INTRODUCTION
The Environmental, Social, and Governance (ESG) frameworks have been increasingly recognised in the literature and practice of corporate governance as important tools for improving accountability, transparency, and responsible business practices. Conventional business reporting was primarily financial in nature. However, the emergence of global socio-environmental issues such as climate change, social inequality, and governance ethics has created a need to enhance the quality of disclosure to cover non-financial aspects of business activities.1 The ESG frameworks not only meet regulatory requirements but also address investors’ needs regarding sustainability performance, risk management, and long-term value creation.2 Researchers have argued that effective ESG regulation can enhance corporate governance by ensuring that companies’ activities align with society and the international community.3
In the Indian context, the Business Responsibility and Sustainability Reporting (BRSR) guidelines, as mandated by the Securities and Exchange Board of India (SEBI), are the main ESG reporting guidelines for listed companies. The BRSR guidelines, which were voluntary, have become mandatory for the top 1,000 listed companies based on market capitalisation and now include reporting on environmental impact, social representation, and governance framework.4 However, recent studies on policy analysis have reduced the scope of compliance, prolonged the period of value chain identification, and covered the aspect of assurance by a third party to enhance data quality.5 This is the outcome of the prudent policy of the Indian government to integrate sustainability into corporate accountability, based on global standards such as the Global Reporting Initiative (GRI) and Sustainable Development Goals (SDGs).6 Although major breakthroughs have been achieved, challenges still persist in terms of data standardisation and comparability, with some scholars highlighting the lack of assurance and enforcement systems.7
The ESG of the European Union has resulted in an inclusive and harmonised approach, particularly with the introduction of the “Corporate Sustainability Reporting Directive (CSRD)” and other frameworks such as the “Sustainable Finance Disclosure Regulation (SFDR)” and the EU Taxonomy for Sustainable Activities. The CSRD applies to a broader set of large companies and imposes stringent reporting obligations to ensure consistency, double materiality, and relevance to stakeholders.8 Although the current political landscape in the EU has led to certain modifications and exceptions for smaller firms, the regulatory agenda remains firmly rooted in the principles of comparability and transparency among member states.9 These ESG tools largely align with the EU’s sustainability strategies and investor protection policies, which aim to directly incorporate social and environmental factors into corporate governance structures.10
A comparison of the Indian and EU ESG frameworks reveals convergences and divergences in the regulatory agendas, scope, and implementation maturity. Although the EU has a prescriptive regulatory agenda and a wide scope of implementation, the Indian government’s market capitalisation-driven, staged approach, and its attempts to improve credibility and align with best international practices are quite different.11 However, the focus on mandatory reporting and disclosure quality suggests a certain global trend towards the incorporation of ESG factors into corporate governance structures.12 It is important to recognise these differences in the context of policymakers, regulators, and MNCs navigating cross-border ESG compliance and improve corporate governance structures in the rapidly sustainability-driven business environment.
LEGAL AND CONCEPTUAL FRAMEWORK
A. Conceptual Framework of ESG and Corporate Governance
Environmental, Social, and Governance (ESG) refers to a set of non-financial criteria used to evaluate corporate performance outside traditional financial metrics. ESG integrates environmental stewardship (climate risk, emissions, resource use), social responsibility (labour standards, human rights, stakeholder engagement), and governance mechanisms (board accountability, transparency, anti-corruption measures) into corporate decision-making.13 Conceptually, ESG evolved from “corporate social responsibility (CSR)” but differs in its measurable, disclosure-oriented, and investor-focused framework. It aligns closely with stakeholder theory, which argues that corporations must serve broader societal interests rather than solely maximising shareholder wealth.14
In corporate governance theory, ESG strengthens oversight by embedding sustainability into board responsibilities, risk management structures, and executive accountability. The integration of ESG metrics into governance mechanisms enhances long-term value creation, reduces reputational risk, and improves investor confidence.15 The concept of “double materiality,” mainly highlighted in the European Union, expands the traditional materiality doctrine by requiring companies to disclose not only financial risks to the firm but also the firm’s impact on society and the environment.16 Thus, ESG serves as both a governance tool and a sustainability accountability.
B. Legal Framework in India
In the Indian context, ESG regulation is mainly regulated by the Securities and Exchange Board of India (SEBI). The most prominent regulatory body is the Business Responsibility and Sustainability Reporting (BRSR) framework, which was made mandatory in 2021 for the top 1,000 listed companies in terms of market capitalisation.17 The BRSR framework has replaced the earlier Business Responsibility Report (BRR) and is intended to ensure that the corporate reporting is in compliance with the National Guidelines on Responsible Business Conduct (NGRBC) in India.
