Corporate Law in India: Responsibility Reporting & Governance Standards Explained

Introduction – Corporate Law in India

The evolution of corporate law in India has followed a steady shift from compliance-oriented obligations to governance-based responsibility frameworks. Over the last two decades, Indian corporate regulation has evolved significantly, extending beyond maintaining books of account and filing annual returns. Today, corporate governance is expected to encompass environmental, social, and governance (ESG) considerations, with directors being held accountable not only for profits but also for the company’s broader impact.

Listed companies, large private entities, and even growing startups are expected to develop board-led mechanisms to oversee ethics, sustainability, and social responsibility. This reflects a wider trend, where regulators globally are expecting corporations to explain not only how they operate, but also how they contribute to broader economic and environmental objectives.

Indian regulatory bodies, particularly the Ministry of Corporate Affairs (MCA) and SEBI, have institutionalised this shift through mandatory corporate responsibility reporting, combining both financial and non-financial disclosures. These disclosures are now formalised through BRSR filings, CSR policy reporting, and Board governance frameworks, all of which are no longer voluntary in nature for certain thresholds.

Some of the most notable legal drivers of this shift include:

Mandatory CSR obligations for eligible companies under Section 135 of the Companies Act;
SEBI’s framework on BRSR reporting norms for top listed entities;
Governance disclosures mandated under Clause 49 and LODR Regulations;
Director-level responsibilities on ethical, environmental, and risk matters;
Alignment with global ESG reporting regulations in India is emerging through BRSR.

As a result, business responsibility reporting standards are no longer a matter of reputation management alone. They now form part of enforceable legal duties under Indian law, and failure to implement or disclose appropriately can lead to scrutiny, penalties, or shareholder action.

Legal Framework Under Companies Act, 2013

The Companies Act, 2013, introduced a foundational shift in corporate accountability. Beyond routine governance and reporting, the Act brought structured obligations on Corporate Social Responsibility (CSR), director responsibility, and stakeholder engagement. For companies falling within specified thresholds, CSR obligations are no longer advisory; they are binding, enforceable, and annually reportable.

This statutory shift has placed new duties not just on companies, but also on directors and CSR committees, embedding sustainability into the corporate governance structure.

Statutory Corporate Governance Obligations

Under the Act, directors are now expected to discharge fiduciary responsibilities in a manner aligned with fairness, transparency, and accountability. Section 166 outlines the duties of directors, which include acting in good faith, avoiding conflicts of interest, and protecting the environment and community.

Key governance obligations under the Act include:

Maintenance of registers, disclosures of interest, and a record of Board meetings;
Director accountable for ensuring policy implementation and internal controls;
Responsibility to ensure Board diversity, independence, and oversight.

This governance model is no longer limited to financial prudence; it integrates ethics, stakeholder fairness, and sustainable conduct, forming part of a broader approach to corporate law in India.

CSR Policy, Implementation, and Disclosure

Section 135 of the Companies Act introduced CSR as a legal obligation for companies meeting either of the following:

Net worth of ₹500 crore or more;
Turnover of ₹1,000 crore or more;
Net profit of ₹5 crore or more in the preceding financial year.

Such companies must:

Formulate a CSR Policy;
Constitute a CSR Committee of the Board;
Spend at least 2% of the average net profits of the last 3 financial years on eligible CSR activities.

Disclosures must be made in the Directors’ Report and uploaded on the company’s website. The CSR activities must align with Schedule VII of the Act, which includes education, healthcare, environmental sustainability, and rural development projects.

Role of the Board and CSR Committees

The responsibility for CSR compliance does not rest with the management team; it is placed squarely on the Board. The Board’s obligations include:

Approval of CSR policy and monitoring its implementation;
Disclosure of reasons for under-spending, if applicable;
Ensuring alignment of CSR spending with community needs and business relevance.

CSR Committees must meet periodically and provide structured oversight. Many companies now have internal legal teams supporting CSR committees to ensure alignment with CSR compliance under the Companies Act and mitigate governance risk.

Penalties and Non-Compliance under the Act

Earlier CSR provisions were subject to a “comply or explain” model. However, following amendments introduced in 2021, the framework has become stricter. Unspent amounts must now be transferred to a separate Unspent CSR Account (within 30 days), and eventually to a notified CSR fund if not utilized.

