I. Introduction

In a landmark move, the Ministry of Environment, Forest and Climate Change (“MoEFCC”) on 29 August 2025 had officially notified the Environment Audit Rules, 2025 (“Rules”)[1] under the auspices of the Environment (Protection) Act, 1986 (“Act”)[2]. These Rules are essentially a byproduct of the Indian government’s vision to prevent environment degradation whilst promoting sustainable development under an accountability/assurance-based governance framework. The Indian government has shaped the new Rules after thorough critical analyses from the best environmental audit practices practiced globally[3]. These new Rules establish a formal audit regime to plug gaps in India’s existing compliance monitoring framework and in furtherance to renewed interest for assured sustainability reporting globally. For instance, the EU’s Corporate Sustainability Reporting Directive has now mandated independent assurance of all environmental disclosures. In this context, India’s 2025 Rules seek to strengthen environmental governance by making third party verification a routine part of regulatory compliance in addition to the existing oversight by the Indian statutory authorities.

II. Objective & Scope of the Rules

The focal vision of the Rules is to strengthen self-compliance and ensure accountability by rather supplementing government oversight with independent audits, which aide in reducing the dependence of statutory authorities seen as the bearers of environmental preservation and sustainable development and also opens up the entities/individuals to be the first protectors of environment and sustainable development in line with international standards. The Rules by enlisting certified third-party auditors are rather intended to address the lack of manpower and resource gaps in statutory authorities like the Central Pollution Control Board (“CPCB”) and State Pollution Control Board (“SPCB”), thereby improving transparency and credibility in enforcement.

This move by the Government of India (“GoI”) is ought to be applauded as the Rules do not replace or negate the existing regulatory inspection postulated by the existing statutory framework but rather, it institutionalizes periodic environmental audits to enhance environmental protection, promote self-compliance, and strengthen climate action commitments. In totem, the scope of the Rules cover all the industrial projects, processes and activities that have an environmental impact under the core environmental laws at both the central and state level.

These Rules explicitly mandate audits of projects, activities and processes that have a bearing on the environment, ensuring compliance with legal safeguards under statues such as the, Water (Prevention and Control of Pollution) Act, 1974, Air (Prevention and Control of Pollution) Act, 1981, Forest (Conservation) Act, 1980, Wildlife (Protection) Act, 1972 & the Act. Therefore, in practice this envisages entities holding environmental clearances or consent orders to engage Registered Environment Auditors (“REA’s”) to verify compliance.

Further, the Rules explicitly empower REA’s to verify compliance not only with the central statutes but with various green frameworks visioned under these central legislations as the Green Credit Rules, E-waste/ Plastic Waste management obligations and eco-labelling standards etc.

III. Major Overhaul from the Previous Regime

These Rules bring in a contemporary compliance structure. This is the first instance wherein the GoI S has created an independent & structured audit mechanism for environmental compliance, previously only reserved for statutory authorities Some of the focal and pertinent changes from the previous regime include:

• Establishment of Certified & Registered Auditors: In the past, environmental audits were either informally or merely consultative, the newly introduced Rules require all environmental audits to be conducted by a REA. Individuals or firms must firstly, register and secondly, require certification to become certified environmental auditors. The Rules postulate this to be possible through either demonstration of prior qualifications/ experiences or through passing of a national level examination which would likely be formulated and structured by the GoI. subsequently, this requires registration under this new framework. The Rules also establish a dedicated Environmental Audit Designated Agency (“EADA”), which is ought to be notified by the GoI in due course and the EADA would oversee the certification, registration, training and monitoring of the REA’s.

• Independence and Elimination of Bias: The Rules emphasizes on stringent independence requirements. The REA’s are ought not to have any financial, familial, or business ties to the entities/ individuals they audit, and are required to sign an impartiality undertaking before each such assignment. Further, the Rules envision that assignments of REA’s to projects is to be done by lottery or other automated means in order to prevent collusion or bias from occurring. This random allocation symbols a steep departure from previous practices wherein industries would often choose their preferred consultant.

• Dual Level Compliance Mechanism: In the previous regime, the environmental compliance was enforced solely by statutory authorities (ex., CPCB & SPCB).

• However, the Rules revolutionizes this practice by inculcating a formal split level mechanism, wherein the regulators will continue their routine oversight by virtue of the existing statutory framework i.e., Level – 1, whilst Level – II would consist of periodic third – party audits by REA’s in supplement & complement to the functioning of the statutory authorities. This dual level mechanism is visioned to ensure compliance is more credible, measurable, and enforceable.

• Expanded Scope of Audit Mandates: Certified REA’s are now authorized to inspect facilities, collect samples (air, water, soil, waste etc.), examine records, calculate environmental compensation, and verify self-compliance under various laws as per the new Rules. Further, these audits explicitly cover compliance under ancillary regulations in tandem with the core central legislations such as the Green Credit Rules, E-Waste/ Plastic Waste management rules and eco-labelling standards.

• Establishment of Regulatory Institution: The novel Rules establish new regulatory institutions such as the EADA & the Steering Committee which establishes measures for registration, reporting and discipline. The Steering Committee would be led by an Additional. Secretary of MoEFC which would monitor the implementation of the Rules and address any issues which may arise. The Indian government’s priority is to bolster the ease of doing business and form trust among stakeholders whilst ensuring environmental preservation and sustainable development in line with the Country’s national development vision.

