Introduction

Environmental, Social, and Governance (ESG) criteria have become increasingly important in the corporate world, reflecting a growing awareness of sustainability and responsible business practices. In the context of India, this article aims to comprehensively analyse the initiatives under- taken by Indian companies to incorporate ESG principles into their operations. By examining the efforts towards ESG by several Companies, this research seeks to provide insights into the current state of ESG adoption among Indian companies and its implications for India's corporate landscape. The importance of ESG considerations in business has gained significant attention globally, driven by increasing awareness of environmental issues, social inequalities, and Corporate Governance failures. Statutory compliances help businesses to operate responsibly and follow the regulations set forth by the governing authorities on how they should treat their employees. It can also be said to be a pre-defined legal framework, and all organizations must function according to it.

Adhering to all rules, laws, and policies that are established by the authorities for an organi- zation to obey is known as statutory compliance for business. An organization and all its employees must adhere to the regulations and legal requirements set forth by the regulatory office and the in- dustrial bodies. It is imperative that all businesses – big and small, follow state and central labor rules. These regulations protect the interests of the company, the employee, and the employer. There are many statutory compliances and following them is not an easy task. The regulatory environment is always changing because new regulations are quickly implemented and enforced by the regulato- ry agencies. Companies should always be aware of how these regulations change because breaking them might result in penalties. This shift represents a significant departure from traditional business practices, highlighting a big transformation in the Indian business environment specially on legal complainces.While there is a widespread discussions and research going on ESG at the Global level but there is a limited understanding of how Indian companies are following this transformative journey for legal requirements. The present research may be valuable resource for Indian businesses seeking guidance on ESG integration and offer insights to policymakers and stakeholders interested in shaping the ESG landscape in India.

Why is it important for manufacturing businesses to ad- here to statutory regulations:

Businesses should be informed about the latest statutory requirements for conducting business in relation to their nation’s labor laws. All businesses must follow these guidelines because if these regulations are not adhered to, it might result in penalties, fines, legal issues, and other concerns. This is why companies spend money, time, and energy trying to comply. They must make sure that everything is up to date, including professional taxes and minimum wage taxes. Companies can also enlist the assistance of outside specialists to make sure they are operating in compliance with these regulations.
Motivations for Esg Adoption:

Regulatory Environment:

Regulatory bodies in India, such as the Securities and Exchange Board of India (SEBI) and the Ministry of Corporate Affairs (MCA), play a crucial role in promoting Environmental, Social and Governance (ESG) reporting and integration into corporate practices. SEBI as the primary regulato- ry authority for the securities market in India has taken several initiatives to promote ESG reporting and compliance among publicly listed companies. For example for FY2022-23, which ended on March 31, 2023,SEBI has made it mandatory for India’s top 1,000 listed companies based on mar- ket capitalization to file Business Responsibility and Sustainability Report (BRSR). This require- ment was introduced through a circular issued in May 20211. These companies are required to in- clude a Business Responsibility and Sustainability Report (BRSR) as part of their annual reports, delineating their ESG performance and initiatives.Further to ensure that companies focus on ESG issues that are prominent for their specific industry and operations, SEBI encourages companies to conduct a materiality assessment to identify ESG factors that are most relevant to their business. Debnath, P., & Kanoo, R.(2021) This approach ensures a structured framework for ESG reporting and integration, including guidelines on content, format, and disclosure requirements in the BRSR.SEBI’s recognition of certain ESG rating agencies for scoring and verifying ESG disclosures contributes to the reliability, transparency and comparability of ESG data. This boosts investor con- fidence in the accuracy and credibility of ESG information, which can influence investment deci- sions and, consequently, encourage companies to improve their ESG performance.

