Why in NEWS
A Parliamentary Standing Committee on Finance has recommended that the Ministry of Corporate Affairs (MCA) set up a dedicated ESG (Environmental, Social, and Governance) oversight body to tackle rising concerns over greenwashing.
Key Terms / Concepts
| Term | Explanation |
|---|---|
| ESG (Environmental, Social, and Governance) | A framework for evaluating an organisation’s impact on the environment, society, and corporate governance practices. |
| Greenwashing | False or exaggerated claims by companies about being environmentally friendly to mislead consumers. |
| BRSR (Business Responsibility and Sustainability Reporting) | SEBI-mandated framework for top 1,000 listed companies to disclose ESG performance in line with global standards. |
| CCPA (Central Consumer Protection Authority) | Regulatory body under Consumer Protection Act, 2019 to check misleading claims, including environmental ones. |
| NFRA (National Financial Reporting Authority) | Regulator overseeing auditing and accounting standards in India. |
| SFIO (Serious Fraud Investigation Office) | Investigates complex corporate frauds in India. |
Key Points
| Aspect | Details |
|---|---|
| Importance of ESG for India | Environmental: Reduces risks from floods, heatwaves, sea-level rise. Social: Addresses poverty, inequality, basic needs. Governance: Builds trust, attracts investment, ensures transparency. |
| Committee’s Recommendations | Create ESG oversight body within MCA, include forensic experts, set sector-specific guidelines, support MSMEs in ESG adoption, amend Companies Act to make ESG a director’s duty, impose stricter penalties for false claims, strengthen SFIO and NFRA, improve CSR oversight. |
| India’s ESG Initiatives | SEBI’s BRSR framework for top 1,000 companies aligned with GRI and SASB standards. |
| Greenwashing Factors | Rising eco-consumerism, weak enforcement of eco-labels, fragmented ESG compliance laws, lack of strict penalties, cultural exploitation of “natural” and “Ayurvedic” labels, token CSR marketing. |
| India’s Anti-Greenwashing Measures | Consumer Protection Act (CCPA), CSE’s Green Rating Project, Advertising Standards Council of India’s guidelines for accurate green claims. |
In a nutshell
Mnemonic: E-S-G-ACT
E – Establish ESG oversight body
S – Strengthen SFIO & NFRA
G – Guidelines for sectors & MSMEs
A – Amend Companies Act for ESG duty
C – Curb greenwashing with strict penalties
T – Transparent CSR monitoring
Prelims Practice Questions
- Which of the following bodies regulates misleading environmental claims in India?
a) NFRA
b) CCPA
c) SFIO
d) NITI Aayog - The Business Responsibility and Sustainability Reporting (BRSR) framework in India aligns with which global standards?
- Global Reporting Initiative (GRI)
- Sustainability Accounting Standards Board (SASB)
- Paris Agreement
Select the correct answer using the code given below:
a) 1 only
b) 1 and 2 only
c) 2 and 3 only
d) 1, 2 and 3
- Greenwashing refers to:
a) A process of cleaning industrial waste before disposal
b) The practice of making false environmental claims
c) A method for recycling organic waste
d) Government funding for renewable energy projects
Mains Practice Questions
- Discuss the need for a dedicated ESG oversight body in India and its role in combating greenwashing. 10 Marks (UPSC GS3 – Economy & Environment)
- How can ESG integration in corporate governance strengthen sustainable economic growth in India? 10 Marks
Answers for Prelims Questions
| Q.No | Answer | Explanation |
|---|---|---|
| 1 | b | The Central Consumer Protection Authority (CCPA) under the Consumer Protection Act, 2019 regulates misleading claims, including environmental ones. |
| 2 | b | The BRSR aligns with GRI and SASB but not directly with the Paris Agreement. |
| 3 | b | Greenwashing is making false or exaggerated environmental claims to mislead consumers. |
