Why India’s Green Credibility Matters In The New Trade Order

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Global trade is undergoing a fundamental reset. While the tariff issue is still relevant, it is no longer the primary determinant of market access. Today, credibility on sustainability determines who supplies, who scales, and who is trusted over the long term.  

Given this shift, Indian companies can benefit from it by treating Environmental, Social, and Governance (ESG) as a lever for global competitiveness. 

This is already visible in the trade agreements that our companies now operate under. India has signed trade agreements with the UK, Oman, and New Zealand, and wrapped up a Free Trade Agreement with the European Union (EU) on Jan 27. These agreements broaden the prospects of Indian exporters to high-value markets that require credible and verifiable ESG performance across entire value chains. 

Making ESG A Competitive Advantage - Can India Inc Do It? 

At present, EU’s Carbon Border Adjustment Mechanism (CBAM) applies to steel and aluminium, with textiles expected to follow. Under this regime, faster decarbonisers gain structural cost advantage, while slower decarbonisers face increasing trade friction. 

In light of the manufacturing scale and diversified supply chains of Indian industry, as also growing services exports, it seems well-placed to tackle this transition. 

India is already able to deliver ESG-compliant products at volumes that only a handful of competitors can match. A trend is already being noticed - textile exporters now deliver fibre-level traceability, metal makers are investing in measuring emissions at the plant level and agri-exporters are establishing long-term contracts based on sustainability credentials.  

As large corporates move first, ESG requirements are also cascading through MSMEs and industrial clusters. That said, Indian companies will need board-level ownership of ESG to convert this momentum into a durable competitive advantage. 

Steps To Improve India Inc’s Standing On ESG 

First, MSMEs must be anchored firmly into global value chains. In that regard, India’s efforts for regional cooperation on energy, for instance through partnerships like the International Solar Alliance, is useful for these enterprises to access cleaner technology and energy solutions. ESG adoption among MSMEs will also scale if large corporates act as anchors by sharing audits, pooling certifications, providing traceability tools, and extending transition finance. Today, over 60% of export-oriented MSMEs are already aligned with the ESG disclosure norms set by larger corporates. 

Second, Sustainability must be treated as economic infrastructure, not merely a compliance requirement. The country’s experience with GST, Aadhaar and UPI demonstrates how standardisation and digital public goods can reduce friction and increase scale. Linking financial support and incentives to verified ESG compliance can help exporters and MSMEs modernise without disrupting output. For example, government schemes such as MSE-SPICE, MSE-GIFT, PM KUSUM and the ZED Certification programme are lowering adoption barriers in ESG.  

Third, a unified ESG data backbone is critical. Product-level emissions, supply-chain traceability, labour compliance and water use must be measurable, verifiable and interoperable. A comparable digital registry, part of the National Single Window System, will enable real-time compliance with laws by all sectors and markets. 

The BRSR framework of SEBI already mandates ESG disclosures for the top 1,000 listed entities. The subsequent phase should emphasise standardisation of sectoral metrics, linking MSMEs to BRSR-aligned value chains, and connecting credible ESG performance to capital access. 

Fourth, organisations must change from compliance to product leadership. According to a PWC Global Study, consumers and industrial buyers are ready to pay a premium of 10% for credible sustainability credentials. This creates a golden opportunity for firms in high-emission sectors to strengthen their green branding through sustainable product labels, advertisements, and brand communications. 

Fifth, carbon markets should be deployed as a competitiveness lever. India’s Carbon Credit Trading Scheme is moving into implementation, with emission-intensity targets notified for over 130 large entities. For Indian firms, a credible domestic carbon market can reward efficiency, accelerate technology upgrades, and channel capital into low-carbon processes, particularly in export-facing sectors. 

What Is Indian Industry’s Role? 

Corporate leadership will ultimately determine sustainability outcomes. As the government is unlikely to establish a dedicated ESG oversight body under the Ministry of Corporate Affairs, the onus is now squarely on boards and management.  

Rather than waiting for new regulations, boards and CEOs should elevate ESG from mere reporting to organisational transformation. This entails establishing interim targets, evaluating emissions at the product level, mitigating supplier risk, and investing in cleaner processes. Supporting suppliers through this transition will be crucial. This measure will create resilient and competitive value chains in the industry. 

Global trade now values credibility as much as scale. Indian businesses have both. The differentiator will be disciplined execution and the willingness to treat sustainability not as an obligation, but as a strategic asset.

This article first appeared in Business World on 9th February 2026

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