A parliamentary panel has recommended that the Ministry of Corporate Affairs (MCA) establish a dedicated oversight body to combat greenwashing and penalize fraudulent claims related to Environmental, Social, and Governance (ESG) principles. The recommendations, outlined in a report tabled in Parliament, urge the ministry to move beyond its current disclosure-based system and create a more robust framework for accountability.
Greenwashing, which refers to companies making misleading claims about their products or services being environmentally friendly, has become a growing concern globally. The Standing Committee on Finance, in its action-taken report on the demands for grants for the MCA, pushed back against the ministry’s position that existing penal provisions and board accountability are sufficient. The panel argued that a specialized oversight body with forensic expertise is necessary to actively combat greenwashing.
Furthermore, the committee called for statutory amendments to the Companies Act, 2013, to explicitly include ESG objectives as part of directors’ fiduciary duties. This, they believe, would transition ESG from a mere disclosure requirement to a “fundamental corporate responsibility.” The panel also urged the ministry to formulate sector-specific guidelines and provide targeted support to Micro, Small, and Medium Enterprises (MSMEs) in their ESG efforts.
This recommendation builds on previous discussions regarding ESG oversight in India. An ESGNews.earth report from March 2025 referenced the Standing Committee on Finance’s earlier proposal to establish an ESG oversight body within the Ministry of Finance. This earlier proposal aimed to integrate ESG considerations into the financial regulatory framework to enhance investor confidence. The report highlighted how this body would complement the Securities and Exchange Board of India’s (SEBI) existing advisory committee on ESG in the securities market, which focuses on areas like enhancing Business Responsibility and Sustainability Reports (BRSR), ESG ratings, and mitigating greenwashing risks in investments. The proposed body within the MCA, as recommended by the parliamentary panel, would provide a broader scope, ensuring accurate ESG disclosures and implementing penalties for greenwashing across various sectors.
In addition to its ESG recommendations, the parliamentary panel also called for the MCA to develop a multi-pronged strategy to combat financial crimes, bolster the efficacy of the Serious Fraud Investigation Office (SFIO), accelerate hiring at the National Financial Reporting Authority (NFRA), and create a more transparent and results-oriented Corporate Social Responsibility (CSR) oversight system.
