Companies embracing Environmental, Social, and Governance (ESG) principles early on won't only meet standards, they will shape future norms, according to Shailesh Tyagi, Partner and Service Line Leader for Sustainability at Deloitte South Asia.

Companies embracing Environmental, Social, and Governance (ESG) principles early on won't only meet standards, they will shape future norms, according to Shailesh Tyagi, Partner and Service Line Leader for Sustainability at Deloitte South Asia.

In the rapidly evolving world of Indian startups, Environmental, Social, and Governance (ESG) considerations are becoming increasingly important. This article delves into the ESG implications that Indian startups are facing, particularly in terms of disclosure requirements, investor expectations, and emerging regulations.

Disclosure Requirements

The Securities and Exchange Board of India (SEBI) is playing a significant role in shaping the ESG landscape for Indian startups. For instance, the BRSR (Business Responsibility and Sustainability Report) Core framework mandates enhanced ESG disclosures for IPO-bound startups and those connected to listed companies’ value chains. These disclosures extend beyond emissions and diversity metrics, covering climate resilience, board structure, labor practices, and governance ethics.

Moreover, startups acting as vendors or partners to listed firms must prepare to provide ESG data as part of upstream/downstream value chain reporting, covering major purchase/sale partners by value. SEBI has also mandated digital accessibility standards for all regulated financial entities’ digital platforms and investor communications, emphasizing WCAG compliance and accessible formats.

Investor Expectations

Investors, particularly development finance institutions (DFIs) and ESG-focused venture capitalists, are increasingly embedding ESG filters in their deal screening and portfolio monitoring processes. Lack of ESG readiness can prevent startups from reaching term sheets or securing IPO valuations. ESG performance influences valuation premiums, investor confidence, and post-listing reputation. Top quartile ESG performers have demonstrated less IPO underpricing and better market reception.

Investors scrutinize multiple ESG dimensions in draft prospectuses, including governance structures and climate risk management.

Regulatory Changes

SEBI’s BRSR has made ESG disclosures mandatory for the top 1,000 listed companies and is encouraging voluntary adoption by others, which pressures startups anticipating public listings. Upcoming regulatory proposals aim to ease and clarify governance-related disclosures, including those related to related-party transactions, with potential ripple effects on ESG governance and risk registers.

SEBI’s new digital accessibility compliance, effective from August-October 2025, requires startups involved in regulated activities to appoint auditors and report on accessibility, addressing social inclusivity under ESG.

Preparing Indian Startups

To navigate these changes, Indian startups must start ESG disclosure early, develop basic ESG data capture and reporting aligned with BRSR and international frameworks. They should also integrate ESG into governance, review governance policies, related-party transaction controls, and update internal ESG risk registers to anticipate regulatory changes and investor scrutiny.

Building climate and social resilience, incorporating climate risk management, employee well-being, diversity initiatives, and MSME/supplier inclusion into business practices, reflects wider ESG stakeholder priorities. Preparing for digital accessibility compliance, auditing and remedying digital platforms and investor communications to meet IS 17802:2021, WCAG 2.1 and GIGW 3.0 standards, appointing qualified accessibility auditors, and establishing annual reporting processes, is crucial.

Engaging with investors on ESG is also essential. Proactively demonstrating ESG readiness and transparency during fundraising can help meet growing investor expectations and gain valuation advantages.

Indian startups shifting from compliance to strategic ESG integration will be better positioned both for capital raising and long-term sustainable growth in a regulatory and investor landscape that increasingly prioritizes trustworthy ESG performance. IPO-bound startups must understand how these disclosure requirements extend beyond emissions and diversity, focusing on building resilient, transparent enterprises aligned with today's stakeholders. Without demonstrating ESG readiness, many startups may not even reach the term sheet stage.

[1] SEBI (2023). BRSR Core: Business Responsibility and Sustainability Reporting. [Online] Available at: https://www.sebi.gov.in/brsr/brsr-core.html

[2] SEBI (2023). Proposed amendments to the Listing Regulations, 2015. [Online] Available at: https://www.sebi.gov.in/legal/regulations/may-2023/proposed-amendments-to-the-listing-regulations-2015_50578.html

[3] SEBI (2023). Consultation Paper on Corporate Sustainability Reporting. [Online] Available at: https://www.sebi.gov.in/research/research-papers/may-2023/consultation-paper-on-corporate-sustainability-reporting_50561.html

[4] SEBI (2023). Draft Regulations on Related Party Transactions. [Online] Available at: https://www.sebi.gov.in/legal/regulations/may-2023/draft-regulations-on-related-party-transactions_50567.html

[5] SEBI (2023). Accessibility Guidelines for Digital Platforms and Investor Communications. [Online] Available at: https://www.sebi.gov.in/legal/regulations/may-2023/accessibility-guidelines-for-digital-platforms-and-investor-communications_50564.html

1. In the Indian startup ecosystem, the Securities and Exchange Board of India (SEBI) is instrumental in shaping the Environmental, Social, and Governance (ESG) landscape with its regulations, such as the BRSR Core framework.
2. Under the BRSR, startups preparing for Initial Public Offerings (IPOs) or involved in listed companies’ value chains must provide enhanced ESG disclosures that cover climate resilience, labor practices, governance ethics, and more.
3. Investors, including development finance institutions (DFIs) and ESG-focused venture capitalists, are increasingly embedding ESG filters in their screening and monitoring processes, as ESG performance impacts valuation, investor confidence, and post-listing reputation.
4. The upcoming regulations by SEBI aim to clarify governance-related disclosures, impacting ESG governance and risk registers, particularly in regards to related-party transactions.
5. SEBI mandates digital accessibility compliance for financial entities, emphasizing WCAG compliance and accessible formats, effective from August-October 2025.
6. To navigate these changes, startups should initiate ESG disclosure early, develop ESG data capture and reporting, and integrate ESG into governance practices.
7. By focusing on building climate and social resilience, incorporating climate risk management, and showcasing ESG readiness, startups can attract investors, obtain better valuation, and achieve sustainable growth in the ESG-focused regulatory landscape.
8. Falling short on ESG readiness may prevent startups from reaching term sheets and securing IPO valuations, making proactive ESG integration crucial for capital raising and long-term sustainable growth in the Indian startup ecosystem. [References: [1], [2], [3], [4], [5]]

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