Balancing sustainability reporting: How India, the US and the EU are following different paths

The global market for environment, social, and governance (ESG) investing is growing slowly, but steadily. Sustainable debt markets (markets for instruments such as green bonds) grew 10% year-on-year in 2024 after declining for two consecutive years. However, the foundation of this growth, reliable corporate sustainability reporting, is under increasing strain, posing a potential risk to the market’s continued expansion. Global institutional investors are expressing growing concern over the escalating issue of corporate greenwashing, emphasising that the materiality, comparability and accuracy of sustainability disclosures require significant improvement. 

Against this backdrop, three major markets, the US, the EU and India, have each taken different regulatory steps around sustainability disclosures in the past few weeks. These developments come at a critical time for ESG investing, when the demand for reliable, comparable and verified data continues to grow. For investors and companies alike, these regulatory shifts reveal a widening gap in how jurisdictions are balancing climate goals under economic and political pressure. 

US: SEC Retreats from Climate Disclosure Rule 

In a major reversal, the US Securities and Exchange Commission (SEC) announced last month that it would no longer defend its own climate disclosure rule in court, introduced last year. The rule required companies to disclose climate-related risks and greenhouse gas emissions. Additionally, the SEC in February 2025, terminated a rule which had made it difficult for companies in the US to exclude social, policy, and environmental shareholder proposals, a move that will lead to fewer ESG-related resolutions making their way to a vote in company annual general meetings.  

By stepping back from these rules, the SEC sends a mixed signal to markets. This raises concerns about the reliability and availability of ESG data, and avenues to hold companies accountable for their adverse effect on climate, in the world’s largest financial market. It may also slow momentum for corporate climate action in the absence of mandatory disclosures. 

The co-chairs of the Congressional Sustainable Investment Caucus in the US issued a statement in response to the SEC’s position, emphasising that investors have consistently called for clear, consistent and meaningful information on companies’ climate-related risk exposure. They argued that the SEC’s decision runs counter to its core mission and undermines investor protection. 

EU: Delay and Simplification 

In the EU – long seen as a global leader in shaping sustainability regulations – policymakers voted on the first part of the “Omnibus package,” on 3rd April, which delays ESG reporting for smaller companies until 2028. At the upcoming voting sessions, the rules could be relaxed further, by excluding up to 80% of firms from the reporting scope. The EU also proposed to reduce the frequency at which companies assess their supply chains for social and environmental risks, from annually to once in five years.  

While some industry groups supported these changes, investor coalitions say they may weaken sustainability disclosure requirements, potentially hindering transparency, accountability and the effective allocation of capital for sustainable investments. For instance, the Principles for Responsible Investment reported that over 200 financial sector entities, with a combined US$6.8 trillion in assets under management, signed a joint statement, urging the European Commission to maintain the integrity and ambition of the EU’s sustainable finance framework. They warned that the Omnibus package could weaken EU sustainability disclosures, hindering investment and economic competitiveness in the region. 

India: A Measured and Structured Approach 

While regulatory regimes in the West are hitting speed bumps, India has taken a cautious but clear path. In response to industry feedback aimed at enhancing the ease of doing business, India’s market regulator, SEBI, has updated its Business Responsibility and Sustainability Reporting (BRSR) framework.  

Under the revised framework, companies have the option to assess or verify their BRSR core disclosures. Mandatory third-party verification will begin with the top 500 listed companies in FY2025-26, expanding to the top 1,000 in FY2026-27. SEBI also clarified key definitions related to value chains and introduced voluntary reporting of value chain ESG metrics, effective from FY2025-26. While the circular dilutes some of the more stringent regulations that were part of the BRSR core disclosure requirements, given the global developments in sustainability reporting, SEBI’s stance as a developing market regulator is commendable.  

The rollbacks in the US and the EU may embolden regulators in other parts of the world to delay or dilute ESG disclosure rules by citing competitiveness concerns. This risks creating a fragmented global landscape where data inconsistency, greenwashing and investor mistrust grow. India’s structured approach to sustainability reporting can serve as a reference point for developing economies seeking to unlock ESG finance. India’s approach, while more flexible, maintains regulatory direction and could support greater investor confidence. However, SEBI should keep strengthening its disclosures in line with investor requirements. For instance, corporate climate transition plans is one disclosure requirement that is still not part of the BRSR; however, it is a key piece of information that investors globally require in their decision-making process.      

With trillions needed to meet its net-zero goals, building trust through stable regulations can help derisk investments and reduce "greenwashing premium", helping India tap into global sustainable finance more effectively. 

This article was first published in Financial Express.