union: The Corporate Sustainability Reporting Directive (CSRD) mandates robust ESG disclosures with third-party assurance.
• United States: The Securities and Exchange Commission (SEC) has proposed climate risk disclosures tied to financial performance.
• Japan: ESG reporting is linked to corporate credit rating and shareholder value, incentivising genuine compliance.

India could adopt similar strategies, particularly introducing third-party audits for sustainability reports and linking ESG performance to financial incentives or penalties.

The Way Forward: Toward a Holistic Legal Framework

Legislative Reforms

To enhance environmental accountability, the CSR framework must be overhauled to include performance benchmarks, penalties for greenwashing, and tax benefits for verified sustainability investments.

Strengthening SEBI’s Powers

SEBI should be empowered to penalise companies for non-compliance with BRSR disclosures. Additionally, it must create sector-specific ESG guidelines that consider India’s unique environmental challenges.

Enhanced Role of Independent Directors and Auditors

Independent directors and statutory auditors should be trained and mandated to review environmental performance and disclosures actively. This ensures environmental governance becomes integral to board-level decision-making.

Encouraging Stakeholder Engagement

Companies should be required to consult affected communities and publish impact assessments. Establishing ombudsman offices for environmental grievances can further enhance public accountability.

Conclusion

Corporate environmental accountability is no longer a peripheral concern but a central pillar of sustainable economic development. In India, the integration of environmental considerations into corporate governance through legal instruments like the Companies Act, 2013, and the regulatory frameworks of the Securities and Exchange Board of India (SEBI) marks an important shift toward institutionalising sustainability. However, despite the foundational steps taken, the current legal approach remains largely disclosure-based and often lacks the mechanisms necessary to drive measurable environmental outcomes. While transparency through frameworks like BRSR is a step forward, it must be accompanied by robust enforcement and clearly defined performance metrics.

The Companies Act’s CSR provisions and SEBI’s sustainability reporting regulations have contributed to the normalization of environmental consciousness in corporate boardrooms. Yet, compliance often tends to be procedural rather than substantive. The “comply or explain” model under Section 135, for instance, allows companies to evade true accountability by providing explanations for non-spending. Similarly, SEBI’s reporting frameworks, though improving in detail and scope, currently lack the power to impose penalties for misleading or inadequate disclosures. As such, the absence of statutory compulsion for actual performance on environmental goals poses a significant limitation.

Furthermore, stakeholder engagement remains weak, with minimal opportunities for affected communities, civil society, or minority shareholders to influence corporate environmental conduct. Strengthening participatory mechanisms, such as public consultations, grievance redressal systems, and third-party audits, could ensure that environmental accountability is not just top-down but participatory and inclusive. Moreover, environmental governance in the corporate sector must be better coordinated with existing environmental laws and regulatory agencies to avoid fragmentation and overlap.

To address these challenges, the legal framework must evolve toward a more outcome-oriented approach. Introducing sector-specific environmental performance standards, mandating third-party verification of ESG data, and linking executive compensation to sustainability outcomes are potential strategies to ensure deeper integration of environmental concerns into corporate strategy. Additionally, regulatory bodies such as SEBI and the Ministry of Corporate Affairs should be equipped with stronger enforcement powers to penalise non-compliance effectively.

In conclusion, enforcing corporate environmental accountability requires more than voluntary commitment or superficial compliance. It necessitates a fundamental recalibration of legal and regulatory priorities—one that redefines corporate success not only by profit margins but also by environmental impact. For India to meet its sustainable development goals and its climate commitments under international frameworks, corporate actors must be held accountable through a legal system that is both progressive and enforceable.

Bibliography (Indicative, Bluebook Format)

• Companies Act, No. 18 of 2013, INDIA CODE.
• Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
• SEBI Circular on Business Responsibility and Sustainability Reporting (BRSR), May 2021.
• National Guidelines on Responsible Business Conduct (NGRBC), Ministry of Corporate Affairs, 2019.
• MC Mehta v Union of India, AIR 1987 SC 965.
• Tata Housing Development Co. v Goa Foundation, (2003) 11 SCC 714.
• European Commission, “Corporate Sustainability Reporting Directive (CSRD),” 2022.
• SEC, “Proposed Rule: The Enhancement and Standardization of Climate-Related Disclosures for Investors,” 2022.

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Author: Anika Nusrat

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