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India did not get the ESG rollback memo.

The ESG rollback is real, but it is not happening everywhere. While the US and Europe recalibrate, India continues to expand its sustainability regulatory architecture. This analysis examines the divergence and what it means for Indian companies.

Nachiketa Das

Nachiketa Das

— 8 min read
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In the United States, the anti-ESG movement has been building executive and legislative momentum. In May 2026, the US Securities and Exchange Commission formally moved to rescind its climate disclosure rules, opening a 60-day public comment period on June 3. This caps a year-long sustained rollback agenda (see timeline). It comes as no surprise that major asset managers have withdrawn from Net Zero Asset Managers, Climate Action 100+, and other voluntary climate alliances.

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The US ESG rollback: sequence of events from January 2025 to May 2026

In Europe, the Omnibus I Directive cut the corporate sustainability reporting universe from 50,000 companies to 5,000 and slashed mandatory data points by 70%. The Commission calls it simplification, not abandonment. Company scope narrows to those with over 1,000 employees and EUR 450 million in turnover. The supply chain due diligence directive now covers only firms with over 5,000 employees and EUR 1.5 billion in turnover. The first wave of CSRD reporters received an exemption for 2025 and 2026. Three hundred and thirty-five European sustainable investment products dropped ESG labels from their names.

On ISSB adoption, the picture is more encouraging. As of May 2026, 28 jurisdictions have adopted or are implementing IFRS S1 and S2, with a further 12 having taken formal steps toward adoption. The United States may have stepped back, but the global momentum continues. The EU and ISSB are not walking away from sustainability reporting. They are reducing administrative complexity. That is a legitimate regulatory choice. It just happens to run in the opposite direction to what SEBI has been doing.

For Indian companies with European exposure, the divergence creates a specific challenge. CBAM applies regardless of what SEBI mandates. EU client RFP requirements apply regardless of domestic exemptions. In practice, Indian companies serving global markets will need to meet the higher of two standards, even as regulators move in opposite directions on paper.

The narrative writes itself. ESG is in retreat. Sustainability reporting is becoming optional. Except it is not - at least not everywhere. While Western markets recalibrate, India's regulatory machinery has moved consistently in the opposite direction.

SEBI has expanded its BRSR framework every year since 2021. MoEFCC has issued sweeping Extended Producer Responsibility mandates across plastic, e-waste, and batteries. The Carbon Credit Trading Scheme (CCTS) has activated binding compliance obligations for seven industrial sectors. The question for Indian corporates is not whether this infrastructure is being built. It is whether your organisation is prepared for it.

India's trajectory: what the data shows

Against the US and EU backdrop, India's regulatory direction stands out, not because implementation is perfect, but because the direction has been consistent year-on-year.

SEBI introduced mandatory BRSR for the top 1,000 listed companies from FY 2022-23. The BRSR Core framework has expanded progressively: top 150 from FY 2023-24, top 250 from FY 2024-25, top 500 from FY 2025-26, and the full top 1,000 from FY 2026-27. Value chain ESG disclosures remain voluntary. Companies in the top 250 that choose to disclose value chain data must now obtain third-party assurance or assessment on those BRSR Core disclosures.

A 2025 IIM Ahmedabad study analysed BRSR disclosures from 1,012 companies for FY 2022-23. The average disclosure rate was 71.8% across 140 indicators. Only 17.7% of firms had made explicit net-zero or carbon neutrality commitments, and just 119 had specified timelines. The Scope 3 reporting gap is sharp: while 75% of companies report Scope 1 and 2 emissions, only 18% disclosed Scope 3 data. ISSB mandates Scope 3; BRSR does not.

The sector divide is instructive. IT companies average a BRSR score of 78.23, driven partly by commercial pressure from overseas clients requiring sustainability data as part of RFPs. Manufacturing companies average 62.18 — the lowest of any sector — reflecting higher compliance costs and the challenge of measuring sustainability across physical operations.

In March 2025, SEBI linked BRSR Principle 6 leadership indicators to the Green Credit Programme (GCP), specifically the generation of compensatory afforestation credits. An August 2025 revision narrowed the GCP's scope considerably: credits are now limited to compensatory afforestation obligations, made non-tradable, and restricted to forest department land. The broader market mechanism originally envisioned has been set aside. Whether this has the intended impact on biodiversity and ecosystems restoration is debatable. Nevertheless, this reflects a deliberate approach by the regulator to iterate nascent frameworks, in response to ecological and implementation feedback, by adjusting scope before expanding coverage to encourage adoption.

The CCTS entered into force from April 2025 for approximately 490 entities across seven sectors. Emission intensity targets were notified in two phases: October 2025 for the first four sectors, January 2026 for the remaining three. Certificate trading is expected to begin mid-2026.

These frameworks are not isolated mandates.

