ESG Regulations: Environmental, Social and Governance (ESG) Regulations include the various social and environment costs of the business while dealing with various economic aspects of the business. Environmental, Social and Governance (ESG) Regulations is important for UPSC Mains Exam (GS Paper 2- Governance policies and programs for regulation and development of various sectors; GS Paper 3- Environment protection and conservation measures by the government).
Over the last decade, the idea of measuring businesses have evolved from measuring only traditional economic outputs to measuring their environmental impact, commitment to social issues, etc.
India has a robust corporate social responsibility (CSR) policy. India’s CSR Policy mandates that corporations engage in initiatives that contribute to the welfare of society. The Companies Act of 2013 (amended in 2014 and 2021) codified the CSR mandate of various companies in India.
On the other hand, ESG regulations, in comparison to CSR, differ in process and impact. The U.K. Modern Slavery Act, for example, requires companies with business in the U.K. and with annual sales of more than £36 million to-
India has long had a number of laws and bodies regarding environmental, social and governance issues, including the Environment Protection Act of 1986, quasi-judicial organisations such as the National Green Tribunal, a range of labour codes and laws governing employee engagement and corporate governance practices. The penalty for violations can be substantial.
Compliance with ESG regulations, both originating in India and elsewhere around the world, pose a significantly different challenge than India’s CSR regulations.
Companies that wish to maximise their opportunities in the global economy need to embrace these new ESG requirements and adjust their organisations accordingly.
Ans. The Companies Act requires companies with a net worth of ₹500 crore or a minimum turnover of ₹1,000 crore or a net profit of ₹5 crore in any given financial year spend at least 2% of their net profit over the preceding three years on CSR activities.
Ans. Regulators and corporations around the world have embraced the idea of ESG regulations which measures businesses- Environmental impact, Commitment to social issues and Soundness of their corporate governance and protection of shareholder rights.
Corporate Social Responsibility: New CSR Mandate for Corporate India
The Companies Act requires companies with a net worth of ₹500 crore or a minimum turnover of ₹1,000 crore or a net profit of ₹5 crore in any given financial year spend at least 2% of their net profit over the preceding three years on CSR activities.
Regulators and corporations around the world have embraced the idea of ESG regulations which measures businesses- Environmental impact, Commitment to social issues and Soundness of their corporate governance and protection of shareholder rights.
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