In recent years, ESG—short for Environmental, Social, and Governance—has moved from being a global buzzword to a measurable business imperative. While larger corporations have already begun reporting ESG data to regulators and investors, MSMEs and startups in India are gradually being drawn into this evolving framework. As stakeholders become more sustainability-focused, ESG compliance is no longer just about ticking regulatory boxes—it’s about long-term credibility and access to capital.
What is ESG and Why Does it Matter?
ESG comprises three key pillars:
- Environmental: How a business impacts nature—carbon emissions, water usage, waste disposal.
- Social: How it treats employees, vendors, customers, and communities.
- Governance: How ethical, transparent, and accountable its leadership and reporting practices are.
For Indian businesses, especially those in manufacturing, exports, IT, or finance, ESG signals transparency and responsibility. Lenders, investors, and even clients increasingly assess a company’s ESG rating before making decisions.
How MSMEs and Startups Are Affected
Although ESG disclosures are currently mandatory only for the top 1,000 listed companies under SEBI’s Business Responsibility and Sustainability Report (BRSR), many smaller businesses are now expected to meet ESG standards indirectly. For instance, large companies outsourcing to MSMEs may demand ESG commitments from their suppliers. Additionally, private equity and impact investors are applying ESG filters to startups seeking funding.
Steps to Get Started with ESG
Businesses can begin with basic internal steps like:
- Conducting an ESG risk assessment
- Setting measurable sustainability and ethics goals
- Publishing voluntary ESG statements
- Aligning internal policies (e.g., on labor rights, waste management, anti-bribery)
Engaging a Chartered Accountant to help integrate ESG into financial and statutory reports can give credibility to these efforts. It also positions the business as future-ready in the eyes of stakeholders.
Conclusion
ESG is not just a compliance trend; it’s a pathway to building resilient, responsible, and investor-friendly enterprises. MSMEs and startups that adapt early will not only stay ahead of potential regulations but will also open doors to funding, partnerships, and growth. As financial advisors and governance professionals, Chartered Accountants play a vital role in guiding businesses on this evolving frontier.
