From Compliance to Change: How ESG Can Create Social Value Through MSME Integration

Extended Producer Responsibility (EPR) is a policy mechanism that makes producers, brand owners, and importers responsible for the end-of-life management of the products they place in the market. In India, EPR is mandated across multiple waste streams under specific regulations, including the Plastic Waste Management Rules, 2016 (amended 2022), E-Waste Management Rules, 2022, Battery Waste Management Rules, 2022, Waste Tyre Management Guidelines, and other sectoral laws. These rules ensure that companies take accountability for collection, recycling, and safe disposal of post-consumer waste.

Who Needs to Comply with EPR?

EPR compliance is applicable to:

• Producers – Manufacturers of regulated products such as plastic packaging, electrical and electronic equipment, batteries, tyres, and lubricants.
• Importers – Entities importing products or packaging into India.
• Brand Owners – Companies selling products under their own brand, regardless of whether production is in-house or outsourced.
• Online Marketplaces (in certain cases) – Where regulated products are sold through the platform.

EPR Compliance Procedure (Plastic Waste Example)

1. Registration on CPCB Portal – All obligated entities must register with the Central Pollution Control Board (CPCB) or relevant State Pollution Control Board (SPCB).
2. Assessment of EPR Obligation – Calculate total plastic packaging introduced into the market in a financial year and identify its category (I–IV as per PWM Rules).
3. Target Allocation – CPCB assigns annual collection and recycling targets (in tonnes).
4. Engagement with Waste Management Partners – Partner with registered Plastic Waste Processors (PWPs), Producer Responsibility Organisations (PROs), or recyclers.
5. Fulfilment & Documentation – Collect and recycle/dispose of the waste and obtain certificates from CPCB-registered processors.
6. Annual Reporting – Submit annual compliance reports to CPCB/SPCB.

Consequences of Non-Compliance

Non-compliance with EPR regulations can have significant repercussions:

• Monetary Penalties – Environmental Compensation (EC) calculated based on shortfalls in meeting targets.
• Registration Suspension/Cancellation – Loss of legal rights to sell products in the Indian market.
• Legal Action – Prosecution under the Environment (Protection) Act, 1986 in serious cases.
• Reputational Damage – ESG ratings downgraded, investor confidence reduced, and supply chain relationships impacted.

EPR and ESG: Strategic Linkages

EPR compliance directly strengthens the Environmental pillar of ESG by:

• Diverting waste from landfills and reducing pollution.
• Promoting circular economy practices.
• Providing measurable and verifiable sustainability data.
  For companies preparing ESG disclosures, EPR targets and achievements become tangible proof points that can improve sustainability ratings and stakeholder trust.

The Role of Chartered Accountants in EPR Compliance

For many companies, the challenge lies not only in achieving EPR targets but also in proving compliance with credible evidence. Chartered Accountants (CAs) and statutory auditors play a vital role in bridging this gap between regulatory fulfilment and ESG assurance.

• Verification of EPR Data – Checking the accuracy of reported quantities of products and packaging introduced into the market, and waste collected, recycled, or disposed.
• Validation of Certificates – Ensuring that recycling and disposal records are authentic and issued by CPCB-registered recyclers or processors.
• Financial Impact Assessment – Reviewing the cost implications of EPR obligations, provisioning for potential EC penalties, and reflecting these in financial statements.
• ESG Assurance – Providing independent assurance on ESG reports where EPR performance is disclosed, thereby enhancing investor confidence and credibility.
• Advisory Support – Helping companies design robust internal control systems for tracking and recording waste management activities.

⚠ Critical Audit Insight: What Happens if Companies Do Not Comply

Failure to meet EPR obligations can lead to regulatory, financial, and reputational damage:

• The CPCB may impose Environmental Compensation (EC) charges based on the shortfall in meeting collection and recycling targets.
• EPR registration can be suspended or cancelled, halting legal sales in the Indian market.
• In serious cases, prosecution under the Environment (Protection) Act, 1986 may follow.
• From an ESG perspective, such lapses can severely damage sustainability credentials, reduce investor trust, and harm brand image among environmentally conscious consumers.
• Audit implication – Auditors must flag such non-compliance in statutory reports, which can materially affect financial statements and market standing.

The Bottom Line

EPR is more than just a compliance requirement—it is an opportunity to align business practices with global sustainability goals, strengthen ESG ratings, and enhance stakeholder trust. With the scope of EPR expanding across multiple waste streams, Chartered Accountants and auditors are indispensable in ensuring that companies not only meet their legal obligations but also demonstrate them transparently. Their role safeguards corporate reputation, mitigates financial risk, and upholds the integrity of India’s sustainability commitments.