Amend Companies Act to bolster ESG initiatives, set up oversight body: House panel tells MCA
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A House panel has underscored the need to amend the Companies Act, 2013, to explicitly enshrine environmental, social and governance (ESG) objectives as integral components of directors' fiduciary duties The Parliamentary standing committee on finance, in a report submitted with the Lok Sabha on Monday, also urged the corporate affairs ministry to set up a dedicated ESG oversight body to combat greenwashing through specialized forensic expertise.Such a body should also formulate sector-specific guidelines, extend support to Micro, Small, and Medium Enterprises (MSMEs), and to ensure expeditious and deterrent application of penal provisions against fraudulent ESG claims, the panel under senior BJP leader Bhartruhari Mahtab said.'The Committee are of the view that while Section 166(2) (of the Companies Act) provides a broad stroke, a direct and unambiguous legislative mandate will elevate ESG considerations to a non-negotiable strategic imperative for (company) boards, providing a clear legal bedrock for accountability in integrating sustainability into core business strategies, thereby transitioning from mere disclosure to fundamental corporate responsibility,' the panel said in the report.The panel has asked the ministry to firm up a multi-pronged strategy to stamp out financial crimes at their genesis while improving the Serious Fraud Investigation Office 's (SFIO's) efficiency.The panel called on the ministry to submit a comprehensive, evidence-based report detailing the impact of SFIO's referrals to other agencies and a judicial analysis of prosecutions.The committee called for swift filling of vacancies at the National Financial Reporting Authority As for the National Financial Reporting Authority, the panel flagged that only 32 out of 69 posts were filled in FY25, pushing for drawing up a road map to establish a dedicated, permanent cadre of skilled professionals for the audit regulator.It has stressed the need to significantly accelerate the recruitment process to fill all vacant positions within a defined time-frame.The road map to fill in the NFRA vacancies, the panel said, should also address current recruitment bottlenecks by potentially reviewing and revising recruitment rules for higher echelons, where appropriate, to reduce the over-reliance on deputation.The committee has urged the ministry to build a transparent and results-oriented oversight system for corporate social responsibility . Companies would then be required to submit, and the ministry to publish, analytical reports detailing the actual socio-economic impact of CSR projects, and not just the amount of such expenditure.It wants the ministry to create a public system to transparently track all unspent CSR funds and provide exhaustive data on all enforcement actions, including the type of non-compliance, penalties collected, and their effectiveness.The panel flagged that the ministry's assertion that the extant CSR framework provides accurate mechanism of reporting, monitoring, penalty for noncompliance and proper utilization 'remains an unquantified claim, devoid of empirical substantiation, or performance metrics on project outcomes, utilization of all unspent funds, or specific, impactful enforcement actions'.
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The Hindu
7 hours ago
- The Hindu
Parliamentary panel pitches for ESG oversight body to combat greenwashing activities
The corporate affairs ministry should set up an ESG oversight body to actively combat greenwashing activities and also put in place penal provisions for fraudulent ESG claims, according to a Parliamentary panel. Generally, greenwashing refers to claims by companies about any product or service having a climate-friendly impact. ESG (Environmental, Social, and Governance) principles are part of the Companies Act, 2013. In its report tabled in Parliament on Monday (August 4, 2025), the Standing Committee on Finance mentioned the ministry's demurral against establishing a dedicated ESG oversight body, citing that the prevailing disclosure-based regime, underpinned by a company board's accountability and extant penal provisions, constitutes an adequate monitoring mechanism. Against this backdrop, the panel urged the ministry to 'establish a dedicated ESG oversight body for actively combating greenwashing through specialised forensic expertise' as well as formulate sector-specific guidelines and extend targeted support to Micro, Small, and Medium Enterprises (MSMEs). Besides, it should be ensured that there is 'expeditious and deterrent application of penal provisions against fraudulent ESG claims,' the action-taken report said. 'The Committee are of the view that while Section 166(2) provides a broad stroke, a direct and unambiguous legislative mandate will elevate ESG considerations to a non-negotiable strategic imperative for Boards, providing a clear legal bedrock for accountability in integrating sustainability into core business strategies, thereby transitioning from mere disclosure to fundamental corporate responsibility,' it noted. According to the committee, there is a need for statutory amendments to the Companies Act, 2013, to explicitly enshrine ESG objectives as integral components of Directors' fiduciary duties. The recommendations are part of the panel's action taken by the government on the observations/recommendations contained in the 10th report of the Standing Committee on Finance on 'Demands for Grants (2025-26) of the Ministry of Corporate Affairs'. Meanwhile, the committee has asked the ministry to develop a proactive and multi-pronged strategy to combat financial crimes at their genesis as well as bolster the investigatory and prosecutorial efficacy of the Serious Fraud Investigation Office (SFIO). Also, it has urged the ministry to accelerate hiring at the National Financial Reporting Authority (NFRA) as well as put in place a 'truly transparent and result-oriented CSR oversight system'. Under the Companies Act, 2013, a certain class of profitable companies is required to shell out at least 2% of their three-year average annual net profit towards Corporate Social Responsibility (CSR) activities. The ministry is implementing the Act.
