Preparing Your Manufacturing Business for ESG Compliance in India

Environmental, Social, and Governance (ESG) compliance has become an increasingly important consideration for manufacturing operations in India. Beyond meeting regulatory requirements, businesses are expected to manage environmental impacts, strengthen workforce welfare, ensure responsible governance, and improve supply chain transparency. These expectations are driven by evolving ESG regulations, global investor priorities, and customer due diligence requirements.

Why ESG compliances matter in manufacturing

Manufacturing activities have deep environmental and social impacts due to their reliance on energy, water, raw materials, labour, and industrial processes. As a result, regulators, investors, customers, and financial institutions are increasingly scrutinising how manufacturers manage sustainability risks.

In India, ESG compliance is governed by a matrix of laws such as the Companies Act, 2013, the Environment (Protection) Act, 1986, Stock Exchange Board of India (SEBI) regulations, etc.

Manufacturers that proactively integrate ESG practices can strengthen regulatory compliance, reduce operational risks, improve resource efficiency, and enhance their attractiveness to investors and global customers.

Environmental (E): Environmental compliance and resource efficiency

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Manufacturing activities have major environmental impacts through energy consumption, water use, emissions, waste generation, and resource utilisation. Under SEBI’s Business Responsibility and Sustainability Report (BRSR) framework, listed manufacturers disclose their environmental policies, management approach, performance indicators, and environmental risks. These disclosures are supported by compliance with India’s environmental and energy regulations.

Environmental regulatory compliance

Manufacturers must comply with environmental laws governing pollution control, waste management, and energy efficiency. Key regulations include the following:

1. Environment (Protection) Act, 1986
2. Water (Prevention and Control of Pollution) Act, 1974, & Water (Prevention and Control of Pollution) Amendment Act, 2024
3. Air (Prevention and Control of Pollution) Act, 1981
4. Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016
5. Plastic Waste Management Rules, 2016
6. E-Waste (Management) Rules, 2022
7. Battery Waste Management Rules, 2022
8. Energy Conservation Act, 2001

Additionally, environmental clearance from the central government or the State Level Environment Impact Assessment Authority (SEIAA) and consent from the respective State Pollution Control Boards (SPCBs) are mandated for those projects which have an impact on the pollution load.

Environmental management

Beyond regulatory compliance, manufacturers are increasingly integrating sustainability into production processes to improve operational efficiency and meet stakeholder expectations. Common initiatives include:

• Air emissions and pollution control
• Industrial wastewater treatment and water conservation
• Hazardous, plastic, e-waste, and battery waste management
• Energy-efficient technologies and renewable energy adoption
• Resource efficiency, recycling, and circular manufacturing practices
• Environmental monitoring, recordkeeping, and regulatory reporting

Energy-intensive industries may also be subject to sector-specific obligations under the Perform, Achieve and Trade (PAT) scheme.

Social (S): Workforce, employee welfare, and responsible manufacturing

Manufacturing businesses depend on skilled workforces, safe workplaces, and responsible labour practices. Under the BRSR framework, listed manufacturers disclose their approach to workforce management, occupational health and safety, employee welfare, human rights, and responsible value chains. These disclosures are underpinned by India’s labour, occupational safety, and social welfare laws.

Workforce and workplace management

Manufacturers should establish policies and systems that support responsible employment throughout their operations, including permanent, fixed-term, and contract workers. Key focus areas include:

• Fair wages and statutory benefits
• Social security coverage, including EPF and ESIC, where applicable
• Workforce planning and employee records
• Skills development and employee training
• Worker grievance redressal
• Responsible management of contract labour

These areas are primarily governed by the Code on Wages, 2019; the Code on Social Security, 2020; and the Industrial Relations Code, 2020.

Occupational health and safety

Manufacturing facilities face elevated workplace risks due to machinery, hazardous substances, and industrial processes. Effective safety management includes:

• Workplace hazard identification and risk assessment
• Safe operation and maintenance of machinery
• Personal protective equipment (PPE)
• Employee safety training
• Emergency preparedness and incident response
• Occupational health monitoring, where required
• Investigation and corrective action following workplace incidents

These requirements are primarily governed by the Occupational Safety, Health, and Working Conditions Code, 2020.

Human rights and responsible value chains

Manufacturers in India are also expected to integrate responsible business practices across their operations and supplier networks. Key measures include the following:

• Prevention of workplace harassment and discrimination
• Equal employment opportunities and workplace inclusion
• Prevention of child and forced labour
• Supplier codes of conduct
• Labour and human rights due diligence
• Supplier audits and corrective action plans

Compliance with laws such as the POSH Act, 2013; Rights of Persons with Disabilities Act, 2016; and Child and Adolescent Labour (Prohibition and Regulation) Act, 1986, remain mandatory.

Governance (G): Corporate governance and ESG oversight

Strong governance enables manufacturers to manage regulatory compliance, operational risks, and stakeholder expectations. Under the BRSR framework, listed companies disclose governance structures, ethics and compliance systems, board oversight, and ESG management practices. These disclosures complement the governance requirements prescribed under the Companies Act, 2013, and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Corporate governance and compliance

Manufacturers should establish governance frameworks that promote accountability, transparency, and effective risk management. Core elements include:

• Board oversight of ESG and business risks
• Internal financial controls
• Statutory and secretarial compliance
• Whistleblower and vigil mechanisms
• Anti-bribery and anti-corruption policies
• Related-party transaction governance
• Compliance monitoring and internal audits

ESG reporting and data management

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The top 1,000 listed entities by market capitalisation must prepare a BRSR under the SEBI (LODR) Regulations. Although the framework is not mandatory for most unlisted manufacturers, many voluntarily adopt similar reporting practices to satisfy customer, investor, and lender expectations.

Effective ESG reporting requires reliable systems to monitor and verify data on:

1. Energy and water consumption
2. Greenhouse gas emissions
3. Waste generation and recycling
4. Occupational health and safety performance
5. Workforce composition and diversity
6. Employee training
7. Ethics, compliance, and supply chain risks

Robust ESG data management enables manufacturers to strengthen regulatory compliance, support sustainability reporting, respond to customer due diligence, and improve access to ESG-linked financing.

Sector-specific ESG considerations for manufacturing in India

Different manufacturing sectors face distinct ESG priorities.

Best practices for ESG obligations in manufacturing

To strengthen ESG performance, manufacturers should consider:

• Conducting ESG gap assessments against applicable Indian laws and customer expectations
• Establishing environmental, health, safety, and governance management systems
• Implementing robust ESG data collection and internal reporting processes
• Performing periodic supplier ESG due diligence
• Training employees on sustainability, ethics, and compliance obligations
• Monitoring evolving Indian and international ESG regulations
• Publishing sustainability or ESG reports where appropriate.

Embedding ESG into business strategy can improve operational efficiency, reduce compliance risks, strengthen stakeholder confidence, and support long-term competitiveness.

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