In addition, Section 135 of the Companies Act, 2013, also makes it mandatory for eligible companies to incur expenses on Corporate Social Responsibility (CSR), underscoring the social aspect of ESG regulation.18 While CSR is an expenditure-based approach, ESG under the BRSR framework is a disclosure and performance-based approach. The Indian ESG regulatory framework is still principle-based and evolving, with a greater focus on value chain disclosures and guarantee mechanisms.19 The regulatory framework is less enforcement-based compared to the EU, and there are issues related to standardisation.
C. Legal Framework in the European Union:
The European Union has created one of the most sophisticated ESG frameworks in the world. The Corporate Sustainability Reporting Directive (CSRD) has further strengthened the sustainability reporting requirements and introduced the European Sustainability Reporting Standards (ESRS).20 It replaces and strengthens the earlier Non-Financial Reporting Directive (NFRD).
The Sustainable Finance Disclosure Regulation (SFDR) has enforced the transparency requirements of financial entities on the market, leaving no room for doubt that sustainability risks are considered in investment decisions.21 The EU Taxonomy Regulation has created a system of classification for environmentally sustainable economic activities, fighting greenwashing and ensuring comparability.22 Together, these tools create a harmonised, enforceable, and mandatory ESG disclosure administration grounded in double materiality and investor protection principles.23
COMPARATIVE ANALYSIS OF ESG FRAMEWORKS IN INDIA AND THE EUROPEAN UNION:
Comparing the Indian and European tactics to ESG frameworks reveals the major differences in the development of regulations, implementation, disclosure, and corporate governance related to ESG reporting. Certainly, although both sides recognise the need for ESG reporting to enhance transparency and accountability, their views differ greatly on how to approach the issue.
Scope of ESG Disclosure Requirement:
The extent of the ESG report’s mandatory nature is yet another factor differentiating the regulatory regime of the two jurisdictions, namely India and the European Union. The reason for this is the mandatory reporting of ESG reports in India through the implementation of the Business Responsibility and Sustainability Reporting Framework by the SEBI. This reporting framework is applied only to one thousand listed companies in India, considering the market capitalisation value.24 The extent of the regulation is informed by the gradual introduction of the regulation, which prepares businesses to adopt the regulation.
On the other hand, in Europe, the application of the regulation is not limited to listed businesses but extended to large firms, certain small medium enterprises, and foreign businesses doing business within the European Union.25 The extensive application scope suggests the determination of the EU in incorporating sustainability in its corporate governance system.
Regulatory Approach:
The Indian ESG framework is principle-based, whereas the European Union ESG framework is mainly rule-based and regulatory. The regulatory regime for ESG disclosures in India follows a principles-based model, making it easy for organisations to scheme into the ESG domain. However, there may be variations in disclosure quality, as the level and nature of disclosures are flexible and depend on the NGRBC guidance from the Ministry of Corporate Affairs.26
By contrast, the European Union follows a rule-based regulatory regime for ESG disclosures, where ESRS standards govern the uniformity of such disclosures through CSRD.27
Materiality Standards:
Nonetheless, it can also be noted that there occurs yet another key difference between the two approaches in esteem to the nature of the concept of materiality. The notion of materiality is used in the Indian ESG approach in terms of corporate obligation rather than double materiality.28
As for the European Union approach, double materiality needs to be measured by corporations, as it is essential to assess both financial risks associated with the enterprise and its impact on other parties.29
CHALLENGES IN THE IMPLEMENTATION OF ESG FRAMEWORKS IN INDIA AND THE EUROPEAN UNION
The ESG concept in India and the European Union has helped enhance sustainability reporting and made companies accountable for their actions. However, it is worth noting that even though the regulation has been adopted, India and the EU have encountered some challenges in the regulatory process for ESGs. This may adversely affect the ESG concept’s impact on corporate governance practices.
Challenges in India
One more challenge associated with the ESG reporting system in India includes the lack of a common measurement tool. Although there have been attempts to ensure proper ESG disclosures by firms registered in India, including the introduction of BRSR by SEBI, the challenge of inconsistent disclosure persists because different firms have adopted different approaches.30 One should admit that the non-uniform criteria in the context of BRSR create both opportunities and challenges.
