Environmental and Social Due Diligence in the Sugar Industry

Environmental and Social Due Diligence in the Sugar Industry- Quick Overview

The sugar industry has changed a lot. Today, it is not defined by the amount of sugar production, but by how quickly it can switch from sugar to key products, including sucrose, ethanol, bagasse, and press mud. With increasing operational efficiency, increases the social and environmental risks. This requires environmental and social due diligence in the sugar industry.

The environmental and social due diligence supports sugar businesses in a systematic risk mitigation. It identifies and assesses environmental and social risks, ensuring regulatory compliance, pollution control, and follows social responsibility standards across the supply chain.

Environmental and social due diligence in the sugar industry fulfil sustainable goals for long-term growth strategies. With ESDD in the sugar industry, businesses gain visibility into the potential risks of high-water consumption, air emissions from boilers, wastewater discharge, and improper waste management to prevent gaps, challenges, and regulatory penalties, too.

Key Statistics of the Indian Sugar Industry in 2026

Find the key statistics of the Indian sugar industry in 2026 in this section. Know the economic impacts, social concerns, sustainability, compliance, industrial challenges, and more.

ECONOMIC IMPACTS

• Sugar Production is around 32 million after Ethanol diversion.
• Sugarcane farming is widespread across 5.9 million hectares, producing 480 million tonnes.
• Over 533 sugar mills operate across India
• The current Sugar industry size is worth Rs.1.95 Lakh Crore (US$ 23.4 Billion)
• Employment supports 5 crore farmers, 5Lakh+ cane cutters, and 4.5 Lakh mill workers.

ETHANOL & ENERGY CONTRIBUTION

• Ethanol Blending is 18.6% achieved, 20% target expected earlier than planned.
• Production capacity is Rs.1580 Crore liters per year.
• Power Generation is 9810 MW from biomass (Bagasse-based energy)

PRICING AND EXPORTS

• Sugar exports are 1 million tonnes allowed after quota removal.
• FPR (farmers’ price) is Rs.340 per quintal with an estimated 10.25% recovery rate.

SOCIAL CONCERNS

• Women Workforce is less than 6% in the mills.
• Health issues in 13000+ reported cases of serious health concerns in specific regions.

SUSTAINABILITY AND COMPLIANCE

• There are 14 sugar companies in the top 1,000 listed firms.
• There are 27 certified mills following global sustainability standards (Bonsucro)
• CO2 is produced at a rate of 28 million tonnes annually to reduce carbon emissions.

INDUSTRY CHALLENGES

• There have been 67 mills shut down in the last 5 years.
• Legal actions include 412 cases or orders from NGT with Rs 1820 crore penalties.
• Bank NPAs are 4.2% of loan stress in the sugar sector.

Stakeholders that require Environmental and Social Due Diligence in the Sugar Industry

Here is a quick list of the key stakeholders who require the environmental and social due diligence in the sugar industry:

• Sugar Mills/Refineries/Sugar Cooperatives: The cooperatives require ESDD in the sugar industry for CTO renewal under the Air and the Water acts, expanding the facility, modifying the EC, responding to NGT (National Green Tribunal) directives, refinancing or restructuring debt with RBI-regulated lenders and preparing BRSR for FY2024-25.
• Greenfield and Brownfield Project Promoters: Launching a new sugar mill, distillery, or ethanol plant, or co-gen unit must commission ESDD before EIA report submission under EIA Notification 2006 (sugar is category B, distillery, Category A).

The EIA report consists of site selection, capacity sizing, ZLD design, water-balance modelling, and community-impact mitigation. The brownfield expansion triggers EC and re-ESDD.

