ESG in India’s Auto Ancillary Industry

The Economic Powerhouse

India's automotive ancillary industry is not only a significant contributor to the national economy but also a dynamic player in the global market, with ambitious growth and export targets.

Key Economic Indicators (FY2024)

Auto Component Output

$75 Billion

Auto Component Exports

$21.2 Billion

The sector's robust performance underscores its critical role in India's manufacturing landscape and export earnings.

Growth Projections to 2030

The industry is poised for substantial expansion, driven by domestic demand and increasing global integration.

The ESG Imperative

ESG is rapidly evolving from a niche concern to a mainstream business imperative, influencing investment decisions, consumer preferences, and regulatory landscapes worldwide.

Rise of ESG Investing in India

USD 1.17 billion

ESG-aligned firms gain better access to sustainable financing like green bonds and loans, as ESG investments grow, with India's ESG fund AUM at $1.17B in 2024

ESG's Impact on Valuation

20-30%

Potential Increase in Company Valuation

Strong ESG performance can significantly enhance market valuation and investor appeal.

Environmental Pillar: Towards a Greener Future

The automotive industry is at the forefront of environmental stewardship, driven by national commitments, technological advancements, and a growing urgency to decarbonize.

India's CO2 Emissions from Energy

Road transportation is a significant contributor to energy-related CO2 emissions, highlighting the need for greener mobility solutions.

National Net-Zero Target

2070

India's commitment to achieving net-zero emissions underscores the long-term vision for sustainability.

BEV Sales Targets by 2030

Ambitious targets for Battery Electric Vehicle (BEV) adoption are set to transform the automotive landscape.

Key Environmental Regulations Shaping the Industry

A series of progressive regulations are driving the Indian automotive industry towards higher environmental standards, focusing on emissions, fuel efficiency, and end-of-life vehicle management.

BS-VI Emission Norms

Effective: April 2020

Strict limits on pollutants.

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CAFE Norms Stage II

Effective: April 2022

Stricter fleet CO2 targets.

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ELV Rules 2025

Effective: April 2025

Eco-friendly vehicle recycling.

Social Pillar: People and Responsibility

The social dimension of ESG focuses on fostering fair labor practices, ensuring employee well-being, and promoting diversity, equity, and inclusion throughout the value chain.

Women's Representation in Auto Sector

Addressing gender disparity is crucial for a more inclusive and equitable workforce.

Workplace Safety Concerns

80%

of injured workers in Haryana & Maharashtra (FY23-24) were from auto supply chains.

Ensuring worker safety, especially for contract labor, is a critical social imperative.

Working Hours of Injured Workers

Excessive working hours pose significant risks to worker health and safety.

Governance Pillar: Transparency and Accountability

Robust governance frameworks, including transparent ESG reporting and ethical conduct, are essential for building trust and ensuring long-term sustainability.

BRSR Implementation Timeline in India

India is progressively strengthening its ESG disclosure norms, mandating greater transparency from listed companies and encouraging it across their value chains.

FY 2022-23

BRSR mandatory for Top 1,000 listed companies.

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FY 2023-24

BRSR Core (with assurance) mandatory for Top 150 listed entities.

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FY 2025-26 (Voluntary)

ESG Reporting for Value Chain Partners (Top 250 listed entities).

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By FY 2026-27

BRSR Core phased extension to Top 1,000 listed entities.

Value chain assessment encouraged from FY 2026-27.

Key Drivers for ESG Adoption

Several powerful forces are accelerating the integration of ESG principles within the Indian automotive ancillary industry.

Global OEM ESG Requirements & Sourcing Shifts: Increasing demand from international buyers for sustainable supply chains, amplified by "China Plus One" strategies.
Growing Investor Interest & Sustainable Finance: A surge in ESG-focused investments and easier access to green financing for compliant companies.
Government Policy Push & National Targets: Supportive policies like PLI schemes, FAME India, and national net-zero commitments.
Enhanced Brand Reputation & Competitive Differentiation: ESG adherence builds consumer trust, strengthens brand image, and can lead to higher market valuations.

Navigating the Challenges

Despite the compelling drivers, the path to full ESG integration is fraught with obstacles that the industry must overcome.

High Transition Costs: Significant initial investment required for green technologies and infrastructure.
Complex Supply Chains & Data Issues: Difficulty in ensuring transparency and standardizing data across multi-tiered global supply chains.
Skilled Labor Shortage: Lack of expertise in new domains like EV technology and advanced battery manufacturing.
Import Reliance for Critical Materials: Dependency on imported raw materials for EV components, posing supply chain risks.
Unorganized Recycling Sector: Nascent LiB recycling ecosystem hindering circular economy goals.
SME Constraints: Limited ESG expertise and financial resources among Small and Medium Enterprises.

Leading the Way: Industry Initiatives

Industry associations and pioneering companies are taking proactive steps to champion ESG adoption and foster sustainable practices across the sector.

ACMA

The Automotive Component Manufacturers Association of India (ACMA) is guiding members in monitoring and reducing carbon emissions, defining ESG policies, and promoting ethical practices, with a special focus on supporting MSMEs.

SIAM

The Society of Indian Automobile Manufacturers (SIAM) actively promotes sustainable mobility, circular economy principles (e.g., "Nature Positive Recycling" conference), and the integration of Extended Producer Responsibility (EPR) for waste streams.

Leading Companies

Companies like Bharat Forge (targeting carbon neutrality by 2040, 80% renewable energy by 2035), Sona Comstar (GRI aligned reporting), and Motherson Sumi Wiring (sustainable supplier policies) are setting benchmarks in ESG integration.