ESG Norms and Sustainable Corporate Governance: Contemporary Challenges in Accountability and Compliance

ESG, Corporate Governance, Sustainability, Accountability, Greenwashing, Disclosure, Compliance

The notion of Environmental, Social and Governance (ESG) has shifted from its edges into the very heart of today's governance debate. The norms which were once regarded primarily as a voluntary add-on to business models are increasingly emerging as binding business standards to be observed, and finding their way into an expanding network of nationally and trans-nationally enacted regulatory measures. But this development has not been an easy one. Enforcement is continuing to be patchy, and companies' responses are varied from heartfelt transformation to 'impression management'. This paper explores the theoretical framework of ESG in corporate governance, reviews the history of the international and domestic regulatory landscape, and discusses the key issues which impede proper accountability and compliance. It explores the structural shortcomings of existing ESG reporting and disclosure frameworks, the legal nature of any enforcement left to the church, greenwashing, social washing, shareholder primacy and stakeholder-hearing governance frameworks, and the specific vulnerabilities of emerging markets like India in facing this fast changing landscape. The paper proposes a concept of meaningful ESG integration, which would require greater disclosure, a change in how corporate purpose is defined with a view to truly value or interests-based integration, and a more effective judiciary and regulatory framework. Based on a combination of doctrinal analysis, comparative regulatory study and empirical research, the paper suggests that additional disclosure is not sufficient to achieve meaningful integration and that meaningful integration calls for a fundamental reorientation of the corporate purpose, reinforced by robust judicial and regulatory frameworks and independent verification infrastructures. The paper ends with a series of reform suggestions addressed at the regulators, corporate boards, and international standard setters.