Abstract

The article discusses the question of whether the mandatory Business Responsibility and Sustainability Reporting (BRSR) structure in India would effectively stop the process of ESG-washing or restructure it into a more coherent one. As Environmental, Social, and Governance (Hereinafter referred to as “ESG”) is becoming a defining factor in access to capital and corporate plausibility, the previous focus of Corporate Social Responsibility (Hereinafter referred to as “CSR”) and Business Responsibility (Hereinafter referred to as “BR”)  reports in India on narratives opened up a rich environment of bogus sustainability reporting. BRSR aims to rectify this by proposing standardised and quantitative disclosures, value-chain reporting and limited assurance under BRSR Core. Although these characteristics raise the level of comparability and transparency, the evidence of failure to ensure its efficiency persists due to compliance-driven reporting, poor enforcement, discretionary materiality decisions and low assurance levels. Compared to other international frameworks such as the Corporate Sustainability Reporting Directive (Hereinafter referred to as “CSRD”) of the EU, the International Sustainability Standards Board​ (Hereinafter referred to as  “ISSB”) standards and the US climate-disclosure regulations, it can be seen that India, up to now, does not have effective sanctions, sector-related indicators and strict audit procedures that can push companies into misreporting. The manuscript argues that enforcement should be enhanced, the concept of double materiality should be used, assurance adopted and the standards of industry-specific reporting should be developed to discourage selective or exaggerating claims. Finally, BRSR is a move in the right direction, though its effectiveness in eliminating ESG-washing requires a transformation of the mandatory disclosure into a real accountability with regulatory, institutional and market-level reform.

Introduction: The Rise of ESG and India’s Regulatory Turning Point

In the last ten years, Environmental, Social and Governance (ESG) factors have ceased to be marginal aspects of corporate policies, and have instead become integral components of corporate strategy and international investment decision-making. Firms in all industries have realised that their performance in relation to sustainability directly determines access to capital, regulatory relations and brand loyalty. However, this accelerated rise of ESG has come with an equally concerning side effect of ESG-washing, where companies overstate or paint a rosier picture of the sustainability successes to make them seem more responsible than they are in reality. This became particularly acute in India as the dominant approach to CSR reporting was the narrative-based approach, in which companies showcased their philanthropic endeavours and concealed material concerns including emission levels, labour standards or governance lapses.

It is in this context that the regulatory ecosystem in India has been significantly changed due to the emergence of Business Responsibility and Sustainability Reporting (BRSR) framework by the Securities and Exchange Board of India (SEBI). BRSR, which is made mandatory to the largest 1000 listed companies, is the most ambitious effort in the country to standardise sustainability reporting and bring it closer to the rigour of financial disclosures. Nevertheless, mandatory reporting does not ensure integrity. The question is whether BRSR actually prevents ESG-washing or only allows it in a more organised manner. This manuscript is a critical analysis of BRSR architecture, its initial performance, positioning it globally and reforms required to make it an effective instrument against ESG-washing.

Understanding ESG-Washing in India and the Rationale Behind BRSR

The historical, regulatory and market conditions in India have created a special conducive environment that has helped ESG-washing to establish itself in the country. The country had over the years depended on voluntary sustainability reporting like the CSR reports and the older Business Responsibility Reports (BRR). These forms gave companies some considerable freedom in the selection of disclosed information. Consequently, companies frequently focused on charitable or community-related activities like planting trees, sponsoring local activities or educational programs without taking into consideration the physical consequences of their business activities. This developed a reporting ecosystem that rewarded public relations narratives and not substantive performance changes.

Investor behaviour exacerbated this problem. The longstanding challenge with domestic investors was that they did not have the tools or expertise to question the sustainability claims, and this led to a lack of demand for high-quality disclosures. Also, regulators never applied stringent follow-up or fines in the absence of incomplete or misleading reporting in the past. The vast supply chains in India were also not easy to manage, especially in areas like textiles, automotive and chemicals where the supply chains tend to have environmental and social risks that may lie way in the depths of the supply chain. Against this backdrop, ESG-washing thrived since a company could disclose what they would like without extensive scrutiny.

These structural weaknesses were supposed to be rectified by the introduction of BRSR. SEBI aimed to enhance the credibility, comparability and decision-usefulness of sustainability data by requiring standardised, quantifiable sustainability metrics. This was followed with the introduction of BRSR Core that only needs limited assurance on particular Key Performance Indicators (KPIs) and this was another indication that the intention was to introduce some level of independent verification to the ESG reporting process. The rationale was clear, India needed to move away from storytelling-driven sustainability disclosures and toward measurable, data-driven accountability.

Critical Assessment: How Far Does BRSR Go in Preventing ESG-Washing?

In order to determine the effectiveness of BRSR, one must determine the strengths of its design and the limitations of its structure. The best thing about BRSR is that it is moving towards quantitative disclosure. The framework will minimise the range of ambiguous interpretations and will compel companies to follow a consistent reporting baseline in their reporting. Further, compulsory disclosure has also increased reputational risks of listed companies. It has been discovered that the companies are operating under the pressure that the investors, analysts and civil society will scrutinize their disclosures with greater scrutiny, and this pressures the companies to avoid any form of outright misrepresentation.