On the other hand, the Ministry of Corporate Affairs (MCA) has also contributed in promot- ing ESG practices. The mandate under the Companies Act, 2013, requires companies meeting spe- cific financial thresholds to mandatorily allocate a portion of their profits to Corporate Social Re-sponsibility (CSR) activities. Majumdar, A. B. (2014) While not identical to ESG, CSR and ESG are closely interlinked Gillan et al. (2021), and this mandate has led companies to consider their so- cial and governance responsibilities more seriously. Further, MCA has issued National Guidelines on Responsible Business Conduct to encourage companies to align their strategies with sustainable development goals and incorporate ESG considerations into decision-making.2 These guidelines provide a broader framework for ESG integration beyond reporting, influencing companies to inte- grate ESG principles into their business operations Mahajan, R. (2023) Additionally, requiring companies to report their CSR activities and expenditures in their annual reports enhances trans- parency and accountability regarding social initiatives. This reporting requirement ensures that companies fulfill their CSR commitments and provides stakeholders with visibility into their social efforts. Finally, the Corporate Governance codes issued by the MCA indirectly influence ESG adop- tion by emphasizing Board composition, transparency, and ethical conduct. These aspects are close- ly linked to governance and are integral components of ESG considerations.

Global Trends and Investor Pressure:

In recent years, institutional investors’ pressure and global ESG (Environmental, Social, and Governance) developments have had a big impact on Indian companies. Sharma.& Dangwal, (2020). Indian enterprises’ are trying their best to follow the ESG norms and practices. This change is being brought about by the necessity to live up to the expectations of international investors Twinamatsiko, E (2022). who adhere to global ESG frameworks like the Sustainable Development Goals (SDGs) and the UN Principles for Responsible Investment (PRI). Indian businesses under- stand that adhering to these criteria makes them more appealing to a wider investment base. Addi- tionally, the desire of global money has evolved into a driving force. Indian companies seeking for- eign investments and access to international capital markets are aware of the importance of proving outstanding ESG performance. Bodhanwala, S., & Bodhanwala, R. (2019). ESG factors are becom- ing more important to institutional investors around the world when making investment decisions. Indian businesses are driven to demonstrate their dedication to sustainability and ethical business practices in order to draw these investors and obtain foreign finance.

The emphasis on risk reduction is another significant factor. According to Galaz et al.(2012), Global ESG trends have highlighted possible hazards related to governance shortcomings as well as environmental and social challenges. These risks are now more fully understood by Indian busi- nesses, who are also aware of the serious financial and reputational repercussions they may have. These businesses are responding by acting proactively to address ESG challenges, improve gover-nance procedures, and increase risk management tactics. This strategy not only guards against po- tential problems, but it also fits in with the larger push towards sustainable and ethical business practises.

Impact of Global ESG frameworks and rating agencies on Indian corporations:

Global ESG (Environmental, Social, and Governance) frameworks and rating agencies have exerted a profound influence on Indian corporations, shaping their ESG practices in several ways. Firstly, these international frameworks, including the Global Reporting Initiative (GRI) and the Sus- tainability Accounting Standards Board (SASB), have played a pivotal role in standardizing ESG reporting among Indian companies. The impact is significant as it has prompted these corporations to adopt consistent as well as structured approaches to reporting their ESG integration and perfor- mance. This standardization has resulted in more transparent and comparable ESG data, which is vital for both investors and stakeholders in assessing a company’s sustainability efforts. Further, the presence of international rating agencies specializing in ESG assessments has had a prominent ef- fect on Indian corporations. Companies recognize that their ESG ratings can directly influence in- vestor sentiment and access to global capital markets. Consequently, they are increasingly inclined to improve their ESG performance for securing favorable ratings. This not only enhances their at- tractiveness to international investors but also aligns with the broader trend of ESG integration into investment decisions globally.

In the present turbulent business scenario, the Indian corporations are increasingly aware of the reputational and operational risks associated with poor ESG performance on the international stage. International rating agencies often evaluate these risks and emphasize on the areas where companies need to improve. This resulting scrutiny has encouraged Indian corporations to proac- tively address ESG deficiencies to protect their reputations. Therefore, international ESG frame- works and rating agencies have played a crucial role in expanding the focus of Indian corporations beyond compliance to genuine sustainability efforts. Companies in India are focusing on meaning- ful sustainability initiatives that align with global sustainability goals and address environmental and social challenges effectively.

