[Nawneet Vibhaw is the Senior Director and Head at the School of Law, UPES Dehradun, and Shubham Joshi is the Assistant Dean – International Affairs at the School of Law, UPES Dehradun.
This post is part of the IndiaCorpLaw Blog Symposium on ‘Corporate Law and Climate Change: Indian and Comparative Perspectives’.]
India’s environmental regulatory framework obligates industries to prevent, control, and mitigate the adverse environmental consequences of their operations. One such recurring obligation under this framework is the development and maintenance of green belts or green cover within industrial premises and estates. Backed by scientific literature, and as also acknowledged by the government through CPCB’s Guidelines for Developing Greenbelts, industrial green belts serve important pollution mitigation functions, such as mitigating emissions, suppressing dust, helping in carbon sequestration, and providing onsite buffers against noise, heat and the impact of industrial activity on surrounding communities.
Considering the significant value of a green belt cover, the Ministry of Environment, Forest and Climate Change (MoEFCC) through its Standard Environmental Clearance Conditions, issued vide Office Memorandum (OM) dated 09 August 2018 and supplemented in 04 January 2019 and 08 January 2019 stipulated a uniform mandatory condition on the industries for most sectors to maintain green belt cover on at least 33% of their industrial estates.
However, MoEFCC vide its new OM dated 29 October 2025 (Green Belt Cover OM 2025) has revised the uniform mandatory green cover criteria of 33% to 10% with differentiated requirements in a bid to ‘rationalise’ these requirements based on pollution potential. This means that some industrial estates must now reserve only 10% as common green cover at least, with different requirements applying to standalone industries, and some categories such as green and white industries facing no mandatory percentage. The government, in its official reply, has attributed this change to balance environmental needs with land availability and reduce compliance burden.
While the revision seeks to balance environmental considerations with industrial land requirements, it significantly lowers the applicable thresholds for several categories of industries. Although this reduces what companies are legally required to do, unfortunately, it may not necessarily reduce the environmental consequences of their operations, and the role that additional green cover can play in mitigating them. The question then becomes whether companies should treat relaxed regulatory minimum as the full extent of their environmental responsibility or should the companies assume greater corporate responsibility and comply with such conditions beyond the regulatory floor.
Therefore, this post is an attempt to answer this question. It argues that when regulatory environmental norms are relaxed, corporates should consciously consider undertaking measures such as developing additional green cover beyond the prescribed regulatory floor. Although the director’s duty under section 166(2) of the Companies Act, 2013 does not compel such expectation, corporate disclosure framework can incentivise such actions by recognising verified environmental contributions and making them visible and valuable to investors and other stakeholders through a combination of Green Credits and Business Responsibility and Sustainability Report (BRSR) framework. Hence, the post will examine how such strategies can motivate companies to move from minimum environmental compliance towards voluntary environmental leadership.
Voluntary Environmental Leadership Beyond Compliance
One of the major objectives of environmental regulations is to prescribe what corporates must do. When environmental regulations are relaxed, such as the reduction of the green belt cover requirement, it posits a wider choice or perhaps a dilemma for the companies. Should companies adhere to the revised minimum standards and simply comply with the law? Or should they consciously or willingly pursue actions that bring additional value to the environment and comply beyond the law? The latter is what is described as voluntary environmental leadership, i.e., actions that are taken over and above the legal compliance, not because any corporate or environment statutory duty compelled it, but because the companies took onus on themselves to assume greater environmental responsibility and contribute positively to the environment.
Therefore, when the government lowers the requirement for industries to maintain lesser green belt cover, despite the environmental benefits of the tree plantations remaining unchanged, corporates should consciously and willingly consider taking measures to undertake plantation above the applicable minimum standard prescribed by the Green Belt Cover OM 2025, either within their estates, if the land is available, or outside. In fact, Green Belt Cover OM 2025 itself encourages companies to take up ex-situ plantation in collaboration with State Forest Departments, Urban Local Bodies, or other government agencies in schemes such as Nagar Van, Compensatory Afforestation Programs, etc., in addition to the minimum green belt criteria.
Once the regulatory requirement has been relaxed, an important question remains: why would companies willingly go above and beyond the required environmental standards when doing so requires additional capital, long-term maintenance, and diversion of resources? It is argued that companies should consider doing voluntary contributions beyond minimum compliance because it can potentially create a distinct edge over their competitors and show investors and other stakeholders that their environmental commitments go beyond what is required by law, thereby earning credibility and competitive position.