• Distilleries and Ethanol Producers (E20, EBP, ENA, Industrial Alcohol): Distilleries in molasses, grain and dual-feed forms supply ethanol under the Ethanol Blending Program (EBP), which requires ESDD as a precondition for OMC, supply contract, SBI, NABARD soft loans, Sugar Development Fund, and World Bank-linked DFI financing.
• Investor and financial institutions: Banks, NBFCs, AIFs, Private Equity, Venture Capital and DFIs implement ESDD to identify potential risks linked with the investment in the sugar industry.
• Listed Sugar Companies (SEBI BRSR Core): The top 1,000 entities listed must report and obtain reasonable assurance on the SEBI BRSR Core 9 KPIs. Currently, there are 14 listed companies.
• Supply Chain Managers: ESDD helps to address social issues, such as fair labour practices, child labour, workers’ rights and community conflicts
• Governmental and Regulatory Bodies: Compliance with environmental regulations for water consumption, pollution, and deforestation is required.
• Foreign Investors: FII, FPI, FDI, and DFI Equity need to align with ESDD due to OECD/ IFC PS-aligned audit.
• Export and International Compliance: If a sugar business exports to Europe, the US, or the UK, it must follow strict rules on sustainability and labour practices.
• Sugar Buyers, FMCG brands and Off-Takers: Top brands run sustainable sourcing programs requiring supplier mills to undergo ESDD and obtain Bonsucro/SAI Platform/FSSC certifications. In case of failure, delisting from the buyer’s approved vendor list.
• Insurance Underwriters: Property, liability, business, interruption, and the new parametric weather-index insurance underwriters excessively require ESDD as a secure document.
• M&A; Acquirers & Targets (Vendors/Buy-Side Due Diligence): An entity must check social and environmental risks whenever a sugar company is sold, bought, or merged. This avoids penalties linked to pollution, farmers' dues, or labour issues.

ESG, BRSR and Sustainability Reporting Integration

Environmental and social due diligence is a basis for ESG reporting. After gathering reliable data on the risks associated with the social and environmental issues is used in multiple reporting frameworks. Look below the given pointers to know how ESDD supports reporting:

• BRSR (SEBI) provides verified data for key ESG indicators that are required for listed companies.
• GRI standards help to report sector-specific sustainability performance in agriculture and related industries.
• ISSB (IFRS S1 and S2) supports global climate and sustainability disclosures for investors.
• TCFD Analysis enables climate risk assessment under distinct temperature conditions.
• DJSI/S&P assessment helps benchmark performance against global industry peers.
• The CDP report includes climate, forest, and water impact disclosures.
• The Bonsucro Certificate proves compliance with sustainable sugar production standards.
• The SAI platform (FSA 3.0) gives inputs for farm-level sustainability assessments.
• EU CSRD reporting helps to align with the European sustainability disclosure requirements.
• SBTi targets support setting and tracking science-based climate goals.

ESAP Relevance in Environmental and Social Due Diligence

ESAP (Environmental and Social Action Plan) aims to transform ESDD findings into a clear action plan. For this, it sets timelines, costs, and responsibilities to fix all major environmental and social gaps. Look below to know what a typical ESAP includes:

• Zero Liquid Discharge (ZLD) Upgrade
• Real-time emission monitoring
• Upgrading migrant worker facilities
• Set rules for Child Labour prevention
• ESG Reporting Readiness
• CSR Strategy Alignment
• Sustainability Certification Roadmap
• Boiler and Worker Safety Upgrade
• Strong safety systems and gender policy measures
• Farmers Grievance System & Training Programs
• Assessment & Strategy for Climate Risk

What are the Essential Documents for Environmental and Social Due Diligence in the Sugar Industry?

In this section, you will know the mandatory documents for legal, compliance, social, and other things. Once you have a complete list of all documents, keep them updated to use for further processing. Find the essential documents required for the Environmental and Social Due Diligence in the Sugar Industry listed below.

