INDIA – New Sustainability Regulations in 2024: What Businesses Need to Know

India’s Sustainability Landscape in 2024

India has been progressively strengthening its sustainability framework, with several new regulations coming into effect in 2024. These regulations aim to enhance corporate accountability, promote sustainable practices, and align with global sustainability goals.

Business Responsibility and Sustainability Reporting (BRSR)

The Securities and Exchange Board of India (SEBI) introduced the Business Responsibility and Sustainability Report (BRSR) to replace the earlier Business Responsibility Report (BRR). The BRSR framework, which became mandatory for the top 1000 listed companies by market capitalization in 2023, is designed to provide a comprehensive view of a company’s ESG performance. In 2024, further updates to the BRSR framework are expected to enhance the depth and breadth of ESG disclosures.

Key Features of BRSR:

• Nine Principles of Responsible Business Conduct: The BRSR is structured around nine principles that cover various aspects of responsible business conduct, including ethical governance, environmental sustainability, and social responsibility.
• Quantitative and Qualitative Disclosures: Companies are required to provide both quantitative data (e.g., greenhouse gas emissions, energy consumption) and qualitative information (e.g., policies, practices) related to their ESG performance.
• Sector-Specific Guidelines: The BRSR includes sector-specific guidelines to ensure that disclosures are relevant and meaningful for different industries.

Implications for Businesses:

• Enhanced Transparency: The BRSR framework promotes greater transparency in ESG reporting, enabling stakeholders to make more informed decisions.
• Increased Accountability: Companies are held accountable for their ESG performance, with potential reputational and financial consequences for non-compliance.
• Resource Allocation: Businesses may need to allocate additional resources to collect, analyze, and report ESG data in compliance with BRSR requirements.

Environmental, Social, and Governance (ESG) Regulations

In addition to the BRSR, India has introduced new ESG regulations that mandate more comprehensive disclosures and encourage sustainable business practices.Key Aspects of ESG Regulations:

• ESG Disclosure Requirements: Companies are required to disclose detailed information on their ESG policies, practices, and performance, including climate-related risks and opportunities.
• Integration with Financial Reporting: ESG disclosures are integrated with financial reporting, ensuring that sustainability considerations are embedded in business decision-making.
• Third-Party Assurance: To enhance the credibility of ESG disclosures, companies may be required to obtain third-party assurance on their ESG reports.

Impact on Different Sectors:

• Energy-Intensive Industries: Sectors such as manufacturing, mining, and energy are likely to face stricter regulations and higher compliance costs due to their significant environmental impact.
• Financial Services: Banks and financial institutions are expected to play a key role in promoting sustainable finance by incorporating ESG criteria into their lending and investment decisions.

Renewable Energy Mandates

India has set ambitious renewable energy targets as part of its commitment to the Paris Agreement and its goal of achieving net-zero emissions by 2070. In 2024, new mandates are expected to accelerate the transition to renewable energy sources.Key Elements of Renewable Energy Mandates:

• Renewable Purchase Obligations (RPOs): Companies are required to source a certain percentage of their energy consumption from renewable sources.
• Incentives for Renewable Energy Projects: The government offers various incentives, such as tax benefits and subsidies, to promote the development of renewable energy projects.
• Penalties for Non-Compliance: Companies that fail to meet their RPOs may face penalties, encouraging them to invest in renewable energy solutions.

Implications for Energy-Intensive Industries:

• Increased Investment in Renewables: Companies in energy-intensive industries are likely to invest more in renewable energy projects to meet regulatory requirements and reduce their carbon footprint.
• Operational Changes: Businesses may need to implement operational changes, such as upgrading infrastructure and adopting energy-efficient technologies, to comply with renewable energy mandates.

Circular Economy Initiatives

To promote resource efficiency and reduce waste, India has introduced new regulations aimed at fostering a circular economy. These initiatives encourage businesses to adopt sustainable practices throughout the product lifecycle, from design to disposal.Key Aspects of Circular Economy Initiatives:

• Extended Producer Responsibility (EPR): Companies are held responsible for the entire lifecycle of their products, including end-of-life management and recycling.
• Waste Management Regulations: New regulations set targets for waste reduction, recycling, and the use of recycled materials in production processes.
• Innovation and Collaboration: The government encourages innovation and collaboration among businesses, research institutions, and other stakeholders to develop sustainable solutions.

Implications for Businesses:

• Product Design and Development: Companies may need to redesign their products to enhance durability, reparability, and recyclability.
• Supply Chain Management: Businesses must ensure that their supply chains are aligned with circular economy principles, which may involve working with suppliers to source sustainable materials and manage waste effectively.
• Compliance Costs: Implementing circular economy practices may involve additional costs, but these can be offset by the long-term benefits of resource efficiency and waste reduction.