Failure to comply may attract:

Penalty on the company: up to ₹1 crore;
Penalty on defaulting officers: up to ₹2 lakh.

These penalties are in addition to the reputational risk of failing to meet sustainability targets. In light of this, several listed companies have begun integrating CSR compliance with their risk reporting frameworks and internal audit plans, especially where business responsibility requires cross-verification between BRSR and Companies Act filings.

CSR Compliance Requirements under Companies Act, 2013

Criteria	Requirement
Applicability	Net worth ≥ ₹500 Cr OR Turnover ≥ ₹1,000 Cr OR Profit ≥ ₹5 Cr
Board Responsibility	Approve and monitor CSR policy; explain shortfall, if any
CSR Committee Role	Draft policy, oversee spending, ensure alignment with law
Disclosure Requirements	Annual Report + Company website; Directors’ Report mandatory
Penalties for Non-Compliance	₹1 crore (Company) and ₹2 lakh (officers)

SEBI’s Business Responsibility & Sustainability Reporting (BRSR) Mandate

SEBI’s introduction of BRSR has formalised a significant part of the non-financial disclosure landscape in India. The BRSR framework compels companies to disclose ESG-linked information in a structured, verifiable, and comparable format.

Where earlier ESG disclosures were voluntary and largely qualitative, SEBI’s framework now mandates detailed metrics, processes, and outcomes. It has become a key pillar of corporate responsibility reporting, especially for listed entities.

Applicability to Listed Entities

Initially introduced voluntarily, BRSR reporting has been mandatory (since FY 2022–23) for the top 1,000 listed companies based on market capitalization. These entities are required to include the BRSR within their annual report submitted to stock exchanges.

This aligns Indian disclosure practice with evolving global norms and positions BRSR as a legal component of public accountability. Companies not meeting these criteria may still voluntarily adopt BRSR.

Scope of ESG and Non-Financial Disclosures

BRSR is structured around nine core principles as part of SEBI’s ESG framework, including:

Business ethics and transparency
Product responsibility and sustainable sourcing
Employee well-being
Environmental stewardship
Stakeholder engagement
Inclusive development

Each principle requires responses to essential indicators (mandatory) and leadership indicators (voluntary). These include quantifiable ESG metrics such as:

Energy consumption and emissions
Employee diversity and turnover
Supplier grievance mechanisms
Risk management for climate events

These indicators together represent SEBI’s expectation for uniformity in ESG reporting regulations, allowing investors and regulators to assess corporate behaviour on non-financial parameters.

Format and Structure of BRSR Filings

BRSR follows a template-based format:

Section A: General disclosures (corporate identity, group structure);
Section B: Management and process disclosures (policy framework, oversight);
Section C: Principle-wise performance disclosures.

Companies are expected to detail how sustainability factors are embedded in their decision-making and operational management. The format includes narrative responses, numeric disclosures, and Board-level accountability statements.

To support BRSR filings, legal teams often coordinate with ESG, compliance, and finance departments to ensure accuracy. For businesses subject to both SEBI norms and the Companies Act, reporting overlaps must be reconciled, an emerging challenge in corporate law in India.

Enforcement and Oversight Mechanisms

While BRSR is a disclosure obligation and not (yet) a compliance requirement with punitive penalties, SEBI expects accurate, full, and timely filings. Any discrepancy, inconsistency, or willful omission may attract regulatory scrutiny.

SEBI’s powers under the SEBI Act, 1992, allow it to:

Issue show-cause notices;
Levy penalties for false or misleading disclosures;
Require re-statements or clarifications in case of audit findings.

Further, institutional investors have begun tracking BRSR data closely, with proxy advisors benchmarking Board ESG oversight and disclosure maturity.

Corporate Governance Laws and Board-Level Accountability

The role of corporate boards in India has undergone a significant transformation in recent years. No longer limited to quarterly meetings or compliance-driven appointments of independent directors, boards are now expected to take an active, documented role in overseeing governance across ethics, sustainability, and enterprise risk. This shift is particularly pronounced for companies governed by SEBI’s LODR Regulations and the Companies Act. The evolution is not merely aspirational; it has legal foundations. Between statutory obligations and evolving governance frameworks, there is a clear expectation that directors engage meaningfully with the company’s broader impact, not just its financial performance. This marks the emerging paradigm of corporate governance under Indian law.