Project and Legal Documents

• Certificate of Incorporation, MoA, AoA, MGT-7, AoC-4
• Cooperative society registration (where applicable)
• Audited financials (last 3 years) + tax returns
• Board/ESG/Sustainability Committee charters
• Org chart – Board, KMP, ESG, EHS, HR heads
• Land Ownership/Lease Deed

Environmental Compliance and Risk Documents

• CTE/CTO by SPCB or PCC
• EC, EIA, EMP
• OCEMS data (last 24 months)
• Stack/ambient air/surface water/groundwater test reports
• ZLD certification report
• Spent wash/Vinasse management evidence
• Form V (Environment Statement)
• Climate-risk/TCFD assessment
• PAT cycle reports/ ESCerts (if specified consumer)
• GHG inventory (ISO 14064/ GHG Protocol)

Social and Safety Documents

• Wage registers, ESI/EPF/LWF challans (24 months)
• Factories Act license, Boiler license, and Stability certificate
• Child/Adolescent Labour age-verification protocol
• POSH IC composition + Annual report
• Migrant workmen registers (Form XII), Contract labour licenses
• OHS/IS 18001/ISO 45001 audits
• Accident, near-miss, workmen-compensation register
• Fire NOC, disaster Mgmt Plan, Emergency Plans
• Cane-cutter hostel inspection reports
• Cane payment register & FRP/SAP evidence
• Grievance Redressal Mechanism log

Governance, Supply Chain & Sustainability

• Sustainability/Integrated Annual Report
• BRSR/BRSR core report
• Supplier Code of Conduct, Cane-grower contracts
• Bonsucro/SAI/FSSC/SBTi certifications
• CSR Policy, CSR action plan & spend (Sec.135)
• Anti-Bribery & Anti-Corruption (ABAC) policy, whistle-blower mechanism
• Cyber security audit (CERT-In)
• Data Privacy/DPDP Act, 2023 compliance

Process of Environmental and Social Due Diligence in the Sugar Industry

The procedure of environmental and social due diligence in the sugar industry helps businesses with operational risks. That is why you must look for the key steps given below:

Step 1: Scope & Planning

Define the project’s scope, applicable laws, and standards to be followed for assessment.

Step 2: Data Collection and Site Review

Gather all the essential data linked to the permits and consents, along with an on-site inspection report.

Step 3: Risk Assessment & its Impact

Identify environmental and social risks to ensure safety and ESDD in the Sugar industry.

Step 4: Gap Analysis & Action

Compare all the current prices and identify the gaps and key challenges, which will help in the reduction of risk.

Step 5: Consult the Stakeholders

Talk to people in the local community, staff, and farmers to identify previous concerns and take corrective actions.

Step 6: Reporting & Monitoring

Prepare reports, finalize them, and set up systems to track compliance and performance over time.

What is the Timeline for ESDD in the Sugar Industry?

Here is a well-structured table providing a proper timeline based on stages, days required, and key outputs for the ESDD in the sugar industry. See below:

What is the Fee Structure of ESDD in the Sugar Industry?

Here is a fee range for the ESDD in the sugar industry, given in the table below. Look for the cost particulars, applicable for single facility, Indian sugar mill/ distillery.

What are the Key Challenges of Environmental and Social Due Diligence in the Sugar Industry?

To know what the common challenges in the environmental and social due diligence in the sugar industry are, see the pointers given below:

• Water use and scarcity are major issues. Sugarcanes require a high amount of water that pressurizes local water sources in areas with less rainfall.
• Loss of forests and biodiversity is a great concern with expanding sugarcane farms, as it affects wildlife and biodiversity.
• Air and water pollution are major issues with sugar mills producing extreme waste and polluted water. Burning crops releases harmful gases into the air.
• Growing sugarcane continuously on the same land lowers its quality, and that of the soil too, as is the case with heavy use of chemicals that may harm the soil.
• Unpredictable weather affects crop products, making planning and maintaining compliance more difficult.

What is the Need for Environmental and Social Due Diligence in the Sugar Industry?

Environmental and Social Due Diligence in the sugar industry is necessary for major reasons that are as follows:

• ESDD lowers the environmental impact of high wastewater discharge, water consumption, and pollution.
• ESDD fulfils social responsibility by fair labour practices and addressing land disputes in the community.
• ESDD support firms align with environmental laws linked to air emissions and effluent treatments.
• ESDD promotes a sustainable supply chain in farming for adequate raw material sourcing and reducing wastage.

