CAG will add ESG criteria in PSU audits soon

CAG to introduce ESG audits for PSUs

Listed public sector undertakings may soon be on a par with private companies in environmental, social and governance (ESG) disclosures, with the Comptroller and Auditor General (CAG) preparing to integrate ESG criteria into PSU audits over the next year.

The move comes as the CAG seeks to tighten oversight of sustainability and governance practices across the public sector, especially after some PSUs have fallen short of Sebi’s Business Responsibility and Sustainability Reporting (BRSR) norms, which were made applicable to top 150 listed firms from FY24.

Sustainability first

The audit expansion will apply not only to listed PSUs but also unlisted ones.

“Initially 30 listed PSUs and 18 unlisted PSUs we have taken,” deputy CAG Anand Mohan Bajaj said at a press conference in Delhi on November 19.

The CAG’s plan is intended to bring public enterprises in line with evolving global sustainability metrics, as well as to tighten internal governance and disclosure standards.

Tech-led reforms take centre stage

The measures are part of a broader organisational shift inside India’s Supreme Audit Institution. At the 32nd Accountants General Conference in November, the CAG unveiled new technology-focused tools, including a CAG-LLM model and AI-driven risk assessment systems aimed at improving audit efficiency.

The audit body also plans to sharpen its focus on citizen-centric themes such as Ease of Living, Ease of Doing Business, and Foundational Literacy and Numeracy — areas where government schemes intersect heavily with public spending.

Unified data repository

In one of its more ambitious initiatives, the CAG has set up a Centre of Excellence for Financial Audit in Hyderabad. As part of this effort, Bajaj said the organisation plans to build a comprehensive repository of financial statements of all central and state PSUs, autonomous bodies and more than 100 urban local bodies (ULBs).

Currently, autonomous bodies use disparate accounting standards, and several state entities still do not follow accrual-based accounting.

“Idea is to have all data and perform advanced analytics, which could be done in a year or so, which can also pave the way for standard setting,” Bajaj noted.

He added that the new centre is expected to guide autonomous bodies and ULBs to better their accounting approach.