Keeping the ESG Promise: India Accelerates While US & EU Navigate Backlash and Delays

This article is in continuation to my previous blogs related to this topic

1) Corporate Sustainability at a Crossroads: Navigating a Fragmented Future

2) India’s 2025 ESG and Sustainability Shift: Navigating the Rapid Transformation

3) Navigating the Turbulent Waters: MNCs and Global Sustainability Regulations

Environmental, Social, and Governance (ESG) factors have rapidly moved from niche considerations to mainstream business imperatives over the past decade. However, as the calendar turns towards 2025, a fascinating and perhaps unexpected divergence is becoming apparent in the global landscape of sustainability. While the United States and European Union grapple with political backlash, regulatory complexity, and implementation delays, India is demonstrating a clear acceleration and expansion of its own ESG and sustainability frameworks.

This creates a stark contrast in the global momentum for corporate responsibility. Let's delve deeper into the key aspects defining this divide.

Policy Direction: Retreat vs. Acceleration

In the United States and Europe, the narrative around ESG policy is increasingly marked by retreat and delay. In the US, companies are navigating a complex environment where political backlash and legal uncertainty are prompting many to scale back or quietly rebrand their ESG commitments. Federal policy has seen rollbacks on climate initiatives, creating a fragmented landscape where some states and individual companies maintain ambitious targets while others pull back.

Across the Atlantic, the European Union, long seen as a global leader in sustainability regulation, is also facing headwinds. Major directives like the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD), intended to significantly enhance transparency and accountability, are seeing their implementation delayed by up to two years. Concerns are also being raised about the potential weakening of disclosure standards amidst efforts to streamline requirements and ease compliance burdens during a period of economic and political uncertainty. Short-term climate targets, such as those for automakers, have also been eased, signaling a potential tempering of ambition.

Conversely, India is charting a different course. The country is rapidly advancing its ESG and sustainability frameworks with a clear direction towards acceleration and expansion. This is driven by strong regulatory mandates from bodies like the Securities and Exchange Board of India (SEBI), which has introduced the Business Responsibility and Sustainability Reporting (BRSR) Core framework. Mandatory ESG disclosures for the top 1,000 listed companies are being implemented, pushing for higher transparency and accountability. The government and regulators are actively fostering a progressive environment with stricter reporting and assurance requirements, including oversight for ESG rating providers.

Corporate Response: Scaling Back vs. Scaling Up

The differing policy environments are naturally influencing corporate behavior. In the US and Europe, many firms are reacting cautiously to the shifting landscape. There's a noticeable trend of companies quietly reducing or rebranding their ESG and Diversity, Equity, and Inclusion (DEI) initiatives. Climate goals are being removed from executive compensation structures, and there's a greater focus on profitability and operational simplicity, sometimes at the expense of explicit sustainability commitments. Mentions of ESG and related commitments are reportedly declining in some corporate reporting, although resistance to a complete rollback persists in certain sectors and among some forward-thinking companies.

Meanwhile, Indian corporates are largely scaling up their ESG integration efforts. Driven by the clear regulatory push and growing investor demand, companies are investing significantly in data collection systems and preparing for stricter audits under frameworks like BRSR Core. There is a surge in the adoption of sustainability-linked financial products, increased focus on supply chain due diligence, and a growing emphasis on building board-level ESG expertise. Rather than retreating, Indian companies are proactively aligning with global standards such as those from the International Sustainability Standards Board (ISSB), the Task Force on Climate-related Financial Disclosures (TCFD), and even anticipating the requirements of the EU's CSRD.

Regulatory Climate: Fragmented vs. Unified

The regulatory climate further highlights the divergence. The US presents a fragmented and volatile picture, with federal policy often at odds with state-level initiatives and corporate ambitions. This lack of a unified national approach creates uncertainty and complexity for businesses operating across different jurisdictions. The EU, while historically unified in its ambition, is currently in a phase of streamlining and delaying, influenced by the need to ease compliance burdens during challenging economic times.