Independent Directors – Not a Passive Role Anymore

What was once a passive non-executive role is now regarded as a critical pillar of regulatory compliance. Independent directors are today expected to engage in:

ESG oversight (or at least review of material sustainability disclosures);
Supervision of grievance mechanisms, and in some cases, whistleblower follow-ups;
Signing off on statements relating to ethics, human rights, and policy compliance.

These are not voluntary roles anymore. Under LODR, Independent Directors must meet at least once a year without management present. SEBI also expects them to help ensure that the company’s non-financial reports, including those under business responsibility reporting standards, are accurate and not overly optimistic.

It’s also worth noting that Independent Directors can be held liable under the Companies Act if there’s a lapse in governance systems and the lapse can be linked to their negligence. While enforcement is rare, the threat itself has created greater seriousness among boards, especially in listed entities.

Evaluation of Boards and Director Performance

Board evaluations were once largely symbolic, but that is no longer the case. SEBI’s LODR Regulations and Schedule IV of the Companies Act now mandate disclosures confirming whether evaluations have been conducted for the board, its committees, and individual directors.

Under the BRSR framework, companies are required to disclose whether their board has reviewed the ESG policy framework and key material risks. A board lacking a documented stance or reviewing these matters irregularly risks falling short of investor expectations and may face scrutiny for inadequate oversight.

Risk Committees and ESG-Level Oversight

Risk committees are not new, but their scope has definitely widened. Regulation 21 of LODR mandates a Risk Management Committee (RMC) for the top 1000 listed companies. Earlier, these committees mostly looked at market risk, operational disruption, credit, and liquidity.

This includes oversight on:

Energy usage and emissions tracking
Environmental impact disclosures
Ethics policy breaches
Cybersecurity as a board-level risk

Part C of the BRSR filing specifically calls for details on ESG risk management processes. So while RMCs don’t have to write the disclosures, they’re expected to have reviewed them.

Whistleblower Policy and Internal Grievance Frameworks

This is another area where law and governance meet. Under Section 177 of the Companies Act, Audit Committees in listed companies must review the functioning of the whistleblower mechanism.

Here’s what regulators want to see:

That there’s a working policy, not just a downloaded template;
That grievances can be raised anonymously;
These are reviewed at the Audit Committee level.
The actions taken are recorded.

Under the updated LODR rules, companies must confirm the existence of such systems in their Annual Report. For those companies also filing BRSR, this becomes important because whistleblower redressal is now an indirect proxy for ethical performance, a key part of ESG reporting regulations in India.

Also, the absence of an active grievance framework can increase liability, particularly in cases where the company claims to have robust ethical policies but cannot show how it responds when those policies are violated.

Selected Board-Level Compliance Elements (Listed Cos.)

Area	Legal Requirement	Why It Matters
Independent Directors	Sec 149 CA + Reg 17 LODR	Functional system required, reported to the Audit Committee
Board Evaluation	Schedule IV CA + Reg 25(4) LODR	Must include ESG, risk, and ethics in the evaluation matrix
Risk Management Committee	Reg 21 LODR (Top 1000 listed cos.)	Expected to review ESG risk, non-financial risks
Whistleblower Mechanism	Sec 177 CA + Reg 18 LODR	Functional system required, reported to Audit Committee

The structure above is not optional. For companies operating in sensitive industries or those with international capital exposure, compliance here is being actively monitored. At a time when corporate governance laws are tightening and investors want hard proof of oversight, the board has to act as a safeguard, not just a formality.

Integration of ESG Frameworks and Global Alignment

The ESG ecosystem in India is no longer isolated from international benchmarks. As listed companies in India report against BRSR, they’re also being evaluated against global frameworks like GRI, TCFD, and SASB. Legal and compliance teams now have to ensure that reporting standards in India align with investor expectations abroad, particularly for companies with cross-border investments or global ESG-linked financing obligations.

