Preventing ESG Fraud Through Third Party Sustainability Assurance Audit - with Special Reference To The ICICI Bank, Volkswagen & Others.
BRSR -ESG Audit Assurance Challenge - Research by HR Lab
* Birendra K Jha Practitioner Social Impact Assessment Audit; Practitioner BRSR (SEBI ) Audit- ESG Audit - Sustainability Assurance . EMail: birendrajha03@yahoo.com
ESG Sustainability Fraud, is clearly misconduct, loss of trust and crime while reporting non-financial data on the sustainable reporting. This fraud is also attributed as "greenwashing", where companies falsely advertise their products or practices as environmentally friendly to attract consumers and investors.
Lack of rigorous third party assurance has opportunities for manipulation. The notable example of the Volkswagen vehicles case, where the company misrepresented its diesel vehicles as environmentally friendly. It did so after manipulating the emissions tests. This not only misled the end consumers but a fraudulent ESG Reporting.
Wirecard, a German FinTech Company, has been engaged in extensive ESG fraudulent activities. The company fraudulently inflated its own financial status, with €1.9 billion in non-existent cash. This misled the investors and stakeholders. This also damaged the sustainability initiatives. The exposure of fraud led to the breach of trust. A clear crime.
India is also not out of this ESG Sustainability Fraud activities. Recently the ICICI Bank filed the Sustainability Report to the SEBI. There is no mention of large scale Human Right violation. The ICICI Bank is involved in illegal retrenchment of employees of around more than 700 as reported to the Labour Ministry. The ESG Rating agency CRISIL has given top ranking in the ESG Compliance. This shows the rating by the agency and the ICICI Bank reporting are all providing bogus reporting. This shall remain in place if rigorous third party assurance audit on the ESG Compliance is not conducted. ( Two documents related to the ICICI Bank are attached below ).
One another example from India is given on the ESG Sustainability Fraud. The Asian Development Bank funded in the North Eastern sector of India road construction. The road passed through dense jungles. The trees were removed and jungles were damaged carelessly in the name of road construction. This was done without permission of the Central Government. This safeguard violation detected through satellite when site was examined in Before and After format. (See Link: ( Innovative Application of Satellite in the Sustainable Assurance Audit )
M. Steinmeier, in 2016 published in the Journal of Business Ethics, (138, 477-492) , his brilliant work "Fraud in sustainability departments? An explanatory study and A Staiger, in 2025, another brilliant work "Greenwashing: Misleading consumers for profit" brings the dark perspective of the fraudulent ESG practices. More or less T Tarjo, with A Anggono & Sakti presented in 2024 another brilliant work "Environmental, social and governance (ESG) fraud: A bibliometric study and systematic literature review". Seda Yildirim, from the Department of Business Administration, Tekirdag Namik Kemal University, Turkey, also provided a brilliant study in his work "Greenwashing: a rapid escape from sustainability or a slow transition?" He observed that "the rise of green and environmental claims makes some confusion between the sustainable marketing and greenwashing.
As Sustainability Assurance Auditor I have seen following types of fraudulent ESG Reporting. Where the Assurance Auditor should be extremely careful. If Assurance Auditor is not experienced. He will do mistake as seen in the case of ICICI Bank ESG Reporting. The Third Party auditor concentrated here around the financial metrics but failed to report problems in the Labour Law violation. This may be due to his poor knowledge on the Labour Law. The sustainability is not financial metrics. The Assurance Auditor should break this mess and come out to look following ESG fraudulent practices:
1. Manipulation of Sustainability Data: Example Volkswagen diesel vehicles case. ICICI Bank sustainability data on Human Right violation.
2. False ESG Rating: Rating agencies look the published data from the company. This manipulates the ESG Rating. Example - CRISIL ESG Reporting of ICICI Bank in Leadership Grade. This CRISIL Rating ignores large scale Human Right violation in the ICICI Bank. This is false and bogus reporting.
3. Misleading Claims on Sustainability: Example H&M Company case: "The collection made from 100% sustainable and recycled materials”.
Exxon Mobil case- “The net zero gasses emissions by 2050”. False certification or pledges.
4. Misleading Sustainability Credentials: Example DWS Company case : “We are leader in sustainable finance” - This is false declaration.
5. Misleading Sustainability Related Sources: Example IKEA case: “100% sustainable and FSC certified wood in products”.
6. Misleading Social Impact Metrics: misrepresenting a company's social initiatives and impact to local communities or employee well-being. Example: In 2012, Apple's suppliers were exploiting child labor and enforcing abusive working conditions. Apple suppliers did such manipulation as Apple failed to enforce rigorously Third Party Sustainability Assurance on the suppliers.
7. Governance Manipulation: Deceiving stakeholders by misrepresenting governance practices. This is done to gain favors by the the Board of Directors or increase compensation by manipulating internal controls, or ethics programs. Example The ICICI Bank's Chanda Kochhar – Videocon case involves allegations that former ICICI Bank CEO Chanda Kochhar manipulated Governance data to hide a bribe of ₹64 crore received through her husband, Deepak Kochhar, to approve a loan of Rs. ₹300 crore loan for the Videocon Group. An appellate tribunal in New Delhi affirmed these findings in July 2025, stating that Deepak Kochhar controlled Videocon Group operations, validating the bribery allegations.
Another example: in 2021, DWS, a German Asset manager, paid a $25 million penalty to the SEC for allegedly exaggerating its use of sustainable criteria in investment offerings.
8. Corruption and Asset Misappropriation: This is another form of Governance manipulation. Example: The LIBOR scandal in 2012 involved bankers manipulating the benchmark interest rate for personal gain.
How to combat and detect ESG fraud
1. Increase regulatory oversight: Regulators like the SEBI and Ministry of Corporate Affairs' have to increase enforcement activities with Third Party Random Audit on the Sustainability Assurance Audit.
2. Implement internal controls: Company in internal control should implement Internal Audit on Sustainable Practices. Companies are avoiding this. A strong tone from Board Leadership, for effective internal controls can mitigate the risk of ESG fraud.
3. Third-party ESG Assurance: Independent Third Party Assurance audit and its report mitigate the risk of ESG fraud. This has been now implemented by the SEBI. But ESG is not only the responsibility of certain group of companies. It should be extended to all the companies by the Ministry of Company Affairs.
4. Utilize Satellite & AI data by the Assurance Auditor: Expert Assurance Auditor use effectively satellite data and AI data to uncover fraudulent reporting.
5. Stakeholder Due Diligence: Investors, creditors, and other stakeholders are increasing their due diligence by scrutinizing ESG reports, asking more critical questions, and conducting on-site visits. This should be used as "Right To Know." Company should not deny such Right to Know request.
6. Embrace standardized reporting frameworks: ensure high-quality and comparable ESG disclosure.
7. Suggestion: The Qualified Social Impact Assessors listed as Member of the Institute of Social Auditors of India are undertaking Sustainable Impact Assessment Audit in various Sustainable fields. For Sustainable Assurance & Reporting, Member of the Institute of Social Auditors of India, brings specialized fields of expertise in Non-Financial Reporting.
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