Regulatory Framework & Standards for ESDD in the Sugar Industry

Before you proceed with ESDD in the Sugar Industry, it is essential to know the mandatory regulations and standards, which is why here is a list provided below:

INDIAN STANDARDS

• Environment (Protection) Act, 1986
• EIA Notification, 2006 (Sugar Category B, Distillery Category A)
• Hazardous and Other Wastes Rules, 2016
• Water Act, 1974
• Air Act, 1981
• Solid Waste Management Rules, 2016
• Wetland (Conservation & Management) Rules, 2017
• POSH Act, 2013
• Code on Occupational Safety, Health and Working Conditions, 2020
• Companies Act, 2013 – Sec 135 (CSR), 134 (Energy Conservation)
• Forest (Conservation) Act, 1980
• Sugarcane (Control) Order, 1966, State Sugarcane Acts
• SEBI BRSR Code Framework, 2023
• RBI Climate-Related Financial Risk Disclosure, 2024
• Digital Personal Data Protection Act, 2023
• Factories Act, 1948 + State Factory Rules
• Inter-State Migrant Workmen Act, 1979
• Bonded Labour System (Abolition) Act, 1976
• Child Labour (Prohibition & Regulation) Act, 2016
• Code on Wages, 2019/ Industrial Relations Code, 2020
• Real Estate (Regulation & Development) Act, 2016 (where applicable)

INTERNATIONAL STANDARDS

• IFC Performance Standards 1 to 8 (Sustainability Framework)
• Equator Principles 4 (October 2020)
• World Bank ESF/ESS 1 to 10
• ILO Core Labour Standards & Decent Work Agents
• SASB Sugar Industry Standard
• GRI 13 (Agriculture, Aquaculture & Fishing)
• TCFD & ISSB IFRS S1/S2
• EU CSDDD (effective from 2026), US UFLPA, UKMSA
• Bonsucro Production Standard v5.2
• SAI Platform FSA 3.0
• FSSC 22000 v6
• OECD Due Diligence Guidance for Responsible Business Conduct
• UN Guiding Principles on Business and Human Rights

Importance of Environmental and Social Due Diligence in the Sugar Industry

The Environmental and Social Due Diligence in the Sugar Industry is important for a wide range of reasons, as seen below.

Environmental Footprint: Sugar mills are classified under the “Red Category” as per CPCB, implying they are highly polluting and require strict control measures. The distilleries producing ethanol from the sugar-derived products are among the top 17 polluting industries in India. This is due to high emissions and wastewater.

Shift to By-Product Production

Sugar mills are gradually shifting to ethanol and bio-energy production to fulfil India’s energy goals. It brings challenges to operations and strict compliance. Environmental and social due diligence in the Sugar Industry supports:

• Documentation readiness for ethanol production
• Promotes Environmental compliance
• Manage risks in sugar+ fuel (dual) production
• Support ethanol blending targets

Identify Hidden Gaps: The sugar mills generate wastewater with Biological Oxygen Demand (BOD) in high quantities. It deteriorates the aquatic system. ESDD identify the hidden hazardous materials and license violations (if any), before they cause any repercussions.

Funding & Investors’ Confidence: Today, banks and investors evaluate ESG performance prior to providing funds for any project. With ESDD, firms identify risks for labour’s safety and compliance. With strong ESDD, firms can benefit in

• Quick funding
• Improve credit scores
• Attract long-term investors

Social Sensitivity: Around 5 crore sugarcane farmers and 5 lakh+ migrant workers depend on this sector. It creates high social risks like payment disputes, poor working conditions, and labour issues.

Stable Supply Chain: The sugar industry relies heavily on farmers and working staff. But gaps in unfair practices or payments cause problems. ESDD benefits in:

• Timely payments to sugarcane farmers
• Fair labour practices
• Risk the firm’s reputation
• Regulated supply chain operations

Risks Without ESDD: Without proper ESDD, businesses may face shutdown orders, loan cancellations, export bans, serious reputational damage, and investor withdrawal.