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Business Standard
9 hours ago
- Business Standard
Parliamentary panel pitches for ESG oversight body to combat greenwashing
According to the committee, there is a need for statutory amendments to the Companies Act, 2013, to explicitly enshrine ESG objectives as integral components of Directors' fiduciary duties Press Trust of India New Delhi The corporate affairs ministry should set up an ESG oversight body to actively combat greenwashing activities and also put in place penal provisions for fraudulent ESG claims, according to a Parliamentary panel. Generally, greenwashing refers to claims by companies about any product or service having a climate-friendly impact. ESG (Environmental, Social, and Governance) principles are part of the Companies Act, 2013. In its report tabled in Parliament on Monday, the Standing Committee on Finance mentioned the ministry's demurral against establishing a dedicated ESG oversight body, citing that the prevailing disclosure-based regime, underpinned by a company board's accountability and extant penal provisions, constitutes an adequate monitoring mechanism. Against this backdrop, the panel urged the ministry to "establish a dedicated ESG oversight body for actively combating greenwashing through specialised forensic expertise" as well as formulate sector-specific guidelines and extend targeted support to Micro, Small, and Medium Enterprises (MSMEs). Besides, it should be ensured that there is "expeditious and deterrent application of penal provisions against fraudulent ESG claims," the action-taken report said. "The Committee are of the view that while Section 166(2) provides a broad stroke, a direct and unambiguous legislative mandate will elevate ESG considerations to a non-negotiable strategic imperative for Boards, providing a clear legal bedrock for accountability in integrating sustainability into core business strategies, thereby transitioning from mere disclosure to fundamental corporate responsibility," it noted. According to the committee, there is a need for statutory amendments to the Companies Act, 2013, to explicitly enshrine ESG objectives as integral components of Directors' fiduciary duties. The recommendations are part of the panel's action taken by the government on the observations/recommendations contained in the 10th report of the Standing Committee on Finance on 'Demands for Grants (2025-26) of the Ministry of Corporate Affairs'. Meanwhile, the committee has asked the ministry to develop a proactive and multi-pronged strategy to combat financial crimes at their genesis as well as bolster the investigatory and prosecutorial efficacy of the Serious Fraud Investigation Office (SFIO). Also, it has urged the ministry to accelerate hiring at the National Financial Reporting Authority (NFRA) as well as put in place a "truly transparent and result-oriented CSR oversight system". Under the Companies Act, 2013, a certain class of profitable companies is required to shell out at least 2 per cent of their three-year average annual net profit towards Corporate Social Responsibility (CSR) activities. The ministry is implementing the Act. (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
Economic Times
10 hours ago
- Economic Times
Parliament panel pitches for ESG oversight body to combat greenwashing activities
New Delhi: The corporate affairs ministry should set up an ESG oversight body to actively combat greenwashing activities and also put in place penal provisions for fraudulent ESG claims, according to a Parliamentary panel. Generally, greenwashing refers to claims by companies about any product or service having a climate-friendly impact. ESG (Environmental, Social, and Governance) principles are part of the Companies Act, 2013. In its report tabled in Parliament on Monday, the Standing Committee on Finance mentioned the ministry's demurral against establishing a dedicated ESG oversight body, citing that the prevailing disclosure-based regime, underpinned by a company board's accountability and extant penal provisions, constitutes an adequate monitoring mechanism. Against this backdrop, the panel urged the ministry to "establish a dedicated ESG oversight body for actively combating greenwashing through specialised forensic expertise" as well as formulate sector-specific guidelines and extend targeted support to Micro, Small, and Medium Enterprises (MSMEs). Besides, it should be ensured that there is "expeditious and deterrent application of penal provisions against fraudulent ESG claims," the action-taken report said. "The Committee are of the view that while Section 166(2) provides a broad stroke, a direct and unambiguous legislative mandate will elevate ESG considerations to a non-negotiable strategic imperative for Boards, providing a clear legal bedrock for accountability in integrating sustainability into core business strategies, thereby transitioning from mere disclosure to fundamental corporate responsibility," it noted. According to the committee, there is a need for statutory amendments to the Companies Act, 2013, to explicitly enshrine ESG objectives as integral components of Directors' fiduciary duties. The recommendations are part of the panel's action taken by the government on the observations/recommendations contained in the 10th report of the Standing Committee on Finance on 'Demands for Grants (2025-26) of the Ministry of Corporate Affairs'. Meanwhile, the committee has asked the ministry to develop a proactive and multi-pronged strategy to combat financial crimes at their genesis as well as bolster the investigatory and prosecutorial efficacy of the Serious Fraud Investigation Office (SFIO). Also, it has urged the ministry to accelerate hiring at the National Financial Reporting Authority (NFRA) as well as put in place a "truly transparent and result-oriented CSR oversight system". Under the Companies Act, 2013, a certain class of profitable companies is required to shell out at least 2 per cent of their three-year average annual net profit towards Corporate Social Responsibility (CSR) activities. The ministry is implementing the Act.