Esg Initiatives in Indian Companies:

Indian enterprises are increasingly adopting Environmental, Social, and Governance (ESG) initiatives, underscoring their efforts and commitment to sustainability and responsiveness to evolv- ing stakeholder demands. These multifaceted initiatives encompass a wide spectrum of areas re- flecting their dedication to responsible corporate practices and long-term value creation

Environmental Sustainability:

Indian companies have been taking a range of initiatives to address critical sustainability issues, including carbon emissions reduction, renewable energy adoption, waste management, and resource conservation. Tata Motors, a leading Indian automobile manufacturer, has made significant strides in renewable energy adoption. The company installed solar panels at its Pune plant, resulting in a substantial reduction in carbon emissions and energy costs3. Similarly, Wipro has set up large- scale solar power plants at its campuses to reduce its reliance on conventional energy sources [Wipro Sustainability Report 2020-21]. Firms like Tata Motors and Tata Power have entered into power purchase agreements with renewable energy providers to source a significant portion of their electricity from renewable sources. Reliance Industries, one of India’s largest conglomerates, has implemented energy-efficient technologies across its refining and petrochemical operations, reduc- ing energy consumption and greenhouse gas emissions 6[Reliance Industries Annual Report 2020-21].

Several Indian companies are transitioning from traditional fossil fuels to cleaner and more

sustainable energy sources. For instance, Mahindra & Mahindra, a leading automobile manufactur- er, has been working on electric vehicle technology and has introduced electric cars to reduce car- bon emissions. Companies like Infosys and Tata Steel have implemented energy-efficient technolo- gies and practices in their operations. Infosys, for instance, has reduced its per capita electricity consumption through innovative building design and energy-efficient systems in its campuses (In- fosys 2023) Some companies, including ITC Limited, engage in carbon offsetting initiatives by planting trees and investing in reforestation projects to compensate for their carbon emissions8 [ITC Sustainability Report 2022]. Companies like HUL (Hindustan Unilever) have implemented zero- waste initiatives, aiming to send zero waste to landfills. HUL’s program involves recycling and reusing waste materials and promoting responsible disposal practices .

Tech companies like Wipro have robust e-waste management programs that ensure proper disposal and recycling of electronic waste generated from their IT operations Companies in water- intensive industries such as Tata Steel have adopted water-efficient technologies and practices. Tata Steel’s initiatives include rainwater harvesting and recycling water within its operations 10[Tata Steel Integrated Report 2021-22]. Larsen & Toubro (L&T), an engineering and construction con- glomerate, focuses on resource efficiency in its construction projects by optimizing material use and minimizing waste generation11 [L&T Integatred Report 2021-22].The aforementioned proactive sustainability measures carried out by Indian businesses demonstrate a thorough dedication to eco-logically friendly practises, encompassing a wide spectrum of green behaviours. To lessen their im- pact on the environment, they are adopting renewable energy options like solar panels and taking part in carbon- offsetting activities like planting trees. Additionally on the agenda are waste reduc- tion techniques and a focus on resource efficiency, with businesses implementing cutting-edge technologies to reduce waste production and maximise resource utilisation. In India, where busi- nesses are not only prospering economically but also promoting a greener, healthier world for future generations, this coordinated effort demonstrates a growing commitment to environmental respon- sibility and is helping to shape a more sustainable corporate landscape.

Social Initiatives:

A company’s commitment to moral and sustainable business practises includes initiatives related to Corporate Social Responsibility (CSR), community involvement, and labour practises. Numerous businesses in India haveThe desire of global money has evolved into a driving force. In- dian companies seeking foreign investments and access to international capital markets are aware of the importance of proving outstanding ESG performance. Bodhanwala, S., & Bodhanwala, R. (2019). ESG factors are becoming more important to institutional investors around the world when making investment decisions. The launched initiatives to solve various social challenges after real- ising the significance of these factors. These businesses demonstrate a wide variety of CSR initia- tives, demonstrating their commitment to addressing urgent social concerns in India and making a constructive contribution to society. For example ITC Limited, a prominent Indian conglomerate, has been actively engaged in community development through its Social Investments Program. This initiative focuses on rural development, providing livelihood opportunities, and supporting agricul- tural practices1 .Similarly, The Tata Group stands out for its enduring commitment to Corporate So- cial Responsibility (CSR). Through the Tata Trusts, they have consistently funded a plethora of so- cial initiatives, encompassing healthcare, education, and rural development projects. Notable among their endeavors is Tata Consultancy Services’ (TCS) “Adult Literacy Program,” aimed at promoting education among adults in rural areas.

