Environmental, Social And Governance Comparative Guide, 2026

1. Climate – the law governing operations that emit Greenhouse Gases (e.g. carbon trading) is addressed by Environment and Climate Change international guides, in respect of ESG: a. Is there any statutory duty to implement net zero business strategies; b. Is the use of carbon offsets to meet net zero or carbon neutral commitments regulated; c. Have there been any test cases brought against companies for undeliverable net zero strategies; d. Have there been any test cases brought against companies for their proportionate contribution to global levels of greenhouse gases (GHGs)?

a. Is there any statutory duty to implement net zero business strategies;

India has set ambitious national climate commitments at COP26 in Glasgow in November 2021, of: (a) reaching 500 GW non-fossil energy capacity by 2030; (b) fulfilling 50% (fifty percent) of its energy requirements from renewable energy by 2030; (c) reducing total projected carbon emissions by 1 billion tonnes by 2030; (d) reducing carbon intensity of the economy by 45% (forty-five percent) by 2030; and (e) achieving net zero emissions by 2070. India’s commitment towards achieving net zero emissions by 2070 was subsequently reinforced at COP27 in November 2022 (held in Sharm el-Sheikh, Egypt) when India submitted its long-term low carbon development strategy to the United Nations Framework Convention on Climate Change, serving as the national blueprint for achieving India’s net zero emission goals. Recently, in March 2026, India has also updated its Nationally Determined Contribution for the period 2031-2035, marking another pivotal step towards committing to reduce the emissions intensity of its gross domestic product by 47% (forty-seven percent) by 2035 and to achieve 60% (sixty percent) of aggregate installed electricity capacity from non-fossil fuel sources by 2035. India has also enhanced its ambition of creating carbon sink through forest and tree cover to 3.5-4.0 billion tonnes of CO2 equivalent by 2035 from 2005 level.

While these are national-level pledges and targets rather than direct statutory mandates, a comprehensive regulatory framework has been formulated to translate these pledges and goals in the form of binding obligations for specific categories of businesses. For instance:

1. In 2022, the Government of India (“GOI”) introduced an amendment to the Energy Conservation Act, 2001 (“Energy Act”) which empowers the Central Government to establish an Indian Carbon Market (“ICM”), with its own Carbon Credit Trading Scheme (“CCTS”) and to set greenhouse gas (“GHG”) emission intensity targets for ‘designated consumers’ in energy-intensive sectors.
2. (In addition to the ICM, the Securities and Exchange Board of India (“SEBI”) requires the top 1,000 (one thousand) listed companies to publish a Business Responsibility and Sustainability Report (“BRSR”) as part of their annual Environmental, Social, Governance (“ESG”) performance report, which includes detailed disclosures on GHG emissions, energy intensity, and climate-related governance.
3. The Companies Act, 2013 (“Companies Act”) further requires boards of directors to address energy conservation in their annual reports and, for qualifying companies, mandates expenditure of 2% (two percent) of average net profits on corporate social responsibility (“CSR”) activities, which may include environmental sustainability projects.
4. Lastly, in order to establish an innovative market based mechanism to incentivise environment positive actions, and which is independent of carbon credit under the CCTS, the GOI launched the ‘Green Credit Programme’ established under the Green Credit Rules, 2023 which acts as an innovative voluntary market-based mechanism, that issues tradeable ‘green credits’ for verified environmental actions such as afforestation, water conservation, sustainable agriculture, waste management, air pollution reduction, and mangrove conservation. Companies can earn and trade green credits on a dedicated government digital platform, supplementing their broader sustainability commitments.
5. 9 (nine) energy-intensive industrial sectors, namely, aluminium, cement, chlor-alkali, pulp and paper, iron and steel, fertilisers, petroleum refining, petrochemicals, and textiles, have been identified under the CCTS for legally binding GHG emission intensity reduction targets from FY 2025–26.
6. On March 21, 2026, the ICM portal was formally launched, with carbon credit trading anticipated to commence within 4 (four) months.
7. A stricter sub-set of the BRSR requires independent third-party assessment of 9 (nine) key ESG indicators, including GHG emissions intensity for the top 150 (one hundred fifty) listed companies from FY 2023–24, the top 250 (two hundred fifty) from FY 2024–25, the top 500 (five hundred) from FY 2025–26, and the top 1,000 (one thousand) from FY 2026–27.

b. Is the use of carbon offsets to meet net zero or carbon neutral commitments regulated;

