UNGC Participation Falls 25%; SBTi Adoption Surges Among Indian Firms: Icra ESG Report

Sectors like banking, financial services, and IT show strong governance. They have more Independent Directors than required, special committees for sustainability, and separate roles for Chairperson and Managing Director, revealed Icra ESG's Emerging Trends in Governance Practices report. However, sectors like oil, gas, energy, and construction materials are still behind in areas like independent leadership.

Information Technology and construction material sectors also lead in following global standards like the UN Global Compact (UNGC) and Science Based Targets initiative (SBTi), said the report.

The HTA sectors led in sustainability governance initiatives, with nine out of 15 companies having a dedicated sustainability committee, while only six companies in the NHTA sector have such committees. Alignment with the UNGC and SBTi is also stronger in the HTA (hard-to-abate) sectors. These areas are still evolving for the NHTA (non-hard-to-abate) sectors, with progress being gradual.

These numbers indicate that higher environmental impact companies are increasingly focusing on structured ESG supervision, even though they are yet to catch up with the NHTA sector on board structure improvements.

The study revealed that over the last five fiscals, considerable progress has been achieved in setting up dedicated board-level sustainability/ESG committees. Almost half of the sample set (30 companies) has dedicated committees now, indicating that companies are moving away from addressing ESG responsibilities through broader governance structures such as corporate social responsibility (CSR) or Risk Management Committees to committed ESG supervision among Indian corporates.

Given its high environmental impact, oil, gas and energy (OGE) (80%) has led this trend, with most entities setting up dedicated committees. BFS and IT have significantly increased their adoption—from 20% in FY2020 to 60% in FY2024—reflecting a stronger focus on structured ESG governance, followed by construction materials (CM) and automobile, automotive and manufacturing (AM). However, the media, publication and 
entertainment (MPE) sector remains a laggard in establishing dedicated sustainability or ESG committees.

Indian companies often prioritise domestic ESG regulations over international frameworks due to regulatory requirements, business incentives, and alignment with national sustainability goals. This is one of the reasons the UNGC Indian network showed, as of February 2025, variations in sector-wise participation, with an overall decline from over 500 companies in FY2023 to 376 companies in FY2024 — marking a drop of more than 124 companies (24.8%). Among the analysed sectors, 75 companies have aligned with the UNGC to date.

The study showed that low participation from sectors like BFS (Banking and financial services), AM, and CM in the UNGC could be due to cost constraints, regulatory focus, and perceived relevance. Increased focus on local regulatory compliance — particularly Sebi’s BRSR (Business Responsibility and Sustainability Report) framework — is a key driver behind this shift.

On the other hand, the report said that the adoption of the SBTi among Indian companies has surged. From 79 companies in April 2022, the number rose to 92 by July 2022, with 41 having approved targets. By 2023, 78 more companies set targets, resulting in a 520% growth, totalling 93 companies. As of December 2024, 127 companies have joined the initiative, making India the sixth-largest globally in corporate climate commitments.

However, adoption varies across industries. NHTA sectors like textiles, software, and pharmaceuticals lead in setting net-zero targets, while high-emission industries such as power, cement, metals, and mining lag behind. Only 7% of companies with SBTi commitments are from high-emission sectors, despite generating nearly 55% of India's emissions. The ICRA ESG Research Report (2024) highlighted the coal sector's dominance in the energy mix, which limits net-zero commitments from high-emission industries, while low-emission sectors are more proactive.

Methodology
To conduct this research, ICRA ESG evaluated 30 companies across six key sectors with a total market capitalisation of Rs 12,423,778 crore, accounting for 44% of the total market capitalisation of the top 100 companies as of 31 December 2024. The sector mix represents three HTA and three NHTA industries, including the top five companies from each sector.

This report has analysed the corporate and sustainability governance indicators for FY2024 over FY2020. The NHTA sectors include BFS, IT, MPE, while the HTA sectors cover OGE,CM, and AM. This sectoral classification enables a comparative assessment of how top companies by market value across different industries incorporate sustainability and governance practices, considering their unique operational and regulatory landscapes. 

Click here to read the report