As regards the ESG reporting in India, another important challenge is the assurance issue. As far as ESG reporting standards are concerned, some achievements have been made, including the introduction of the BRSR core and the highlighting of value chain disclosures.31 However, assurance is a relatively new process.
Furthermore, problems relating to the knowledge and organisational capacity persist in efforts to ensure that the organisations adhere to their obligations under the ESG criteria, particularly where firms shift from the traditional reporting method to the sustainability reporting framework. It is indeed difficult for organisations to integrate the ESG criteria within their operations due to insufficient technical expertise and organisational capacity.32
Challenges in the European Union
As one of the regions with the most developed regulatory framework, the EU encounters some problems, for example, in relation to compliance with the CSRD as regards the expenses. The increased amount of data to be submitted and obligatory information reporting by some SMEs are becoming an impediment to sustainable reporting due to their high expenses.33 Therefore, the necessity to deal with this issue proportionately was underlined by the corporate representatives.
Firstly, the complexity of the ESRS is evident in the context that the application of this regulation involves performing a double materiality test and sectoral reporting. Although such an approach leads to the increased level of detail, it becomes vital to perform many activities before submitting any information.34 Moreover, multinational companies operating across several European states would experience problems when adapting to the new normative act.
Moreover, one more important aspect that the EU ESG regulatory framework needs to deal with is the coordination issue related to regulatory policies among the member states. Whereas CSRD seeks to develop consistency with respect to sustainability policies in the EU, the different approaches adopted by each member state to regulate supervision could pose some challenges in terms of regulatory enforcement. It thus becomes important to encourage cooperation between managers in order to ensure regularity with regard to ESG regulatory policies in the member states.
ROLE OF ESG IN STRENGTHENING CORPORATE GOVERNANCE
In such cases, it is imperative to note that the ESG model plays a significant role, acting as a catalyst for the shift towards sustainability via good corporate governance. The concept of ESG is no longer just an academic theory; instead, it has become an integral part of good corporate governance in both India and Europe.
Enhancing Transparency and Disclosure Practices:
Among others, enhanced transparency, due to the formation of disclosure practices, is among those advantages. Owing to the implementation of ESG reporting, it becomes inevitable for companies to disclose all information related to the impact that these businesses have on environmental, social, and governance issues, thus minimising informational asymmetry between corporations and stakeholders.35
In this construction, Indian regulatory practice, known as BRSR, and the EU practice, such as Corporate Sustainability Reporting Directive (CSRD) on the basis of ESRS, work to improve the quality of structured disclosures of listed companies.36 It should be stated that all the aforementioned regulatory practices work together to improve corporate disclosures.
Strengthening Board Accountability and Oversight:
Inclusion of ESG in corporate governance has a catalytic effect on the board’s performance due to the increase in the level of board members’ involvement in performing duties, which is not only limited to managing financial risks but also extends to environmental and social risks.37 According to the OECD, the inclusion of ESG in corporate governance is a key distinction of a well-structured corporate governance system.38 Whereas sustainability reporting is mandatory under CSRD in Europe, it can be encouraged in India under SEBI’s BRSR guidelines.
Promoting Stakeholder-Centric Governance:
These frameworks do not follow the conventional structure of corporate governance in terms of shareholding theory but instead apply a different concept of corporate governance based on the stakeholder theory, wherein the aims of the corporation reflect the objectives of society. The stakeholder theory is highly endorsed by the stakeholder theory because corporations should consider the interests of stakeholders within and outside the corporation.39 Disclosure requirements constitute corporate governance under ESG frameworks.
Improving Risk Management and Sustainability Integration:
According to the ESG approach, risk management can be adopted through the inclusion of risks related to the environment and society in the risk assessment process. Environmental, regulatory, and reputational risks have become significant risk factors due to the rising stakeholder awareness.40 According to Gillan et al., the use of the ESG approach will enable the organisation to easily identify long-term risk.41 Regulation supports the risk-oriented approach to ESG reporting in India and Europe.
Increasing Investor Confidence and Market Credibility:
In addition, incorporating of ESG criteria into the business enhances the accuracy of information provided to investors, making them more confident. Incorporating ESG criteria into the investment decision-making process has helped investors assess the potential of the company to create value and risks along with the corporate governance process.42 According to the European Commission, sustainability financing rules like CSRD and SFDR have played an instrumental role in directing investments into sustainable economic activities.43 BRSR guidelines formulated by SEBI can be taken as an example from India for the protection of investor interest.