Mapping Indian Requirements with Global ESG Standards

While SEBI’s BRSR is rooted in domestic law, it takes inspiration from established global frameworks. Companies are now mapping their BRSR data points with:

Global Reporting Initiative (GRI) indicators;
Task Force on Climate-related Financial Disclosures (TCFD) pillars;
UN Principles for Responsible Investment (UNPRI) expectations.

For instance, Principle 6 of BRSR (on environmental stewardship) broadly overlaps with GRI 302 (Energy), GRI 305 (Emissions), and GRI 306 (Waste). This enables Indian firms to use a single ESG data infrastructure for both domestic and international reporting, provided the disclosures are consistent, audited, and Board-approved.

Where the mapping is poor or the terminology is vague, global investors may flag risks or underweight the stock. So the alignment isn’t just technical, it’s strategic, especially for companies seeking long-term credibility in corporate responsibility reporting in India.

UN SDGs, GRI, TCFD Alignment in Indian Filings

Many companies, especially in sectors like infrastructure, IT, and energy, now include alignment statements in their annual ESG reports. For example:

Sustainability reports highlight how the company contributes to SDG 13 (Climate Action) or SDG 5 (Gender Equality);
TCFD-based climate risk disclosures are being annexed as supplements to BRSR filings.
GRI-referenced disclosures are mapped to BRSR indicators through cross-reference tables.

Legal teams often verify these alignments to ensure that companies don’t make unverified or overly optimistic claims, especially where forward-looking statements or carbon neutrality targets are involved. The alignment exercise is also a safeguard against ESG litigation abroad, particularly under evolving European due diligence laws.

Legal Risks for Greenwashing or Misleading Data

With ESG scrutiny rising, so too are risks related to greenwashing. This refers to situations where companies exaggerate, misrepresent, or fail to substantiate ESG claims in public filings. In India, there is no specific greenwashing legislation (yet), but liability may arise under:

SEBI’s LODR and SAST Regulations for misleading disclosures;
Companies Act Sections 447 (fraud) and 448 (false statements);
Investor actions alleging misrepresentation in offer documents or BRSR filings.

Additionally, the authorities have started seeing references to ESG-based allegations in shareholder and SEBI complaints, particularly where the claim is that company behaviour failed to match its stated environmental or ethical policies.

It’s now critical for companies to treat ESG data with the same scrutiny as financial data. Legal vetting, third-party assurance, and audit review of sustainability claims are no longer optional for companies navigating both domestic and international ESG exposure.

Challenges & Enforcement Trends

While the legislative framework on corporate responsibility reporting has matured significantly, implementation remains uneven across sectors and company sizes. Between evolving ESG expectations, compliance gaps, and practical barriers, companies continue to navigate a difficult terrain. Regulatory scrutiny has intensified, and enforcement is no longer limited to high-profile cases. SEBI and MCA have both begun looking closely at data inconsistencies, under-spending justifications, and Board inaction.

Practical Difficulties in CSR Implementation

Even for large companies, spending 2% of average net profits on CSR activities isn’t always straightforward. Many face challenges not just in fund allocation but also in identifying credible implementation partners, creating measurable impact, and ensuring long-term alignment.

Common operational difficulties include:

Lack of in-house teams to run CSR programmes;
Inadequate due diligence of implementing agencies;
Last-minute spending to meet financial targets;
Overlap of CSR efforts with routine business activities (violating Schedule VII norms);
Inability to locate “geography-relevant” causes, especially for tech and financial service companies.

Boards are expected to monitor these difficulties closely, but in practice, the CSR Committee may only meet once or twice annually. This disconnect exposes companies to penalties and reputational risk. Legal teams are increasingly called in to ensure alignment with CSR compliances under the Companies Act, but often, this comes after a red flag has already been raised.

Regulatory Action and SEBI Scrutiny

Over the past few years, both SEBI and MCA have initiated reviews where disclosures under the Companies Act and SEBI BRSR reporting norms appear inconsistent or incomplete. In many of these cases, the issue isn’t deliberate non-compliance; it’s poor coordination between ESG, finance, and legal teams.

SEBI’s expectation now is that sustainability data must be accurate, Board-reviewed, and consistent with previous years unless there’s a justifiable shift. Failure to meet this standard can result in:

Show-cause notices for misleading disclosures;
Requests for clarification during annual filing review;
Investor complaints are escalating to SEBI monitoring cells.
Penalties for inaccurate BRSR metrics under LODR norms.

