Mumbai, June 20, 2025: ICRA ESG Research’s latest report on ‘Emerging Trends in Governance Practices’ highlights encouraging developments in corporate governance, with sectors having broader ownership structures—such as banking and financial services (BFSI) and IT—showing promising progress in board independence and governance maturity.

Sectors like BFSI and IT demonstrate strong governance frameworks, with a high proportion of Independent Directors (IDs) above statutory limits, presence of dedicated sustainability committees, and separation of Chairperson and Managing Director roles.

Companies with more widely distributed ownership structures tend to exhibit higher independence at the top, often higher than the compliance requirements. Reduced promoter control comes with an opportunity and a consequent greater openness to reform, leading to more diverse perspectives and stronger internal checks and balances.

“These practices ensure accountability, transparency, and effective decision making. However, sectors like oil, gas and energy, and construction material lag particularly in areas such as independent leadership and role separation. The IT and construction materials sectors emerge as leaders in adopting global frameworks like the UN Global Compact (UNGC) and Science- Based Targets initiative (SBTi),” Sheetal Sharad, Chief Rating Officer, ICRA ESG Ratings said in the report.

ICRA ESG Research’s analysis of top companies by market capitalisation across six sectors reveals insights into their governance practices. Comparing FY2024 with FY2020 as a base, ICRA ESG Research analysed 15 companies each from both hard-to-abate (HTA) and non-hard-to-abate (NHTA) sectors across six industry classes to understand the changes in governance practices, including those focused on sustainability.

The presence of Independent Chairpersons in the sample set rose to 30 per cent in FY2024 from 13 per cent in FY2020. Banking and financial services emerged as clear leaders while Information Technology (IT), and oil, gas and energy (OGE) continued to see lower representation. Board independence beyond statutory limits showed sectoral variations, with more than a third of the sample set companies exceeding the statutory threshold in FY2024; although this figure declined slightly since FY2020.

While corporate India has made meaningful progress in governance and sustainability practices, the evolution of corporate governance is unfolding in markedly uneven ways across industries.

“Companies with lower promoter shareholding exhibited stronger trends in exceeding statutory independence thresholds, with BFS and IT leading in this space. The establishment of dedicated sustainability or Environment, Social and Governance (ESG) committees increased, reaching 47 per cent of the sample set compared to 27 per cent in FY2020, with BFSI and IT demonstrating higher levels of structured ESG governance. Sectoral differences remain, as IT, OGE, and construction materials (CM) continued to see a lower presence of Independent Chairpersons, reflecting varying approaches to governance structures. Similarly, media, publication and entertainment (MPE) and automobile, automotive and manufacturing (AM) sectors saw relatively lower adoption of dedicated sustainability committees, reflecting different levels of ESG integration,” Sharad pointed out.

Embracing the twin imperatives of governance and sustainability is key to long-term resilience. Companies that hesitate risk being left behind by peers who recognise that sustainable and responsible business practices are no longer a matter of compliance—they are a source of competitive advantage. That said, in March 2025, the Parliamentary Standing Committee recommended amendments in the Companies Act 2013 to include ESG objectives as part of the fiduciary duties of directors and to encourage formation of independent committees for addressing ESG strategy formulation and implementation.

Therefore, India’s business future is being constructed on new foundations. The road ahead will demand courage, adaptability, and a willingness to depart from legacy norms. The shift towards stronger governance and deeper sustainability is not just a trend but a tectonic change in how Corporate India defines success. As businesses align with the values of accountability, transparency, and long-term impact, they are not only safeguarding their future but also earning the trust of a rapidly evolving stakeholder ecosystem.