POLICY RECOMMENDATIONS FOR STRENGTHENING ESG FRAMEWORKS IN INDIA AND THE EUROPEAN UNION
Through this evaluation and comparison of the ESG approach between India and Europe, one will recognise that even though both nations have achieved many advancements towards sustainability concerning their company practices, there is still some improvement required from various angles.
Recommendations for India:
However, some modifications should be made within the current regulatory system in order to make it more efficient and applicable under contemporary circumstances. First of all, the concept of double materiality should be adopted, according to which an organisation must assess both the impact of its activity on its financial situation and the external environment. This approach would provide greater significance to the report.
It is crucial to mention that great attention should be paid to the process of validating the accuracy of the presented information on environmental, social, and governance matters. Given the fact that, lately, value chain reporting has been included in the main body of BRSR, it is necessary to apply a unified criterion in order to conduct this type of reporting.
Finally, it might be argued that the range of environmental, social, and governance disclosure requirements should be broadened, including both public organisations that have medium or large sizes and private companies.
Recommendations for the European Union:
However, despite the relative progressivism of the ESG system in the EU, there are still factors that should be considered to further develop it. First of all, it is important to consider the need to reduce the reporting burden under the CSRD framework, not to overload the process.
Moreover, in order to discuss the issue of the difficulty of the reporting process in various controlling frameworks like CSRD, SFDR, and the EU Taxonomy Regulation, it is possible to simplify.
Finally, it is also necessary to consider the issue of harmonisation of ESG standards throughout the EU in connection with the cooperation between the member states of ESMA.
CONCLUSION
A comparison between ESG in India and the European Union reveals that ESG has become an essential tool for corporate governance and sustainable business practices. The European Union has created a fully aligned and integrated regulatory framework comprising the Corporate Sustainability Reporting Directive (CSRD), the Sustainable Finance Disclosure Regulation (SFDR), and the EU Taxonomy Regulation. These tools address the problems of biased disclosure, the materiality principle for double counting, and compulsory assurance, thereby improving transparency, comparability, and investor protection in the member states.
The ESG framework in India, administered by the Securities and Exchange Board of India (SEBI) through the Business Responsibility and Sustainability Reporting (BRSR) framework, can be termed as a developmental and progressive approach. Even though the application of the mandatory disclosure of the largest listed entities in terms of ESG is a major achievement, the major challenges are in the enforcement, assurance, and standardisation of the data.
The nations of India and the European Union perceive the ESG as a governance mechanism that embeds sustainability into corporate accountability. Improving the clarity, assurance, and alignment of the global framework can further enhance the management of ESG challenges in India, ensuring long-term corporate flexibility, decent governance, and sustainable economic growth.
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Footnotes
1. S. Bhattacharya, Environmental, Social, and Governance (ESG) Compliance and Corporate Governance Reforms in Emerging Economies, 24 J. Corp. L. Stud. 145 (2024).
2. R. Nair, ESG Reporting and Investor Protection: Comparative Insights from India and the EU, 12 Asian Bus. L. Rev. 89 (2025).
3. M. Varghese, Integrating ESG Metrics into Corporate Governance: Trends and Regulatory Reforms, 15 Glob. Bus. & Sustainability J. 77 (2026).
4. SEBI Expands BRSR Compliance and Value Chain Disclosure for Listed Entities, Economic Times LegalWorld (2025).
5. India Strengthens ESG Disclosure Norms Under the Revised BRSR Framework, Down To Earth (2026). Acceptable as a supporting regulatory-context citation.
6. Evolution of BRSR Reporting and ESG Compliance Trends in India (2025–2026 Report), Breathe ESG (2026).
7. Data Standardisation Challenges in ESG Reporting Frameworks: A Comparative Assessment, 9 Sustainability Governance Rev. 201 (2025).
8. The EU Corporate Sustainability Reporting Directive and Its Impact on Corporate Governance, 18 Int’l J. Env’t Sci. 55 (2025).
9. EU Eases Sustainability Reporting Rules Amid Industry Concerns, Reuters (Feb. 2025)
10. India ESG Regulatory Landscape Report 2025, India ESG (2025).
11. S. Bhattacharya, Environmental, Social, and Governance (ESG) Compliance and Corporate Governance Reforms in Emerging Economies, 24 J. Corp. L. Stud. 145 (2024).
12. M. Varghese, Integrating ESG Metrics into Corporate Governance: Trends and Regulatory Reforms, 15 Glob. Bus. & Sustainability J. 77 (2026).