India's regulatory climate, in contrast, appears unified and progressive. Regulators are moving swiftly and decisively to mandate ESG disclosures and assurance, providing clear timelines and enforcement mechanisms. This strong regulatory momentum is not only driving domestic change but is also strategically aligned with international best practices, positioning India as a serious player in the global sustainability arena.

Market and Investor Trends: Skepticism vs. Demand

Market and investor trends mirror the regulatory and corporate responses. In the US, ESG investing has faced significant skepticism and political resistance, leading some financial institutions to withdraw from climate alliances. Regulatory delays in Europe also create uncertainty, particularly for global investors and multinational corporations trying to navigate disparate requirements.

In India, investors are a key driving force behind the demand for credible ESG data, sustainable finance products, and robust climate risk management. There is growing interest in green bonds, sustainability-linked loans, and ESG ratings, with regulators actively working to ensure the quality and comparability of available data. This strong market pull complements the regulatory push, creating a fertile ground for the growth of sustainable finance.

Why India Is Able to Lead in Corporate Sustainability and ESG

India's ability to maintain and accelerate momentum in corporate sustainability, even as other regions face challenges, stems from several key factors:

• Strong Regulatory Push and Clear Frameworks: India’s leadership is fundamentally driven by a robust and clear regulatory environment. SEBI's mandatory ESG disclosures via the BRSR framework for the top 1,000 listed companies align Indian standards with global benchmarks like GRI and SASB. Recent enhancements, such as Green Credit disclosures and phased mandatory assurance of ESG data, balance credibility with flexibility, easing compliance burdens while ensuring rigor. The Reserve Bank of India (RBI) has also integrated ESG principles into lending and investment through green finance guidelines, embedding sustainability deeper into the financial system.

• Investor Demand and Market Incentives: Indian investors are increasingly sophisticated and demanding credible, verifiable ESG data. This strong demand boosts investor confidence and actively attracts sustainable investment. The BRSR framework and new green finance regulations create a transparent and accountable environment that is highly appealing to both domestic and international investors seeking sustainable opportunities.

• Alignment with Global Standards: India’s ESG reporting requirements are designed to be closely aligned with international frameworks. This facilitates global comparability, making it easier for international investors to assess Indian companies and positioning these companies favorably for cross-border investment. The phased and pragmatic approach to ESG assurance and value chain disclosures allows companies to mature their sustainability practices adaptively, avoiding abrupt and disruptive changes.

• Government and Regulatory Commitment: A consistent and strong commitment from the Indian government and regulators to sustainable development is a critical factor. They actively use policy and regulation to drive corporate behavior and accountability. Initiatives like the BRSR Core and the Green Credit program encourage companies to move beyond mere compliance and actively invest in environmental and social initiatives, fostering a culture of proactive sustainability.

• Capacity for Rapid Adoption and Innovation: Indian corporates are demonstrating a strong capacity for rapid adoption and innovation in the ESG space. They are leveraging technology and data systems to streamline ESG reporting and compliance, making it easier to meet new requirements and demonstrate tangible progress. Furthermore, an ecosystem approach involving regulators, businesses, investors, and civil society supports a collaborative and forward-thinking ESG culture, enabling quicker adaptation and innovation.

Comparison of India’s ESG Framework to Global Standards

While India is rapidly advancing its ESG agenda, it's valuable to compare its framework to established global standards to understand its current position and areas for future growth.

Alignment and Progress

India’s ESG framework, primarily driven by the Business Responsibility and Sustainability Reporting (BRSR) requirements, shows significant and increasing alignment with prominent global standards such as the Global Reporting Initiative (GRI) and the Task Force on Climate-related Financial Disclosures (TCFD). The BRSR framework is designed to be comprehensive, mandating quantifiable metrics across a broad spectrum of sustainability factors. These include crucial areas like environmental protection, human rights, anti-corruption measures, employee well-being, and responsible public policy engagement.