Governance Initiatives:

Corporate Governance in India has undergone significant reforms in recent years. The Com- panies Act, 2013, represents a landmark legislative overhaul, introducing crucial provisions aimed at enhancing transparency and accountability. These include the mandatory appointment of inde- pendent Directors, the strengthening of audit committees, and stricter disclosure requirements. Ad- ditionally, the Securities and Exchange Board of India (SEBI) has introduced listing regulations for listed companies, mandating practices such as the separation of the roles of chairman and CEO, the establishment of risk management committees, and the enhancement of the role of independent Di- rectors. The establishment of the National Financial Reporting Authority (NFRA) further reinforces governance by overseeing financial reporting quality and auditor independence. Enhancing trans- parency is a fundamental pillar of Corporate Governance in India. Regulatory authorities, market forces, and investor expectations have driven efforts to improve disclosure and transparency. SEBI listing regulations, for instance, impose stringent disclosure norms on listed companies. Moreover, institutional investors and proxy advisory firms have taken on more active roles in engaging with companies on Environmental, Social, and Governance (ESG) matters and voting on resolutions, thereby advocating for greater transparency and accountability.

What are the specific statutory regulations:

Here is a list of some important compliance areas that can be used as a guide by organizations to meet their compliance requirements:

• The Factories Act, 1948
• The Air & Water pollution prevention and control act 1971
• The Water Cess Act 1977
• The Environmental protection act 1986
• The Hazardous waste management rule 2003
• The Electricity Act and Rules 2003
• The Manufacturers, Storage and Import of Hazardous chemical Rules
• The Petroleum act and Rules
• The Static and Mobile Pressure vessel rules
• The Employee Provident Fund and Miscellaneous Provision Act 1952
• The Employees State Insurance Corporation Act 1948 (ESIC)
• The Contract Labour (Regulation & Abolition) Act 1970 (CLRA)
• The Child Labour (Prohibition & Regulation Act) 1986
• The Minimum Wages Act 1948
• The Equal Remuneration Act 1976
• The Payment of Bonus Act 1965
• The Maternity Benefit Act 1961
• The Apprentice Act, 1961
• Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act 2013

Understanding some main statutory compliances of india:

1. The Minimum Wages Act, 1948:

As stated in Section 1 of the Act, the Minimum Wages Act 1948 is applicable throughout India. Any organization that employs 1000 people in the relevant state is covered by it. Except with the approval of the Central Government, it does not, however, apply to any employees of the Cen- tral Railway or of any enterprise owned by the Central Government. This act ensures that all labor – skilled and unskilled receive a minimum pay so they may sustain their livelihood. There are more than 26000 imprisonment clauses recommended if this act is not adhered to.

2. The Employees State Insurance Act, 1948:

In the event of illness, pregnancy, or work-related injury, the employees of a company are entitled to specific benefits under the ESI Act. The statute covers factories that are non-seasonal, use electricity, and employ more than ten people. Factories that do not use electricity and other or- ganizations that employ twenty or more people also need to comply with this act.

ESIC clinics, hospitals, and authorized independent medical practitioners offer these benefits. All businesses that employ 10 or more people are required to register with the ESI schemes. Workers whose monthly pay does not exceed ₹21000/-will be eligible to check the ESIC registration re- quirements.

3. The Payment of Bonus Act, 1965:

Payment of Bonus Act 1965 allows the workers of an organization to receive bonuses de- pending on productivity or profitability. Subject to a few exclusions, the Act is applicable to facto- ries and other establishments with 20 or more employees on any given day during the fiscal year. An employee is eligible to get a minimum bonus of 8.33% of their annual income. The Act also lays out how bonuses are calculated and what can be subtracted from gross profits. Workers who have worked 30 working days in that fiscal year and are making ₹21,000 per month or less (basic + DA, excluding other allowances) are qualified for the bonus payment.

4. The Employee Provident Fund, Miscellaneous Provision Act 1952 and ESIC:

Employee Provident Funding (EPF), referred to as PF in India, enables workers to set aside a portion of their salary for use in retirement or emergency situations. Both the company and the employees contribute a certain amount to PF each month. All organizations with at least 20 em- ployees should register with the EPF.

