Now Reading: Parliamentary Panel Calls for ESG Regulator to Tackle Greenwashing
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Parliamentary Panel Calls for ESG Regulator to Tackle Greenwashing
Rapid Summary:
- A Parliamentary panel has recommended that the corporate affairs ministry establish an ESG oversight body to counter greenwashing and enforce penal provisions against fraudulent ESG claims.
- Greenwashing refers to misleading claims about climate-pleasant impacts by companies.
- ESG (Environmental, Social, and Governance) principles are incorporated under the Companies Act, 2013.
- The Standing Committee on finance stressed that existing disclosure mechanisms are insufficient and called for statutory amendments to enshrine ESG objectives into Directors’ fiduciary duties under the Act.
- Sector-specific guidelines and targeted support for MSMEs were also proposed in combating greenwashing practices effectively.
- The report urged “expeditious application” of penalties for fraud while advocating forensic expertise in addressing fraudulent claims.
- Other recommendations include strengthening financial crime prevention measures, improving hiring processes at NFRA (National Financial Reporting Authority), boosting investigatory capabilities of SFIO (Serious Fraud Examination Office), and creating a robust CSR (Corporate Social Responsibility) oversight system as stipulated by law.
Indian Opinion Analysis:
The committee’s recommendations appear aimed at transitioning India’s corporate governance from a disclosure-led framework to one rooted in accountability through legislative reinforcement. If implemented, establishing an ESG oversight body might help mitigate greenwashing risks while elevating sustainability considerations across industries. Targeted sectoral guidelines could provide much-needed clarity but may impose regulatory challenges on smaller entities like MSMEs without adequate support structures.
Additionally, practical concerns such as staffing inefficiencies at regulatory bodies like NFRA or limited investigatory capacities at SFIO remain critical roadblocks that could hinder enforcement efforts. Penalizing fraudulent acts swiftly may act as a deterrent but requires thorough forensic capabilities-a promising yet resource-intensive objective. As India seeks enduring industrial growth pathways post-pandemic recovery, these motions reflect growing acceptance of balancing profitability with environmental stewardship within corporate frameworks.
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