The BRSR Core and the broader BRSR frameworks actively promote transparency and global comparability. They adopt a holistic approach, encompassing both mandatory and voluntary indicators, which encourages companies to mature their reporting practices over time. A key strength is the integration of these disclosures directly into companies' annual reports, mirroring global best practices for non-financial reporting and making the information readily accessible to stakeholders.

Key Differences and Gaps

Despite strong progress, there are notable differences and gaps when comparing India's framework to the most comprehensive global standards, particularly those in the European Union:

• Comprehensiveness: While India’s framework is robust and continuously evolving, it is not yet as comprehensive as the European Union’s suite of ESG regulations. The EU's framework, including the Corporate Sustainability Reporting Directive (CSRD), Sustainable Finance Disclosure Regulation (SFDR), and the EU Taxonomy, is broader in scope and more deeply embedded across various legal instruments and financial regulations.

• Regulatory Fragmentation: India’s ESG regulations are currently spread across multiple laws and overseen by various authorities. This can create complexity for businesses, especially multinational corporations operating within India. This fragmentation contrasts somewhat with the more unified and mature regulatory frameworks found in the EU and certain other developed markets, which often provide a more consolidated approach to compliance.

• Coverage Gaps: Specific areas lack dedicated national laws or comprehensive standards in India compared to global leaders. These include explicit national laws for greenhouse gas emissions targets, carbon pricing mechanisms, and comprehensive national waste management standards. Regulations concerning sustainable sourcing and supply chain transparency, while developing, are also less detailed and prescriptive compared to some international benchmarks.

• Enforcement and Implementation: While the disclosure requirements under BRSR are strong, the consistency of enforcement and compliance across all companies in India can still be a challenge. Furthermore, while social and governance aspects, such as workplace safety and minimum wage laws, are covered by existing legislation, their implementation and alignment with international best practices can sometimes face hurdles.

Opportunities for Improvement

India is widely recognized for its rapid progress and clear commitment to aligning its ESG norms with global standards. However, experts and stakeholders point to several key opportunities for further improvement. These include the need for more comprehensive national legislation to address current coverage gaps, stronger and more consistent enforcement mechanisms to ensure compliance across the board, and enhanced requirements for supply chain transparency. Addressing these areas will be crucial for India to match the world’s most advanced sustainability standards fully.

The country’s approach is dynamic and evolving, with increasing involvement from various stakeholders, including civil society, investors, and industry bodies. A growing focus on enhancing transparency and accountability is expected to further strengthen India's alignment with international standards over time, solidifying its position as a leader in corporate sustainability.

Summary Table: India vs. Global ESG Standards

Feature	India (BRSR)	Global Standards (EU, GRI, TCFD, etc.)
Alignment	Increasingly aligned (GRI, TCFD)	Mature, unified frameworks
Scope	Broad, holistic, but evolving	Comprehensive, covers finance, taxonomy
Regulatory Structure	Fragmented, multi-authority	Centralized, clear mandates
Mandatory Disclosures	Yes (for top 1,000 listed companies)	Yes (often broader application)
Enforcement	Improving, but inconsistent	Generally stronger and more consistent
Gaps	GHG targets, carbon pricing, supply chain, waste	Few, more advanced in climate/finance
Transparency	High, integrated with annual reports	High, often more detailed

India’s ESG framework is making significant strides toward global comparability but still has room for improvement in comprehensiveness, enforcement, and certain regulatory areas to fully match the world’s most advanced standards.

Outlook: Cautious vs. Transformative

Looking ahead, the outlook for ESG in the West appears cautious and uncertain. ESG is clearly at a crossroads, with progress slowed by political dynamics, legal risks, and regulatory complexity. The future trajectory will depend heavily on how effectively stakeholders can navigate the backlash, maintain focus on long-term sustainability goals, and adapt to evolving standards.

