India’s textile and apparel sector has entered a high-stakes era of ‘carbon accountability,’ driven by the Securities and Exchange Board of India’s (SEBI) mandatory BRSR Core framework. Under these updated regulations, the top 1,000 listed entities must now provide ‘reasonable assurance’ - a rigorous third-party audit - on nine critical ESG attributes. This regulatory shift coincides with the India-EU Free Trade Agreement (FTA) signed in early 2026, which offers zero-duty access but requires stringent environmental traceability. For the 173 textile units recently brought under the national Greenhouse Gas (GHG) Emissions Intensity Reduction Regime, compliance is no longer a marketing choice but a statutory prerequisite for global trade.
Value chain integration and export readiness
The most significant development for the FY26 is the extension of ESG disclosures to the top 250 listed companies' value chain partners. This mandate forces large apparel exporters to monitor the environmental footprints of their MSME suppliers, who account for over 80 per cent of India’s garment production. Traceability is the new currency for European buyers, stated a representative from the Apparel Export Promotion Council (AEPC). With the Tex-Eco Initiative launched in the 2026-27 Union Budget, the government is incentivizing this transition through credit-linked subsidies for zero-liquid discharge (ZLD) systems and high-efficiency machinery.
Modernization incentives and market access
A notable case study is the Tirupur knitwear cluster, which recently emerged as a global frontrunner by achieving ‘Net-Zero’ status for several key units through collective wind and solar farm investments. These early movers are leveraging their high ESG ratings to secure Sustainability-Linked Loans (SLLs), reducing their cost of capital by 50–75 basis points. Despite short-term EBITDA pressure due to a 10 – 15 per cent increase in compliance-related capital expenditure, the sector is aiming for $100 billion in exports by 2030. By aligning with the EU’s Carbon Border Adjustment Mechanism (CBAM), Indian textiles are effectively positioning themselves as a lower-risk, more transparent alternative to competitors lacking national emission-reduction frameworks.
ESG governance: SEBI BRSR Core
SEBI regulates the BRSR framework to standardize corporate ESG reporting. It targets the top 1,000 listed companies, focusing on energy, water, and social equity. SEBI’s 2026 updates mandate supply-chain transparency to ensure India’s $350 billion textile goal remains environmentally viable.