Non-compliance leads to fines and penalties:

There is a long list of statutory compliance requirements that need to be observed by a com- pany/business. If the businesses do not adhere to the above list of statutory compliance, they may be charged with legal notices and have to pay penalties and taxes. While it is not possible to list down every single penalty and fine, some of them have been mentioned below:In India, there are harsh penalties for breaking tax regulations. Such actions carry heavy fines, which can be anywhere be- tween 100% to 300% of the tax on unreported income. For example, failure to obey a notice issued under section 142(1) or 143(2) of the Income Tax Act can lead to a penalty of Rs. 10,000 for each failure. Additionally, there are fines of between Rs. 10,000 and Rs. 1,000,000 for breaking TDS re- quirements. Moreover, deliberate attempts to avoid paying taxes or to underreport income beyond Rs. 25 lakh may result in fines under Section 276C. The employer may be required to pay interest on any overdue payments if they neglect to submit the ESI and PF contributions by the deadlines. For instance, depending on the length of the delay, the interest rate for postponed PF payments varies from 10% to 15% annually. Penalties for non-compliance with the minimum wage regula- tions can include imprisonment for 3 months and/or a fine of up to INR 100,000.

Suspension/Cancellation of Operational Licenses

To operate their business and adhere to industry norms, businesses need licenses. Non-com- pliance may cause their licenses to be permanently cancelled or suspended. This will close down the operations of the business – leading to heavy losses.

Civil and Criminal Liabilities:

Non-compliance doesn’t just mean paying fines and penalties. It will also create legal prob- lems for the business. Generally, non-compliant corporations face both criminal and civil prosecu- tions, depending on how serious their behaviour is. The proprietors of the firm, the board of direc- tors, the CEO, and/or other comparable corporate heads, or those in charge of managing the busi- ness, will typically be sued for statutory non-compliance.

Damage to Brand Reputation:

It takes many years for a business to win the trust of its customers. Non-compliance attracts many lawsuits and fines, which puts the company’s reputation at stake. This will erode trust from suppliers and customers and discourage prospective lenders from funding the company. A brand’s spoiled reputation can reduce prospects and damage consumer confidence in the business.

Loss of Trusted Employees and Customers

Workers dislike working for organizations that don’t adhere to regulations. It is likely that the current employees will leave the company. Employees dislike working with organizations that have faced legal action, have a poor reputation for breaking government regulations, or are fre- quently seen paying fines for breaking the law. These businesses are considered unreliable and de- ceitful. They will not want their affiliation with such companies as it will tarnish their resume.

Common statutory compliance challenges faced:

Fulfilling statutory compliance is no joke for a business, especially when the laws and regu- lations constantly change. Here are some challenges that manufacturing industries face in India: Manual Processes:

A lot of Indian businesses still monitor and track compliance using manual procedures. This manual method frequently results in mistakes, inefficiencies, and challenges in keeping accurate records. Businesses find it difficult to efficiently maintain and monitor their compliance efforts in the absence of digitization. They have difficulties completing risk assessments, compiling compli- ance-related data, and producing reports on schedule. Due to this lack of digitization, it may be hardy for businesses to stay up to date with the constantly shifting regulatory environment.

Limited Resources:

When it comes to compliance, many Indian businesses—small and medium-sized enterpris- es (SMEs) in particular—face resource limitations. It is possible that they don’t have the resources or specialized compliance teams needed to handle their compliance duties. Companies may find it difficult to invest in legal knowledge, technological infrastructure, and compliance training due to resource constraints. Insufficient resource allocation can raise the risk of non-compliance, which makes it challenging for businesses to remain on top of the constantly shifting regulatory environ- ment.

Limited Access to Legal Updates on Compliance:

The Indian legal system is intricate and dynamic as new rules and regulations are always added, or old ones are updated. Since businesses have their own operations to take care of, it gets difficult for them to stay updated with new changes or implementations in compliance. Most times, there may not be any systematic guidelines that allow familiarization with legal updates, which will ultimately lead to noncompliance and possible legal consequences.

Poor Management:

If the top management of an organization disregards the significance of statutory compli- ance, the company will suffer. When senior management is unaware or does not prioritize compli- ance, the juniors follow the same. A culture that is not focused on compliance may result in a le- nient view of legal requirements. Ignorance will lead to noncompliance, which can include failing to implement the appropriate policies and processes, providing staff with the necessary training, or providing enough funds for compliance-related tasks.

