India's Startups: Time to Scale Responsibly Founders who embed ESG early won't just meet expectations—they will define them, says Shailesh Tyagi Partner and Service Line Leader, Sustainability, Deloitte South Asia
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
In the early days of India's startup revolution, the narrative was simple:grow fast, scale faster. Today, however, growth without responsibility is no longer viable. As India continues to mint unicorns and cement its place as the third-largest startup ecosystem in the world, Environmental, Social, and Governance (ESG) integration has emerged as a defining driver of purposeful growth. It is no longer a corporate luxury—it is a strategic necessity for building resilient, future-forward businesses that can thrive in a changing world. Startups must embed ESG principles to remain competitive and investment-ready. They possess the agility and freedom from legacy systems when combined with an innovation driven mindset, uniquely positioning them to integrate sustainability into their operations from day one.
But Many Don't.
In the race for product market fit and funding, ESG is often seen as a 'later stage problem'—a costly oversight. Recent challenges faced by Indian startups show how weak governance can erode trust and stall momentum. ESG goes ESG scrutiny across the broader ecosystem. From FY 2025-26onwards,the top 250 listed companies are encouraged to voluntarily disclose ESG metrics for their value chains, with assessment or assurance applicants from FY 2026-27.
The value chain shall encompass top upstream and downstream partners of a listed entity, individually comprising 2% or more of the entity's purchases and sales (by value) respectively; and the listed entity may limit disclosure of value chain to cover 75% of its purchases and sales (by value) respectively. For startups, SEBI's ESG norms carry two implications. First, IPO bound startups must understand how these disclosure requirements beyond emissions and diversity—it's about building resilient, transparent enterprises aligned with today's stakeholders.
Investor expectations are equally clear and increasingly aligned across the capital spectrum. Development finance institutions (DFIs) or DFI backed venture capitalists (VCs) are embedding ESG filters into their deal screening and portfolio monitoring processes and without demonstrating ESG readiness, many startups may not even reach the term sheet stage.
For IPO-bound start ups, the stakes are even higher—ESG now influences valuation premiums, investor confidence and post-listing reputation. According to the Journal of Economics & Management (2025), top quartile ESG performers saw significantly less underpricing on the day of their US IPOs. In India too, ESG metrics are now appearing in draft red herring prospectuses, with investors scrutinizing everything, from board structure to climate resilience.
On the regulatory front, the Securities and Exchange Board of India (SEBI) has introduced the BRSR Core framework to enhance disclosures for the top 1,000 listed companies (by market capitalization). While the framework is aimed at public companies, its ripple effects extend beyond the listed space, intensifying apply once listed. Second, startups that serve as vendors or partners to listed firms should prepare to share ESG data as part of value chain reporting. Startups don't need to adopt complex frameworks overnight, but they do need a starting point.
Materiality assessments, which identify the ESG issues most relevant to their sector and stakeholders, can offer the clarity and direction needed at the onset. It is time for India's startup ecosystem to lead not just in scale, but in sustainability. Founders who embed ESG early won't just meet expectations—they will define them.