BRSR Principle 6 disclosures generate the emissions baseline that CCTS compliance requires. EPR targets create the supply chain data demands that BRSR value chain disclosures are designed to address. Companies building strong BRSR data infrastructure are, by design, building what CCTS and EPR also require. India's regulatory architecture rewards integrated sustainability data management in ways that treating each mandate separately misses.

While India's regulatory intent is clear; implementation quality is a different story. The IIM-A study documents persistent problems across three BRSR reporting cycles: inconsistent units, deviations from the prescribed format, data buried in annexures, and 49 firms reporting more waste recovered than generated. A 2024 joint review by NSE, CFA Institute, and CFA Society India, covering 300 companies representing 70% of market capitalisation, found the same recurring issues. The gap between what SEBI mandates and what companies actually disclose is real, and it is wide.

A January 2026 ORF Issue Brief estimates BRSR is approximately 40% aligned with ISSB (IFRS S2). Financial materiality is not formally integrated into the framework. Scope 3 disclosures remain voluntary. There are no BRSR-specific penalty provisions beyond the general SEBI LODR non-compliance fine. Indian multinationals continue filing parallel disclosures under BRSR and ISSB or GRI, treating the former as a domestic compliance exercise and the latter as the standard that matters to international capital.

India's regulatory ambition is ahead of its implementation capacity. The companies that close that gap proactively, rather than waiting for enforcement, will build a durable advantage.

FY 2026-27 is now underway. BRSR Core assessment or assurance obligations apply to all 1,000 SEBI-listed companies in scope this year. CCTS compliance obligations are live for 490 entities across seven sectors. These are in-force requirements, not draft regulations pending consultation.

The CBAM exposure is one of the least-discussed balance sheet risks in Indian boardrooms right now. As of January 2026, every shipment of Indian steel and aluminium into the EU attracts a carbon cost, with certificate prices linked to the EU ETS — currently EUR 70-75 per tonne, projected to reach EUR 130 per tonne by 2030. Indian steel emits roughly 2.5 tonnes of CO2 per tonne produced, approximately 0.7-1.0 tonnes above the EU average. The consequences are already measurable. According to Global Trade Research Initiative (GTRI), India's steel and aluminium exports to the EU fell 24.4% in FY25, with steel alone down 35.1%. According to a Fastmarkets report, India is expected to bear 18% of total global CBAM costs — nearly double its share of EU import value. These costs will begin to appear on income statements from FY 2026-27 for any company with EU-facing manufacturing or supply chains.

The value chain data gap is equally underprepared. A TeamLease RegTech 2025 study of manufacturing MSMEs found that a typical unit already faces 1,450 compliance obligations annually, with regulatory cost burdens of INR 13-17 lakhs. Given the razor thin margins that Indian MSMEs operate on; adding ESG data collection without structured support will only produce patchy, inconsistent data that ultimately undermines the reporting entity's own credibility.

The companies getting this right are not outsourcing the problem. They are running supplier capacity programmes, co-designing data templates with key MSME partners, and linking ESG performance to procurement decisions. This is a cost today. It will be a competitive advantage in three years, when value chain disclosure assurance requirements expand further.

India's ESG roadmap

India's environmental and social regulatory history predates modern ESG. The Environment (Protection) Act dates to 1986, the Factories Act to 1948. The NGRBC principles that underpin BRSR were developed through a multi-stakeholder process rooted in India's own policy context, drawing on but not copying international frameworks. India's approach has been one of viewing international frameworks as a baseline upon which to build India-specific overlays on top. The GCP afforestation linkage is one such overlay, still evolving in its design. The phased value chain approach, calibrated to India's MSME-heavy supply chain reality, is another. The CCTS, connecting BRSR emissions data with a domestic carbon compliance market, is a third. None of these have direct equivalents in CSRD or ISSB. They reflect India's own development priorities and ecological context.

The ESG backlash is a Western phenomenon responding to Western political conditions. India has different pressures: a government that has staked its global climate credibility on NDC commitments and a 2070 net-zero target, a securities regulator that has consistently expanded its sustainability ambitions, and an economy where the physical costs of environmental degradation are present business realities. Soil degradation, water stress, and supply chain disruption are not future scenarios. They are happening now.

Research is beginning to confirm what practitioners have long argued.

The mechanisms for unlocking value from ESG are operational: tighter resource management, better stakeholder trust, earlier identification of supply chain risk. These are not sustainability arguments dressed up as business arguments. They are business arguments, with sustainability data as the evidence.

The question for Indian corporate leaders is not whether ESG is in retreat globally. It is whether you are building the capabilities — in data, governance, and supply chain management — to keep pace with a regulatory environment that will keep expanding regardless of what is happening in Washington or Brussels.

The backlash is happening elsewhere. Here, the building continues.

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