However, it must be noted that these benefits are subject to companies’ voluntary actions being credible and visible. Any unsupported claim of voluntary leadership beyond minimum compliance may carry limited value and may invite concerns about greenwashing. Voluntary environment leadership therefore requires formal recognition of their actions and a recognised channel of communication to the relevant stakeholders. This is where the Green Credit framework and BRSR helps address these concerns.
Making Voluntary Action Visible: Green Credits and BRSR
Green Credits as Formal Recognition
In India, the Green Credit Program introduced by the MoEFCC and formalised through the Green Credit Rules, 2023, exists specifically to acknowledge and incentivise voluntary environment-positive actions taken by companies and other stakeholders by converting eligible and verified activities into formally recognised Green Credits. Rule 4(2)(i) of the Green Credit Rules, 2023, expressly includes tree plantation activities intended to increase green cover as an eligible activity. Interestingly, these credits are not merely symbolic. Under the revised 2025 methodology, such credits may be exchanged once towards specified purposes, including compensatory afforestation, eligible CSR requirements, and project-related plantation obligations.
Therefore, if a company decides to expand its green belt cover or undertakes plantation initiatives elsewhere beyond its minimum compliance level, it will be eligible to claim practically useful Green Credits, which in turn will make its voluntary actions verifiable and credible. However, it is pertinent to note that any additional plantation undertaken under the Green Belt Cover OM 2025 does not automatically fall under the Green Credits framework or recognised as a Green Credit by default. Any such action must independently satisfy the framework and applicable methodology prescribed under the Green Credit Rules such as the requirements on eligible land, implementation, and verification.
Once the voluntary action beyond compliance is verified, the next important step is to ensure that such verified and credible actions are also disclosed to the investors and relevant stakeholders. This is possible through the Securities and Exchange Board of India’s (SEBI) BRSR framework.
BRSR as the Disclosure Channel
SEBI’s BRSR framework is a mandatory reporting standard for listed companies in India to disclose their performance on environmental, social and governance parameters. The framework makes structured information available to the investors and other relevant stakeholders about a company’s sustainability related actions and performance, thereby enabling them to assess its environmental practices beyond financial metrics.
As per SEBI’s recent circular dated 28 March 2025, under Principle 6 of the BRSR framework, which pertains to efforts made to protect and restore the environment, SEBI has added an eighth leadership indicator seeking disclosures on green credits generated or procured by a listed entity. This is particularly important because it now gives Green Credits recognition and backing within an investor-facing disclosure framework as a leadership indicator, which is often used to acknowledge and recognise voluntary actions that go beyond the minimum compliance of reporting entities.
However, it must be noted that this newly introduced leadership indicator on Green Credits merely records the number of credits without determining what those credits represent. It lacks an obligation to explain whether the credits were obtained through voluntary plantation over and above the minimum compliance or whether such credits were procured only to meet the minimum compliance.
Therefore, SEBI should consider expanding the newly introduced eighth leadership indicator to also incorporate factors such as explaining the underlying activity forming the basis of the concerned Green Credits, clearly separating credits which were generated instead of being procured, stating whether such credits were used to meet any legal obligation, and explaining how the voluntary action is considered beyond the minimum regulatory compliance. This would enable companies which voluntarily do more to credibly distinguish their contribution from ordinary compliance. As a result, the investors and relevant stakeholders will get access to valuable, verified and credible information on environmental contributions made by companies over and beyond their regulatory floor.
Conclusion
To conclude, when environmental regulatory norms are relaxed, and companies are not compelled to act beyond the revised minimum, they should nevertheless consciously consider assuming greater responsibility by undertaking measures beyond what the law requires. The 2025 revision of industrial green cover requirements aptly illustrates this choice. Although the applicable mandatory requirements have been lowered for several categories of industries, companies should still choose to develop additional green cover or support afforestation elsewhere. The Green Credit Program can formally recognise eligible verified environmental contributions, while the BRSR framework can make them visible to investors and other stakeholders. Together, these mechanisms can encourage companies to treat the regulatory minimum as a floor for compliance rather than the limit of their environmental ambition.
– Nawneet Vibhaw & Shubham Joshi