Yes, India has established a structured and legally regulated carbon offset mechanism under the umbrella of the CCTS framework (which partially regulates and is presently an evolving framework). The CCTS, notified in June 2023 under the Energy Act, operates through 2 (two) structurally distinct market segments: (i) a compliance market, under which approximately 490 (four hundred and ninety) industrial entities across 9 (nine) energy intensive sectors face binding emission intensity targets; and (ii) an offset market, which enables non-obligated entities to participate voluntarily by undertaking eligible projects in sectors such as renewable energy, forestry, biogas, green hydrogen, and waste management. However, it is important to distinguish between: (i) compliance markets under the CCTS which are governed by mandatory statutory regulatory carbon reduction regime; and (ii) voluntary carbon markets, which are not yet comprehensively regulated under Indian law and are incentive driven for entities to meet their decarbonization targets on a voluntary basis. The carbon credit certificates (“CCCs”), each denominated in one tonne of CO₂ equivalent, are issued to entities that outperform their emission intensity targets – non-compliant entities must purchase CCCs from the market or face an environmental compensation penalty equal to twice the average market price of CCCs, subject to the final notified rules and established enforcement practice, payable within 90 (ninety) days to the environment protection fund under the Environment (Protection) Act, 1986 (“Environment Act”).

The exchange-based trading framework for CCCs has been formally established by the Central Electricity Regulatory Commission (“CERC”) through the CERC (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates) Regulations, 2026 (“CERC Sale of CCC Regulations”), notified on February 27, 2026 and published in the Official Gazette on March 3, 2026. The CERC Sale of CCC Regulations envisage the establishment of India’s first comprehensive regulatory framework dedicated towards exchange-traded carbon credits and the Bureau of Energy Efficiency (“BEE”) has been designated as the ‘administrator’ – responsible for formulating detailed trading procedures, registering market participants, and monitoring compliance; while the Grid Controller of India Limited (“Grid India”) will serve as the registry – responsible for maintaining electronic accounts of CCC holdings, verifying transactions, and recording transfers between buyers and sellers. The trading of CCCs must take place through CERC-approved power exchanges on a monthly basis, with price discovery occurring within a floor price and forbearance price band (maximum regulatory cap) which will be as approved by the CERC based on a proposal to be made by BEE, thereby ensuring market functioning and preventing excessive price volatility. The Grid India is required to verify cumulative bids across all exchanges, declare excess bids void, and if any entity is recorded by Grid Controller to be in breach during such verification for more than 3 (three) defaults in a quarter, such entity will face a 6 (six) month trading ban, without prejudice to any penalty under the Energy Act. The CERC will retain overarching market oversight powers and may intervene where abnormal price movements, sudden volatility, or unusual trading volumes are observed. The ICM is expected to become operational by mid-2026.

The Renewable Energy Certificates (“RECs”) remain tradeable on power exchanges under the CERC (Terms and Conditions for Renewable Energy Certificates for Renewable Energy Generation) Regulations, 2022 (“CERC REC Regulations”), enabling entities with renewable purchase obligations (“RPO”) or renewable consumption obligations (“RCO”) to demonstrate compliance with their clean energy targets. An REC is a market-based tradable instrument (electronic or paper) that allows ‘obligated entities’ to meet their RPOs. An REC can also be voluntarily purchased by entities intending to offset their carbon footprints. In India, at present, there are 2 (two) kinds of RECs – solar based RECs and non-solar based RECs. The compliance unit for CCCs is denominated in tonnes of CO2e, while the RPO/RCO compliance unit for RECs is measured in MWh/KWh, which represents electricity-based green attributes, not tonnes of CO2e. The State Electricity Regulatory Commissions audit RPO compliance of obligated entities against units of green electricity and/or REC redemption, and not against carbon credit certificates. The entities eligible to issue RECs include: (i) renewable energy projects if: (a) the tariff for such project has not been determined or adopted by the CERC or the SERCs, for full or part capacity; or the electricity generated from such project is not sold directly or through an electricity trader or in the power exchange, for RPO compliance by an obligated entity; and (b) such project has not availed of any waiver of or concessional transmission charges/ wheeling charges; (ii) captive power plant based on renewable energy sources if conditions set out in (a) and (b) above are fulfilled and the RECs issued to a captive generating plant cannot be sold, to the extent of their self-consumption; and (iii) discoms and open access consumers if they purchase electricity from renewable energy sources in excess of their RPO (as determined by the SERCs), to the extent of excess renewable energy purchased. The CERC (Terms and Conditions for Renewable Energy Certificates for Renewable Energy Generation) (First Amendment) Regulations, 2026 (“REC First Amendment”), notified on March 24, 2026, have introduced significant reforms to the REC framework, including: (a) formal recognition of Virtual Power Purchase Agreements (“VPPAs”), under which RECs issued to an eligible renewable energy generating station that has entered into a VPPA are transferred to the consumer or designated consumer, who may use such RECs to meet its RPO or RCO. The RECs (forming part of the VPPAs) are extinguished upon transfer to the REC purchaser (although surplus RECs, i.e., the balance RECs over and above those used towards RPO or RCO may be carried forward for future compliance albeit with a restriction on re-sale on power exchanges or through traders); (b) revised certificate multipliers based on a weighted methodology considering tariff range (40% (forty percent)), technology maturity (30% (thirty percent)), and capacity credit/peak support (30% (thirty percent)), with differentiated multipliers for generating stations commissioned before and after the date of effect of the REC First Amendment; (c) expanded eligibility for captive generating stations based on renewable energy sources, including those renewable energy plants which do not fulfil captive generating plant conditions under the Electricity Rules, 2005 but have self-consumption; and (d) revised the mandatory compliance window within which a distribution licensee or an open access consumer must apply for issuance of RECs from 3 (three) months from the end of a financial year to 3 (three) months from the date of certification by the State Electricity Regulatory Commission concerned, failing which no certificate will be issued. The Energy Act provides for a perform, achieve and trade (“PAT”) scheme which also allows designated consumers to earn tradeable energy saving certificates (“ESCs”) for exceeding energy efficiency targets, although the PAT scheme is being gradually transitioned into the CCTS. Additionally, the ‘Green Credit Programme’, operates as a separate, voluntary and complementary mechanism to the CERC REC Regulations, issuing tradeable green credits for 8 (eight) categories of environmental action including tree plantation, water conservation, sustainable agriculture, and waste management.