13. Robert G. Eccles & Svetlana Klimenko, The Investor Revolution, 97 Harv. Bus. Rev. 106 (2019).
14. R. Edward Freeman, Strategic Management: A Stakeholder Approach (Pitman Publ’g Inc. 1984).
15. Stuart L. Gillan, Andrew Koch & Laura T. Starks, Firms and Social Responsibility: A Review of ESG and CSR Research in Corporate Finance, 66 J. Corp. Fin. 101889 (2021)
16. Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 Dec. 2022 Amending Regulation (EU) No. 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU as Regards Corporate Sustainability Reporting, 2022 O.J. (L 322) 15.
17. Securities and Exchange Board of India, Circular No. SEBI/HO/CFD/CMD-2/P/CIR/2021/562, Business Responsibility and Sustainability Reporting by Listed Entities (May 10, 2021).
18. Companies Act, No. 18 of 2013, § 135 (India).
19. Securities and Exchange Board of India, Circular No. SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122, BRSR Core – ESG Disclosures for Value Chain (July 12, 2023).
20. European Commission. (2023). Corporate Sustainability Reporting Directive (CSRD).
21. Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 Dec. 2022 Amending Regulation (EU) No. 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU as Regards Corporate Sustainability Reporting (Corporate Sustainability Reporting Directive), 2022 O.J. (L 322) 15.
22. Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 Nov. 2019 on Sustainability-Related Disclosures in the Financial Services Sector, 2019 O.J. (L 317) 1.
23. Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the Establishment of a Framework to Facilitate Sustainable Investment, 2020 O.J. (L 198) 13.
24. Securities and Exchange Board of India, Circular No. SEBI/HO/CFD/CMD-2/P/CIR/2021/562, Business Responsibility and Sustainability Reporting by Listed Entities (May 10, 2021).
25. Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 Dec. 2022 Amending Regulation (EU) No. 537/2014, Directive 2004/109/EC, Directive 2006/43/EC and Directive 2013/34/EU as Regards Corporate Sustainability Reporting (Corporate Sustainability Reporting Directive), 2022 O.J. (L 322) 15.
26. Ministry of Corporate Affairs, Government of India, National Guidelines on Responsible Business Conduct (2019).
27. Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 Supplementing Directive 2013/34/EU as Regards Sustainability Reporting Standards, 2023 O.J. (L 2772).
28. Securities and Exchange Board of India, Business Responsibility and Sustainability Reporting Format (2021).
29. Directive (EU) 2022/2464, supra note 2.
30. Securities and Exchange Board of India, Circular No. SEBI/HO/CFD/CMD-2/P/CIR/2021/562, Business Responsibility and Sustainability Reporting by Listed Entities (May 10, 2021).
31. Securities and Exchange Board of India, Circular No. SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122, BRSR Core – ESG Disclosures for Value Chain (July 12, 2023).
32. Data Standardisation Challenges in ESG Reporting Frameworks: A Comparative Assessment, 9 Sustainability Governance Rev. 201 (2025).
33. Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 Dec. 2022 as Regards Corporate Sustainability Reporting, 2022 O.J. (L 322) 15.
34. Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 Supplementing Directive 2013/34/EU as Regards Sustainability Reporting Standards, 2023 O.J. (L).
35. Securities and Exchange Board of India, Circular No. SEBI/HO/CFD/CMD-2/P/CIR/2021/562, Business Responsibility and Sustainability Reporting by Listed Entities (May 10, 2021).
36. Directive (EU) 2022/2464 of the European Parliament and of the Council of 14 Dec. 2022 as Regards Corporate Sustainability Reporting, 2022 O.J. (L 322) 15.
37. Organisation for Economic Co-operation and Development, G20/OECD Principles of Corporate Governance (2023).
38. Id.
39. R. Edward Freeman, Strategic Management: A Stakeholder Approach (1984).
40. Commission Delegated Regulation (EU) 2023/2772 of 31 July 2023 Supplementing Directive 2013/34/EU as Regards Sustainability Reporting Standards, 2023 O.J. (L).
41. Stuart L. Gillan, Andrew Koch & Laura T. Starks, Firms and Social Responsibility: A Review of ESG and CSR Research in Corporate Finance, 66 J. Corp. Fin. 101889 (2021).
42. Robert G. Eccles & Svetlana Klimenko, The Investor Revolution, 97 Harv. Bus. Rev. 106 (2019).
43. European Commission, Corporate Sustainability Reporting Directive (CSRD) (2023).