Lack of Expertise:

The intricacy of compliance mandates in India usually surpasses the knowledge and profi- ciency of corporations. Comprehending and analyzing complex legal systems can be a considerable difficulty. It is possible that businesses lack access to knowledgeable legal counsel or compliance specialists who could help them traverse the complexities of regulatory compliance. This ignorance of the law may result in erroneous legal interpretations, improper compliance procedures, and even possible legal infractions. This is why businesses these days employ third parties who specifically excel in the knowledge of statutory compliance.

Steps can manufacturing industries take to ensure they:

Comply with all the appropriate laws:

As we already discussed, statutory compliance is intricate, and only those with the knowl- edge and expertise can manage it efficiently. This is why it is advised that businesses outsource their payroll department to ensure that everything is in line and they are compliant with the statuto- ry compliances. Here are some advantages that businesses can experience if they outsource their payroll to a third party:

Financial Benefits – Payroll processing internally has the potential to take up a large amount of time and resources that could be better used for essential business operations. Businesses can free up internal resources and allow them to concentrate on strategic goals and revenue-generating du- ties by outsourcing payroll processes. Compared to internally processing payrolls, organizations that outsource their payroll activities have an average of 18% savings in operational expenses.

Employee Efficiency – Payroll management involves several complex tasks, such as calculating employee salaries, deducting taxes, and producing reports. Assigning these important responsibili- ties to third-party payroll companies can effectively lessen the administrative burden on their inter- nal staff. According to statistics, organizations may save an average of 40 hours a month on admin- istrative payroll management activities when they outsource these tasks.

Staying Compliant – Payroll compliance is one of the most significant things in running a business smoothly. Considering that tax laws, labor regulations, and other statutory requirements are always changing, they must be taken care of by a third party with access to and knowledge about them. Third-party partners are always updated with legislative changes, they have access to modern tech- nologies and software that allow easy and accurate calculations, and they also invest in high-level secure features that keep your data safe and ensure all tax filings are done on time. All this ensures that you are updated with your statutory compliance. It also ensures that you do not incur any fines or penalties or are subjected to legalities.

Recommendations:

To further promote ESG (Environmental, Social, and Governance) adoption in India, several policy measures can be considered:

1. The regulatory body may extend the requirement for ESG reporting beyond the top 1,000 listed

companies to cover all publicly traded companies. This would enhance transparency and compara- bility across the entire market and encourage smaller companies to embrace ESG practices.

2. The government may announce the tax incentives, such as deductions or credits, to companies that invest in ESG initiatives, renewable energy projects, or sustainable technologies. This can incentivize businesses to allocate resources towards sustainability efforts.Further, the issuance of green bonds and sustainable financial products can be encouraged by offering tax benefits or subsi- dies to companies raising capital for environmentally responsible projects. This would boost sus- tainable investments.
3. There should be clear cut guidelines for ESG disclosure for private companies, making it volun- tary initially and gradually moving towards mandatory disclosure. This would extend the adoption of ESG practices beyond publicly traded firms.
4. Independent audits of ESG reports must be introduced to ensure accuracy and reliability of data. Companies found to be providing inaccurate or misleading ESG information should face penalties.
5. Public awareness campaigns can be launched to educate consumers, investors, and businesses about the benefits of ESG adoption and its positive impact on sustainability and long-term prof- itability.
6. Conclusion:

In a rapidly changing business world where sustainability and responsible business practices are of paramount significance, India’s adoption of ESG principles has positioned it in a good place to compete on the global level. The consideration and adoption of Environmental, Social, and Gov- ernance (ESG) principles in India highlights a transformative shift in the corporate sector. Although, Indian companies are taking comprehensive ESG initiatives, addressing environmental challenges, engaging in meaningful social activities, and enhancing governance practices but still there are sev- eral formidable challenges that persist. The complexities in data collection and reporting systems, weak regulatory and enforcement frameworks, and the pressing need for technological in-frastructure upgrades are the few obstacles that are creating difficulty in ESG reporting for Indian companies. To overcome these obstacles and for further advancing ESG adoption, standardized re- porting of ESG principles is crucial in India. Policymakers may play a crucial role in driving this transformation through targeted measures and actions. First and foremost, creation of a robust regu- latory framework is crucial. Such regulations should mandate companies to transparently disclose their ESG- related data, thereby ensuring that ESG considerations are an integral part of corporate operations.