c. Have there been any test cases brought against companies for undeliverable net zero strategies;

India has not yet witnessed any landmark judicial rulings holding companies liable for failing to meet net-zero or decarbonization commitments. India’s carbon offset and sequestration framework remains at a nascent stage, with the broader compliance architecture still evolving towards a more consequence-based regulatory regime. However, a robust pattern of regulatory enforcement is emerging, which seeks to address climate-related non compliances across the following legal frameworks:

1. Misrepresentation of sustainability data in stock exchange filings, is subject to scrutiny from SEBI under (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI LODR Regulations”).
2. Sustainability considerations, such as environmental impacts, social responsibility and human rights and governance on which listed entities must disclose policies, actions, targets and performance in their annual report through the BRSR framework and the BRSR Core, have been formally integrated into corporate disclosure frameworks. Regulation 34(2)(f) of SEBI LODR Regulations mandates the inclusion of sustainability related commitments as a part of the formal financial reporting.
3. Under the CCTS mechanism read with Greenhouse Gases Emission Intensity Target Rules, 2025, target companies that miss their emission intensity obligations and fail to surrender sufficient CCCs are liable to pay environmental compensation equal to twice the average carbon credit price, payable within 90 (ninety) days to the environment protection fund under the Environment Act.
4. Vague or unsubstantiated environmental claims attract criminal liability under the Central Consumer Protection Authority Guidelines,2024, with penalties of up to INR 50,00,000 (Rupees Fifty Lakhs) and 5 (five) years’ imprisonment for claims not backed by verifiable, third party audited data, as defined under Consumer Protection Act, 2019.
5. The requirement of obtaining prior environmental clearance (“EC”) under the Environment Act is a mandatory precondition for new projects as well as for the expansion or modernization of existing projects, which would have significant environmental effects, with such categorization being updated periodically and enforced strictly.
6. Violation of pollution control laws continue to attract strict actions, leading to fines or closure orders by the National Green Tribunal, constituted under the National Green Tribunal Act, 2010 (“NGT”).

d. Have there been any test cases brought against companies for their proportionate contribution to global levels of greenhouse gases (GHGs)?

No, there have not been any significant judicial precedents in India where companies have been specifically held liable for their proportionate contribution to GHG emissions. However, Indian environmental jurisprudence has evolved robust enforcement mechanisms addressing pollution and environmental harm more broadly.

The NGT has actively exercised its powers to impose penalties, award compensation, and mandate remedial measures against entities found to be in violation of environmental laws. In parallel, the Central Pollution Control Board (“CPCB”), acting under the Air (Prevention and Control of Pollution) Act, 1981 and the Water (Prevention and Control of Pollution) Act, 1974 undertakes routine regulatory and enforcement actions against industries exceeding prescribed emission standards, including the issuance of directions, closure orders, and financial penalties. Notably, environmental compensation for non-compliance has become a prevalent feature under regulatory framework issued by the CPCB, with recent framework explicitly following the polluter pays principle and the principle of strict and absolute liability as laid down by the Supreme Court of India. In the landmark decisions such as the M.C. Mehta v. Union of India [1987 AIR 1086], which introduced the doctrine of absolute liability, and M.C. Mehta v. Kamal Nath [1997 (1) SCC 388], which reinforced the polluter pays principle, have laid the jurisprudential foundation for imposing environmental liability. These principles have since been consistently relied upon and operationalised by the NGT, which has adopted environmental compensation as a pragmatic mechanism to quantify and recover damages for ecological harm, thereby ensuring that the cost of environmental degradation is borne by the defaulting entity, i.e., the polluter.