Improve Regulatory Compliance

Regulations are updated or revised, which creates non-compliance, causing delays and rejections. Environmental and social due diligence in the Sugar Industry helps businesses:

• Stay compliant with government regulations
• Avoid compliance risks and penalties
• Prepare for future policy changes
• Ensure smooth approvals and operations

Capital and Trade Requirements:

Large loan amounts secured from RBI-regulated banks require ESDD in the sugar industry. Exports to global markets and IPOs also need strict compliance and sustainability reporting.

What are the Penalties for Non-Compliance with the Environmental and Social Due Diligence in the Sugar Industry?

If you stay non-compliant with the environmental and social due diligence in the sugar industry, there are penalties like hefty fines, imprisonment, or suspension. Look below to know the penalties in non-compliance for ESDD in the sugar industry are applied under which act.

• Environmental (Protection) Act, 1986: Up to 5 years imprisonment + fine up to 1lakh/day; 2024 Amendment corporate fine up to Rs.25 crores.
• Factories Act/ OSH&WC Code: Up to 5 Lakh fine, 2 years imprisonment for accidental negligence
• Child & Bonded Labour Acts: Up to 3 years imprisonment + Rs.50,000/child; non bailable for bonded labour
• Water Act/ Air Act: Up to 6 years imprisonment, BG invocation, and closure order
• NGT Act, 2010: Rs.25 crore compensation per default; fine of Rs.25000 per day in non-compliance.
• Hazardous Waste Rules, 2016: Cancellation of authorization, Rs.5 to 25 lakh fines.
• POSH Act, 2013: Business license cancelled on repetitive default.
• Sugarcane Control Order, 1966: 15% interest p.a. on FRP arrears, recovery as land revenue.
• SEBI BRSR Non-Disclosure: Up to Rs.1 crore + delisting risk
• RBI Lender ESDD Breach: Loan classification downgrade, NPA tagging, and Recall
• IFC/EP4 Default: Suspension of disbursement, DFI blacklisting, accelerated repayment
• Companies Act, 2013, Sec 134/135 (CSR): 2x unspent CSR + Rs.1 Lakh to 1 Crore on the company, Rs.2 Lakh on every director.

Enterclimate’s Environmental and Social Due Diligence Services in the Sugar Industry

Adopting Environmental and Social Due Diligence Services may be a bit complicated, but it is necessary for sustainable growth. Enterclimate simplifies compliance, risk management and responsible operations for sugar operations. Given below are Enterclimate’s environmental and social due diligence services in the sugar industry-

• We identify the environmental and social risks across by-products and operations to lower the effects.
• We review current plans for businesses in sugar production to find gaps and key challenges. It helps to strategize better to avoid risks and compliance issues.
• Our experts help firms secure licenses and approvals to remain compliant with revisions or amendments in regulations.
• We assess the processing of sugar production in the unit for compliance with food safety and quality standards.

Why Trust Enterclimate for the Environmental and Social Due Diligence in the Sugar Industry?

Enterclimate is India’s most trusted ESDD partner in the sugar industry. Until now, our professional experts have delivered 240+ ESDD assignments across ethanol producers, distilleries, mills, agro-lenders, jaggery clusters, World Bank/IFC-aligned investors, and private equity funds spanning most cities of India.

Given below are the reasons why we are the first choice for the environmental and social due diligence in the sugar industry-

• Rs 1000 Crore+ Sugar Project Risk Exposure
• 24-month OCEMS Performance Data Reviewed
• 3-year Compliance Risk History Assessed
• 10+ Global ESG Framework Aligned
• Rs 45 Lakh IFC/DFI-grade ESDD Capability
• 24/7 Dedicated Support across 100+ Cities
• Funding, Acquisition, Export-readiness Focused ESDD
• 500+ Project Documents Screened Annually