The problem is compounded when companies copy-paste generic answers in BRSR filings or fail to provide evidence of implementation. For example, stating “employee well-being policies exist” without linking to actual documentation or results may be treated as evasive.

As reporting standards become more detailed, enforcement is expected to get stricter.

Data Collection and Assurance Hurdles in BRSR

Unlike financial data, which companies are already equipped to record and audit, BRSR requires tracking dozens of new metrics, from renewable energy usage to supplier diversity to community impact scores. Most companies, especially in mid-cap and unlisted space, simply don’t have internal systems for this.

Some recurring challenges:

No centralised ESG data repository across business units;
Difficulty in obtaining verified, auditable information from vendors or partners;
Misalignment between BRSR and international ESG disclosures (GRI, TCFD);
Absence of documented policies, even where practices exist in reality.

This is especially critical when BRSR filings must be signed off at the Board level. If disclosures understate or overstate performance, it may lead to director liability or shareholder disputes.

For companies falling under the top 1,000 list, legal teams are now frequently asked to review internal ESG metrics for sufficiency before final BRSR approval. Without that oversight, even well-intentioned ESG reporting can turn into a compliance hazard under evolving ESG reporting regulations in India.

Best Practices for Corporate Compliance and Reporting

In a landscape of rising regulatory expectations and market pressure for ethical conduct, companies that prioritise internal alignment are better positioned to meet both legal and investor standards. Compliance with corporate law is no longer about filing timelines or checkbox declarations; it now extends into narrative, evidentiary, and governance-linked territory.

Role of Legal Teams in BRSR Preparation

One of the most effective ways companies are streamlining BRSR readiness is by involving legal teams at the initial stage. Instead of reacting at the time of filing, legal functions now work with ESG and compliance units to:

Map statutory obligations across MCA, SEBI, and internal policy frameworks;
Vet language used in BRSR filings for legal exposure.
Verify consistency between Board minutes and disclosed oversight claims;
Ensure grievance and whistleblower mechanisms mentioned in reports are functioning and documented.

In companies lacking robust legal oversight, BRSR filings are increasingly being revised after submission, typically in response to investor queries. Such post-filing corrections can trigger reputational damage and invite regulatory scrutiny. Ensuring legal accountability in the preparation of business responsibility disclosures is no longer optional; it’s essential.

CSR Audit Readiness and Legal Documentation

CSR compliance is as much about documentation as it is about expenditure. Beyond the financials spent, the MCA looks at how the company selects projects, signs agreements with implementation partners, and documents impact. A company is expected to produce:

CSR Agreements with defined KPIs and timelines;
Verification reports on fund utilisation;
Minutes of CSR Committee meetings cross-referenced with Annual Reports;
Written rationale for any deviation from CSR Policy.

These documents are essential not only for reporting purposes but also for avoiding liability under CSR compliance, especially in light of recent scrutiny into spending disclosures. Where impact is hard to measure (e.g., awareness campaigns), companies are encouraged to get third-party evaluation certificates.

Checklist – ESG and CSR Legal Readiness (Internal Use)

Focus Area	Suggested Documents / Controls
CSR Compliance	Board approvals, partner MoUs, utilisation proofs
BRSR Preparation	Legal-reviewed drafts, policy mapping, Board note
ESG Assurance	Internal tracker, third-party certificates
Governance Oversight	Committee minutes, evaluation reports
Stakeholder Mechanisms	Grievance logs, action reports, whistleblower files

Conclusion – Corporate Law in India

The past decade has redefined what it means for Indian companies to be compliant, not just with financial laws, but with a broader framework of ethical, social, and environmental accountability. As corporate law in India continues to expand in scope, responsibility reporting and governance disclosure are no longer reserved for the legal or finance departments alone; they now involve Board leadership, investor relations, ESG heads, and even marketing teams.

There is no longer a divide between regulatory filings and reputational signalling. The same reports that are submitted to the stock exchange or MCA are being reviewed by institutional investors, proxy advisors, and international ESG rating agencies. The message is clear: the compliance position is now the market position.