Accordingly, while this framework reflects a more stringent domestic approach towards environmental compliance, India is yet to develop a dedicated climate liability regime akin to those emerging in jurisdictions such as Europe and the United States of America, where corporations are increasingly being subjected to litigations for their historical contributions to climate change. Climate and environment related litigation are active in India, notably before the NGT and India’s regulatory and adjudicatory framework is increasingly aligning with global trends by strengthening accountability for environmental harm.

2. Biodiversity – are new projects required to demonstrate biodiversity net gain to receive development consent?

India, currently, does not have a standalone legal requirement for “biodiversity net gain” i.e., a requirement that a project must leave nature in a measurably better state than before, unlike nations like United Kingdom, nonetheless biodiversity-related checks are deeply embedded in India’s environmental regulatory and forest diversion frameworks in the following manner:

1. Environmental Impact Assessment Notification, 2006 under the Environment Act (“EIA”): Projects falling within designated categories, as notified by the central government classified on the basis of their potential environmental impact, must obtain prior environmental clearance, including an assessment of ecological and biodiversity impacts. Further, companies must incorporate measures for avoidance, mitigation, and ecological restoration.
2. Coastal Regulation Zone (“CRZ”) Notifications: Issued under the Environment Act, the notification dated March 8, 2019 issued by the MoEFCC govern activities in notified coastal areas and impose restrictions on development activities, thereby requiring prior CRZ clearance from the coastal zone management authority concerned for specified activities to protect coastal and marine ecosystems.
3. Compensatory Afforestation and Forest Clearance: In projects involving diversion of forest land, compensatory afforestation is mandatory under the Van (Sanrakshan Evam Samvardhan) Adhiniyam, 2023, ensuring that loss of deforestation in one area is compensated through afforestation in other designated areas. The Van (Sanrakshan Evam Samvardhan) Adhiniyam, 2023 or the Forest (Conservation) Act, 1980 also mandates a forest clearance to be obtained from the central government prior to diversion of forest land for non forest purposes to protect fragile coastal ecosystems, including for infrastructure and industrial projects.
4. Wildlife and Protected Areas: The projects located near national parks, wildlife sanctuaries, or eco-sensitive zones require clearance from the Standing Committee of the National Board for Wildlife under the Wildlife (Protection) Act, 1972.
5. Biological Diversity Act, 2002: Mandates that entities must seek prior approval from the National Biodiversity Authority before accessing India’s biological resources for commercial utilisation.
6. Project-Specific Biodiversity Offsets: The Ministry of Environment, Forest and Climate Change (“MoEFCC”) has the right to impose project-specific biodiversity offset conditions under individual environmental clearances, particularly for large mining, road, hydropower, and infrastructure projects.

3. Water – are companies required to report on water usage?

Yes, India has developed various frameworks that require companies to monitor and report on their water usage and discharge of pollutants into water bodies, along with associated data for wastewater generation.

Under the BRSR framework, the top 1,000 (one thousand) listed companies are required to disclose, from FY 2026-27, in their annual reports, the: (i) water withdrawal by source; (ii) total water consumption and efficiency ratios (litres per unit of revenue or output); and (iii) wastewater discharged, including treatment status and discharge point. The water footprint is one of the BRSR core key performance indicators subject to independent verification from FY 2025–26 for the top 500 (five hundred) listed companies.

Under the EIA, projects falling within designated categories and as classified on the basis of their potential environmental impact must report their total water requirement and sources as part of the environmental clearance process. The Water (Prevention and Control of Pollution) Act, 1974, requires industries to obtain consent (both pre-construction and prior to commencement of operation) from the CPCB and/or the relevant State pollution control boards to discharge effluents, which mandates detailed water usage and discharge reporting.

The Solid Waste Management Rules, 2026, notified by MoEFCC and in force from April 1, 2026, have introduced updated provisions on wastewater and leachate management from solid waste processing facilities. Under the Guidelines to Regulate and Control Ground Water Extraction in India, 2020 issued by the Central Ground Water Authority, entities drawing groundwater are required to obtain a no-objection certificate prior to extraction of groundwater and must install SIM-linked digital meters for live reporting and submit biennial water audits, with penalties as may be prescribed under applicable groundwater extraction guidelines and enforcement actions by the Central Ground Water Authority.

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