India, however, seems poised for a rapid ESG transformation. The focus is firmly on enhancing transparency, accountability, and global competitiveness through sustainability. The current regulatory and market environment is actively pushing Indian companies to embed sustainability at the core of their business strategy, suggesting a transformative and forward-looking path.

Summary of Contrasting Trends

The analysis reveals a clear divergence in the trajectory of ESG and corporate sustainability between the US/EU and India:

• Policy Direction: The US/EU are experiencing a retreat and delay in implementing major sustainability regulations and targets, driven by political backlash and economic concerns. India, conversely, is accelerating and expanding its frameworks with clear, mandatory regulations.

• Corporate Response: Companies in the US/EU are often scaling back or rebranding ESG efforts, prioritizing profitability amidst uncertainty. Indian corporates are scaling up integration, investing in systems, and proactively aligning with global standards.

• Regulatory Climate: The US has a fragmented and volatile regulatory landscape, while the EU is streamlining and delaying. India presents a unified and progressive climate with swift regulatory action and clear timelines.

• Market and Investor Trends: ESG investing faces skepticism and resistance in the US, and regulatory delays create uncertainty in Europe. In India, there is strong and growing investor demand for credible ESG data and sustainable finance, supported by regulators.

• Outlook: The outlook for ESG in the West is cautious and uncertain, marked by challenges in navigating backlash and complexity. India's outlook is transformative and forward-looking, driven by a clear path towards transparency, accountability, and global competitiveness.

Impact on Global Sustainability Initiatives

This divergence between the Western backlash and India's acceleration has significant implications for global sustainability initiatives:

1. Risk of Fragmentation: The differing speeds and levels of ambition could lead to a more fragmented global landscape for corporate sustainability. This might create challenges for multinational corporations operating across these regions, requiring them to navigate disparate reporting standards, compliance requirements, and stakeholder expectations. It could also complicate efforts to establish truly universal sustainability frameworks.

   
   

2. Shifting Momentum to Emerging Economies: India's proactive stance demonstrates that momentum for sustainability is increasingly shifting to emerging economies. As developed nations face internal resistance, countries like India, driven by domestic needs, regulatory push, and global aspirations, can become key drivers of progress on the international stage. This could influence the direction and priorities of global sustainability dialogues and standard-setting bodies.

   
   

3. Challenges for International Standards: While India is aligning with standards like GRI and TCFD, the delays and potential weakening of regulations in the US/EU could impact the universal adoption and effectiveness of international frameworks like those from the ISSB. Maintaining global consensus and comparability becomes harder when major economic blocs move at different paces or in different directions.

   
   

4. Opportunity for Collaboration and Learning: Despite the differences, there is also an opportunity for mutual learning. India's experience in rapidly implementing mandatory disclosures and building regulatory capacity can offer lessons for other regions. Conversely, India can continue to learn from the comprehensive nature of EU regulations and the market-driven innovations seen globally. Increased dialogue and collaboration are essential to bridge the gaps and maintain a collective push towards global sustainability goals.

   
   

5. Potential for Uneven Progress: The differing approaches could lead to uneven progress on critical global challenges like climate change. If major economies slow down their efforts while others accelerate, it could impact collective global targets and the overall effectiveness of international agreements.

Conclusion

The global ESG landscape presents a study in contrasts. While the US and EU are currently navigating a period marked by political backlash, regulatory delays, and a cautious approach that risks losing focus on core sustainability issues, India stands out for its determined and accelerating push forward. India's proactive stance, underpinned by robust regulatory frameworks, growing investor demand, and a clear commitment to global alignment, demonstrates significant leadership in driving corporate sustainability. This highlights the potential for emerging economies to champion the sustainability agenda. For global sustainability initiatives to succeed, it is crucial for the West to overcome current hurdles, renew its focus on the fundamental environmental and social challenges at hand, and re-engage with the urgency required. The collective pursuit of a sustainable future demands concerted effort from all major economies, leveraging the momentum built in regions like India and refocusing energy where it is most needed.