As climate accountability moves from voluntary aspiration to regulatory mandate, Indian corporations — particularly in the energy and steel sectors — find themselves at a critical crossroads. The question is no longer whether to disclose carbon emissions, but how rigorously, how transparently, and to what standard.

What Is Environmental Accounting?

Environmental accounting is the practice of incorporating environmental costs, liabilities, and resource consumption into an organisation’s financial and non-financial reporting. It goes beyond traditional bookkeeping to capture what is often called the “true cost” of doing business — one that accounts for air pollution, water depletion, land degradation, and greenhouse gas (GHG) emissions.

In the context of India’s rapidly industrialising economy, environmental accounting serves three vital functions: it equips management with data to make sustainable decisions, satisfies investor and regulatory expectations for ESG transparency, and enables meaningful peer-to-peer benchmarking across industries.

Carbon accounting bridges environmental responsibility with financial reporting — a growing priority for India Inc.

Carbon Footprint Disclosure: The Indian Regulatory Landscape

India’s disclosure ecosystem has matured considerably over the last decade. Key regulatory milestones shaping environmental reporting include:

• SEBI’s Business Responsibility and Sustainability Report (BRSR, 2022): Mandates top 1,000 listed companies to disclose GHG emissions, energy consumption, water usage, and waste generation annually.
• National Action Plan on Climate Change (NAPCC): Provides the policy backbone for sectoral emission reduction targets across energy, industry, and transport.
• Perform, Achieve and Trade (PAT) Scheme: A market-based mechanism compelling energy-intensive industries to improve specific energy consumption and trade certificates.
• Carbon Credit Trading Scheme (CCTS, 2023): India’s first domestic carbon market, creating financial incentives for verified emission reductions.
• Companies Act 2013, Section 135: CSR reporting provisions that increasingly include environmental and climate-linked disclosures for qualifying companies.

Carbon Disclosure in the Indian Energy Sector

India’s renewable energy ambitions demand equally ambitious environmental accounting frameworks to measure and verify real progress.

India’s energy sector — comprising thermal power plants, oil refineries, and the fast-expanding renewables segment — is the single largest contributor to national GHG emissions. State-owned giants like NTPC, ONGC, and IOCL, alongside private players like Adani Green Energy and Tata Power, have taken markedly different approaches to carbon disclosure.

Key Observations — Energy Sector

• NTPC and IOCL publish detailed annual sustainability reports aligned with GRI (Global Reporting Initiative) standards, disclosing Scope 1 and Scope 2 emissions.
• Renewable energy companies typically disclose avoided emissions rather than actual operational emissions — a methodologically weak but widely accepted practice.
• Most energy firms still do not disclose Scope 3 (value chain) emissions, which can account for over 70% of total lifecycle carbon impact in fossil fuel companies.
• Climate-related financial risk disclosures — aligned with TCFD (Task Force on Climate-related Financial Disclosures) — remain voluntary and sparsely adopted.

Carbon Disclosure Maturity — Select Indian Energy Companies (2024–25)

Carbon Disclosure in the Indian Steel Sector

India’s steel industry — one of the world’s largest — faces mounting pressure to decarbonise and disclose with greater rigour.

India is the world’s second-largest steel producer, and the sector’s carbon intensity — averaging 2.5 tonnes of CO₂ per tonne of crude steel — far exceeds the global average of 1.85 tonnes. Tata Steel, JSW Steel, and SAIL lead disclosure practices, yet significant divergences in methodology, boundary-setting, and third-party assurance persist.

 Carbon Disclosure Maturity — Major Indian Steel Companies (2024–25)

“Disclosing carbon data is no longer a reputational choice — it is rapidly becoming a precondition for accessing international capital, securing export markets, and retaining institutional investors.”

Critical Gaps and Challenges

Despite measurable progress, several structural weaknesses undermine the quality and credibility of environmental accounting in India’s heavy industries:

• Absence of uniform methodology: Companies use inconsistent emission factors, system boundaries, and base years, making sector-wide comparisons unreliable.
• Limited Scope 3 reporting: Supply chain emissions — often the largest component — remain largely unaccounted for across both sectors.
• Lack of mandatory third-party assurance: Unlike financial statements, sustainability disclosures are not universally subject to an independent audit, enabling selective or aspirational reporting.
• Greenwashing risk: Companies frequently highlight renewable energy targets without disclosing current absolute emission trajectories — creating a misleading narrative of progress.
• SME exclusion: BRSR mandates apply only to the top 1,000 listed companies. The wider MSME supply chain — which contributes significantly to Scope 3 emissions — operates outside the disclosure framework entirely.