Applicability of Sustainable laws- a brief on laws in India and US
Supriya Sharma
CS Supriya Sharma is a Company Secretary with an experience of a year & a Commerce Graduate from University of Calcutta, having achieved AIR 12 in CS Foundation and Rank 3 in All India Company Law Quiz (ICSI). She is currently pursuing PGD in Securities Law, from the Government Law College and completed Certification Course on BRSR & ESG. After completing her training, she is currently working as Senior Executive Company Secretary with Lux Industries Limited. She started her training with Vinod Kothari & Co. (PCS Firm). She completed 50 hours Corporate Law training from RMLNLU, Lucknow.
Introduction
Sustainability, i.e. the ability to sustain for a long time or the ability to use the natural resources and energy in a way that does not harm the environment, as defined by the Oxford dictionary, both plays an important role in the business. The employee-wellbeing, use of natural resources, emission of greenhouse gases, payment of equal wages, diversity and equal opportunity, conservation of water and even more aspects of operating a business which are now given importance after the profitability of and earnings of the business.
The Global perspective
As per the United Nations Development Programme (UNDP) “The Sustainable Development Goals (SDGs), were adopted by the United Nations in 2015 as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity. The 17 SDGs are integrated as they recognize that action in one area will affect outcomes in others, and that development must balance social, economic and environmental sustainability. Countries have committed to prioritize progress for those who’re furthest behind. The SDGs are designed to end poverty, hunger, AIDS, and discrimination against women and girls.” The primary focus of the 2030 Agenda is based on ensuring the 5Ps, being People, Planet, Prosperity, Peace and Partnership, are safeguarded, which are critical for humanity and planet. 191 UN member States have agreed to achieve the goal by 2030.
Sustainability laws in India
The Responsible business conduct is a globally recognized concept and based on principle that the business conducted by the corporate ensures that the three Ps i.e. people, planet and profit have not been compromised. In India, the National Voluntary Guidelines for Responsible Business Conduct (NGRBC) was introduced in 2019 after revising the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities of Business, 2011 (NVGs), which was the primary framework based on which the Sustainability Reporting was developed over a period of time. The current framework for sustainability reporting is based on the nine principles of the NGRBC.
Environmental laws:
Here’s a glimpse into some key legislations which were passed for protection of the environment in India:
- The Environmental (Protection) Act, 1986 (EPA): This umbrella act provides the foundation for environmental law in India. It empowers the government to set environmental quality standards, regulate industries, manage hazardous waste, and take measures to improve environmental conditions.
- Water (Prevention and Control of Pollution) Act, 1974 & Air (Prevention and Control of Pollution) Act, 1981: These focus on controlling pollution of water and air resources respectively. They establish mechanisms for regulating industrial discharges and emissions, ensuring compliance with environmental standards, and preventing pollution of water bodies and air.
- The Forest (Conservation) Act, 1980: This law safeguards forest cover by restricting the diversion of forest land for non-forestry purposes. It promotes sustainable forest management practices.
- The Wildlife (Protection) Act, 1972: This act protects wildlife species and their habitats. It regulates hunting, trade in wildlife products, and the establishment of protected areas.
- The Energy Conservation Act, 2001: This law addresses energy efficiency and conservation. It sets standards for energy consumption by appliances and equipment, promotes energy audits in industries, and encourages the adoption of energy-saving technologies.
- The National Green Tribunal Act, 2010: This act establishes a specialized tribunal to handle environmental disputes and enforce environmental laws effectively.
Reporting framework:
India’s sustainability reporting landscape combines mandatory regulations with international frameworks.
Securities and Exchange Board of India (SEBI) Business Responsibility and Sustainability Reporting (BRSR): It is the broad set of disclosure on the non-financial reporting. Introduced in 2021, as successor of the Business Responsibility Report, it mandates the top 1000 listed companies {T1000} (by market capitalization) to report on their sustainability performance. The BRSR framework is based on nine principles outlined in the National Guidelines on Responsible Business Conduct (NGRBC) and covers a wide range of environmental, social, and governance (ESG) aspects.
The Report is divided in three sections, viz, Section- A General disclosures, Section- B Management & Process disclosure and Section-C Principle-wise performance disclosures, categorized into the Essential and Leadership indicators. The Report requires 145 disclosures, 26 from Section A, 12 from Section B and 107 from Section C. From financial year 2023-24, the reporting on the BRSR Core has been made applicable for Top 1000 Companies. BRSR Core is a sub-set of the BRSR, consisting of a set of Key Performance Indicators (KPIs) / metrics under 9 ESG attributes. The Reasonable assurance on the BRSR Core is also being rolled in a phased manner on the basis of the market capitalization of the companies, where the Top 150 companies will be reporting it in FY 2023-24 and Top 250 in FY 24-25, Top 500 in FY 25-26 and Top 1000 in FY 26-27.
Further, moving a step further, SEBI is also trying to cover the value chain partners on BRSR Core KPIs on a comply or explain basis, for Top 250 Companies from FY 2024-25 onwards.
The BRSR framework acknowledges these other reporting formats. Companies can reference existing sustainability reports based on GRI, SASB, or TCFD to fulfill BRSR requirements, avoiding duplicative reporting.
Sustainability laws in USA
In 1800s, when there was an industrial revolution happening in the US, the need for laws to protect the environment was felt. While the economy was booming the environment was depleting, and water pollution was major concerns. In 1969, the National Environmental Policy Act (NEPA) was passed being the first legal framework for protection of the environment. The key legislations which were passed for protection of the environment in the US are as follows:
- Clean Air Act (1970): This landmark legislation aims to combat and control air pollution. It sets limitations on emissions from different sources, including vehicles and industrial facilities. The Clean Air Act has been instrumental in improving air quality across the United States.
- Clean Water Act (1972): This law was enacted to restore and maintain the quality of the nation’s waters. It regulates the discharge of pollutants into waterways and sets water quality standards. The Clean Water Act has helped to make many US lakes, rivers, and streams cleaner.
- Resource Conservation and Recovery Act (RCRA) (1976): This act regulates the disposal of hazardous and solid waste. It sets standards for the transportation, storage, treatment, and disposal of hazardous waste. The RCRA has helped to ensure that hazardous waste is handled safely and does not contaminate the environment.
- Endangered Species Act (ESA) (1973): This law is dedicated to the protection of threatened and endangered species and their critical habitats. It prohibits the taking of endangered species and requires federal agencies to ensure their actions do not jeopardize these species. The ESA has been successful in preventing the extinction of many species in the United States.
Conclusion
The stakeholders of the Company are now looking for a more sustainable approach by the corporate, be it consumers for sustainable and environment friendly products, or the investors which are preferring to invest in ESG compliant companies, and the marketing campaigns are also being promoted in the same way. The ESG metrics and sustainability are gradually becoming one of the metrics of assessing the performance of the companies, and the approach towards the integrated reporting is being adopted.
Disclaimer
The information provided herein is for informational purposes only and does not
constitute a professional advice. While efforts have been made to ensure the accuracy and completeness of the content, no guarantee is given regarding the accuracy, reliability, or suitability of the information for any particular purpose. Additionally, laws and regulations are subject to change, and the legal landscape may evolve over time. Therefore, it is essential to consider that the information provided may become outdated or inaccurate due to changes in the law. Readers are advised to consult with qualified professionals or seek appropriate guidance before making any decisions based on the information provided. The author shall not be liable for any loss or damage arising from the use of, or reliance on, the information contained herein. By reading this paragraph, you agree to the terms and conditions of the disclaimer.