Another important step is the value-chain reporting. Most Indian companies have traditionally outsourced environmental and social risks to the suppliers. BRSR counters this by making the sustainability expectation go beyond the immediate operations. Another layer of oversight has been created to assist BRSR Core and this is the assurance mechanism, which, despite its current weakness, is a step in the direction of audit-like accountability of sustainability claims.

Despite these strengths, there are a number of limitations that limit BRSR to curb ESG-washing completely. The continuation of the compliance attitude in India is among the most ingrained issues. Companies tend to take new reporting requirements as a legal requirement instead of a strategic necessity and make reports that fit the format but not the purpose. This is problematic as it may lead to a scenario whereby there are BRSR compliant disclosures and no real ground developments.

Another point of weakness is enforcement. BRSR does not have a well-developed penalty system for incomplete, inaccurate or misleading. Without credible consequences, businesses will be able to keep their selective reporting or make their sustainability information available in a manner that pumps up performance. Further, another weakness lies in the materiality tests, as businesses still have a wide range of discretion over the problems of sustainability that are material to the business. This will enable them to avoid tough or inconvenient topics under the guise of irrelevance.

Assurance, while promising, remains limited to a handful of indicators and may face conflicts of interest similar to those observed in financial auditing. Furthermore, BRSR’s sector-agnostic structure means it fails to capture the specific risk profiles of different industries. A bank’s exposure to climate-related transition risk is fundamentally different from a cement manufacturer’s carbon footprint or a pharmaceutical company’s supply-chain ethics. Yet BRSR requires them all to use largely the same metrics. Early BRSR reports reflect these limitations, many firms still emphasise policies over performance, Scope 3 emissions reporting remains weak, and many commitments lack detailed transition pathways.

Comparative Perspective: Lessons from Global Reporting Regimes

The placement of BRSR in the international context can be used to draw attention to its potential and its failure. One of the stringent sustainability reporting frameworks in the world is the Corporate Sustainability Reporting Directive (CSRD) of the European Union which obliges companies to report with the help of two prisms, i.e., financial materiality and environmental and social impact. This double materiality puts a lot of limitations on selective disclosure. CSRD also demands strict audit and industry sector reporting, ensuring that sustainability assessments are both comprehensive and contextually relevant.

In contrast, BRSR is currently more focused on single materiality and has no sector-specific granularity. Additionally, with the help of IFRS S1 and S2 standards, the International Sustainability Standards Board (ISSB) focuses on disclosures to investors and direct connections between sustainability risks and financial performance. The ISSB approach to the governance of climate risks, scenario analysis and transition plans arguably creates high standards of decision-useful disclosures, another field in which BRSR is still at a nascent stage.

Meanwhile, the climate disclosure rules by the US Securities and Exchange Commission focus on accountability by making climate-related misstatements subject to financial liability. This is what renders ESG-washing particularly risky in the US. The enforcement environment in India is relatively less rigorous, which minimizes the pressure put on companies to evade selective or exaggerated reporting. Such comparisons with the global trends show that although BRSR essentially points to the same trends as they can be seen internationally, there is a lack of enforcement strength, a lack of assurance depth and sector-focused specificity that will allow the practice to address the ESG-washing effectively.

The Way Forward: Strengthening BRSR to Minimize ESG-Washing

To transform into a truly effective measure of anti-washing framework, India must enforce the regulatory, institutional and market frameworks around sustainability reporting. A key priority is the development of substantial punishments against misreporting. The most advanced structures, without enforcement, cannot ensure integrity. Further, Enhancing the materiality framework with a shift towards double materiality would ensure that the companies do not exclude material sustainability impacts of their choice. Also enhancing the scope and independence provisions of assurance would enhance credibility in a manner that will make reported data liable to stringent scrutiny by a third party.

Industry-specific reporting standards are necessary in order to reflect the complexity of the sustainability risk in various industries. This would avoid homogenised disclosures and encourage companies to report on the indicators that matter most. Further disclosure can also be done by creating a centralised, machine-readable sustainability data repository that will help investors and the civil society to audit disclosures more efficiently. Capacity building is equally important, the investors along with rating agencies should be more proficient in order to be able to assess the sustainability data on a more critical level as opposed to a surface one. The system may also be strengthened with the introduction of digital tools such as AI-based anomaly detection to detect patterns of ESG-washing and reporting inconsistencies.

While BRSR represents a landmark step in India’s sustainability journey, its ability to genuinely curb ESG-washing depends on what comes next. Mandatory reporting has raised the baseline, but it must be supported by strong enforcement, credible assurance, increased transparency and a more sophisticated market ecosystem. If these elements are strengthened, India can transform BRSR into one of the world’s most effective sustainability reporting frameworks. ESG-washing will ultimately decline not because companies are compelled to disclose, but because they are compelled to disclose honestly, consistently and with accountability.