Environmental, Social, and Governance (ESG) principles are now at the center of the growth strategy agendas of companies in India. Once thought of as an ancillary consideration or a box-ticking exercise, today's integration of ESG is seen as a core driver of competitiveness. It is a source of innovation, and a pathway for long-term value creation. This evolution is positively being catalyzed by new regulations, cumulative investor pressures, and a national commitment to sustainable development.
The Rise of ESG in India’s Corporate Sector
ESG adoption in India has rapidly accelerated. Indian enterprises are learning that climate risks are not only felt at the community level but will reverberate throughout the entire society, even at the macroeconomic scale.
Indian corporate dealmakers and financiers are increasingly recognizing that sustainability is good for business. Sustainable practices enhance processes, good governance, and efficiencies in production. Additional regulatory, market, and social pressures on companies are accelerating how companies think about their decisions and manage their supply chains.
Why Are Indian Enterprises Prioritizing ESG?
As companies in India try to adjust to the new business environment, a few different factors are favoring the prioritization of ESG. Here is a description of the factors driving that prioritization:
Public Policy and Reporting Mandates
The Securities and Exchange Board of India (SEBI) has required Business Responsibility and Sustainability Reporting (BRSR) for the top 1,000 listed companies. From 2025, the BRSR Core framework provides deeper disclosures on emissions and diversity of employees and employees in the supply chain.
Market Expectations and Access to Capital
Global funds and local investors are increasingly issuing capital to companies that are ESG-compliant. ESG-focused funds in India may see an additional $50 billion in assets under management by 2026, which presents quite a preference for companies that engage in sustainable business practices.
Consumer Behaviour and Brand Value
In India, consumers across generations are shifting priorities towards brands that provide purpose and responsibility. This change acknowledges brands that use sustainable packaging or labor, or alternate labor practices, or even faster methods to ensure equality and inclusivity.
How Indian Firms Are Leveraging ESG for Growth?
Indian firms are strategically using ESG in their operations, geared toward business growth. Here are several ways they do so:
Operational Effectiveness and Cost Reduction
By integrating sustainability, renewable energy, waste minimization, and resource efficiencies, companies are lowering operational spending and increasing the speed of value delivery. They are typically reinvesting these savings in their innovations and then in sustainability.
Gradual Growth and Innovation
If Indian businesses implement ESG standards, they can enter new markets, particularly in situations when sustainability is a prerequisite for trade and investment goals. For instance, car and steel companies are innovating with electric vehicles or green steel to cater for demand for low carbon products.
Increased Brand Value and Talent Acquisition
Increased ESG profile elevates brand loyalty and attracts top companies. Reports show that 80% of Gen Z workers prefer to work for brands with a purpose. They are unique discriminators in the talent market.
Access to Sustainable Finance
Government policies and the Reserve Bank of India (RBI) are creating access to green finance and climate bonds. This supports firms in transitioning towards cleaner technologies and sustainable operations.
Governance and Risk Management
Companies are taking risks and creating stakeholder trust. This is because governance continues to strengthen as companies have more diverse groups and anti-corruption schemes. The rise of AI-enabled dashboards is allowing companies to now track their ESG metrics in real time.
Key ESG Trends and Policy Developments in 2025
Here is a brief description of the major trends and shifts in policy creating India's changing ESG landscape in 2025:
India's Union Budget 2025 and recent policy developments have positioned ESG at the forefront of national economic policy.
Record investment in solar, wind, and green hydrogen energy, more expansive Production Linked Incentive (PLI) schemes. Additionally, viability gap funding for offshore wind projects is starting to drive more green energy solutions into the business.
Companies will now have to show up their ESG considerations and metrics, increasing their transparency.
The Introduction of green bonds and a sovereign green fund will allow for active investment into climate-friendly infrastructure.
Challenges Facing Indian Enterprises in ESG Adoption
While the momentum is positive, Indian companies are confronting multiple obstacles to extract the full benefit of ESG for growth. Here is a brief outline:
Data Quality and Reporting Challenges: Many companies are still learning how to reliably gather data and report against it, raising the chance of greenwashing and undermining trust in the ESG integrity from their stakeholders.
Compliance Costs for MSMEs: Certain small-scale companies are unable to afford an audit of their ESG compliance and upgrades to the technology needed to comply with ESG requirements, which prevents them from taking part in sustainable finance or sustainable markets.
Geopolitical Global Pressures: International mechanisms, like the EU’s Carbon Border Adjustment Mechanism (CBAM), are adding complexity for export-focused sectors, requiring them to rapidly respond to new sustainability protocols.
Best Practices and Success Stories
Multiple companies in India are pushing the boundaries in ESG engagement, exemplifying that sustainable and profitable business models are possible. For example:
Tata Steel and Adani Green: These companies are investing substantially in renewable energy in line with India's Carbon Credit Trading Scheme (CCS) to counter emissions and gain a competitive advantage in their business.
Infosys: This IT giant's oversight of its governance metrics, integrating executive compensation metrics vis-a-vis ESG goals, and leveraging AI-enabled dashboards for real-time ESG monitoring.
Startups and MSMEs: These enterprises attempt to implement clean-tech and agro-tech innovations to decarbonize their operations and expand into new market avenues.
The Road Ahead: ESG for India’s Growth
As it evolves, ESG-related best practices and initiatives towards its net-zero target of 2070, ESG is going to be critical to forge enterprises that are resilient to future shocks. Control measures on carbon emissions through regulations, market incentives, and consumer engagement are turning ESG into the core of an enterprise's business strategy.
Indian enterprises that act first to develop and integrate ESG into their strategic map are on track to lead India's ambition of becoming a $5 trillion economy by 2030, attracting talent, customers, and investors along the way.
Conclusion
Indian companies are using Environmental, Social, and Governance (ESG) to boost operational efficiency, explore new markets, increase investment, and create more resilient brands. Although challenges remain, the momentum is clear: ESG is not only a compliance issue but rather a harbinger for sustainable business growth and global competitiveness. This shift will position companies from India for future long-term success and leadership in global sustainability.