These contemporary aspects of the Rules showcase an acute shift from the compliance checks overseen by established statutory authorities to a rather auditor driven and self-compliance framework. The previous regime in India emphasized on government inspections with very limited third party audits and the new Rules fill that gap, aligning India’s vision with the emerging global norms of assured environmental and sustainability governance.

IV. Salient Provisions of the Rules

• Evaluation and Registration of REA’s: The EADA will issue certifications to the environment auditors either through a National Certification Examination (“NCE”) or through recognition of prior learning like subject matter knowledge and based on professional experience in the subject matter. The certified individuals or firms can then apply to become an REA. The Rules vision only the REA’s to conduct audits under these Rules and the EADA once established would maintain a registry of all certified and registered auditors in their online portal. The Rules also postulates that the auditors are ought to pay any prescribed certification/ registration fees as per the government guidelines.

• Conflict of Interest and Ethical Concerns: The Rules envisage a stern code of conduct. REA’s are ought not to audit any project in which they have a past or present conflict (e.g. they were previously consultant for an entity or have a financial stake or have family ties). The Rules also bars the REAs from accepting any gifts, commissions, or inducements from their auditee entities. Further, the Rules also mandate that the REAs prior to taking on an assignment, must submit a prescribed undertaking affirming impartiality and confidentiality and any contravention/ breach of the same could lead to disciplinary action that would be partaken by the EADA resulting in suspension/ cancellation of the registration.

• Powers of Auditors: The proviso to Rule 4 explicitly authorizes REA’s to carry out site audits. The Rules verbatim states that the REA’s “shall have the authority to enter the premises, collect samples, obtain audit evidence, and access such other information or documents as may be deemed relevant” for their assigned task. Further, the Rules mandates that the Project proponents are required to cooperate with the REA’s by handing them necessary records, monitoring data and access as deemed by the REA’s. This aide the REA’s in verifying compliance by undertaking onsite inspection and independent measurement of emissions, effluents, and waste etc.

• Audit Process and Reporting: The Rules postulates that the REA’s are responsible for conducting comprehensive audits according to the prescribed guidelines of the government. The duties of the REA’s include sampling and laboratory analysis, evaluating pollution control systems, verifying compliance reports, and computing environmental compensation for violations. Upon completion, the auditors are ought to prepare a detailed audit report in a standard format as prescribed by the government. These reports must then be furnished to the project proponent and forwarded to the relevant regulatory authorities such as the CPCB/ SPCB. It is pertinent to note that whilst the Rules do not establish time-based mandate, however, it is presumed that such audits will occur annually or as stipulated by MoEFCC, with the reports filed digitally.

• Establishment of Environment Audit Designated Agency: The most pivotal aspect of the Rules is the establishment of a central regulatory institution i.e., EADA to implement the vision of the Rules. The roles of the EADA include setting eligibility criteria, conducting auditor exams, certifying auditors, administering registrations, maintaining the registry, and monitoring auditor performance. Further, the EADA would enable auditor training and capacity building and the EADA would operate under the auspices of the MOEFCC and in complement and supplement with the statutory authorities like the CPCB/ SPCB’s.

• Steering Committee: The Rules establish a high-level Steering Committee chaired by an Additional Secretary from MoEFCC with members from CPCB, EADA and other regulators who would periodically review implementation. The Steering Committee would essentially give directions to ensure effective enforcement and recommend reforms.

V. Compliance & Enforcement Mechanism

Compliance with the new audit regime is mandatory for projects requiring environmental clearance/ consent to operate, waste management operators and entities claiming green credits, eco labels etc. The Rules envisages that industries and project proponents must engage REA’s for required audits and implement the audit recommendations of the REA’s failing which enforcement actions from the statutory authorities like CPCB’s/ SPCB’s may arise. However, it is pertinent to note that the focal enforcement obligation remains with the existing statutory authorities and would only be complemented and supplemented by the functions of the REAs.

VI. Industry Implications and Way Forward

The new Rules are ought to have a major impact on the dual core of these Rules i.e., for the REA’s as well as for the industries. As far as the REAs are concerned the Rules establishes a novel certified profession and open up a new business avenue and further pushes the existing environmental consultants and firms to seek certification, as the Rules only recognizes REA’s and only allows them to operate in this space. Similarly, for industries, these new audits introduce additional compliance costs and procedural steps, whilst ensuring a more transparent regulation as well as alignment with existent international standards of environmental audits. Further, by essentially participating in this framework, industries would inadvertently support green initiatives which would be a boon for them by simplify compliance requirements with the regulators.

In conclusion, the new Rules cast watershed in India’s environmental governance. The Indian government needs to be applauded for the establishment of the new Rules which institutionalize certified third-party audits, introduce a data driven, and accountable compliance regime that complements and supplements India’s climate and sustainability goals. These, Rules would result in regular independent audits which would generate verified environmental data and nip non-compliance in the bud and strengthen enforcement actions. Therefore, with proactive preparation and transparent implementation, these Rules are ought to set a benchmark for credible environmental governance, keeping India’s commitments under the Act and global ESG standards on track.

*Rahul Kanna R.N. -Associate, Shardul Amarchand Mangaldas & Co, Chennai (Disputes), Jindal Global Law School (BA – LLB Hons).

[1]Government of India, Ministry of Environment, Forest and Climate Change (2025) Environment Audit Rules, 2025, S.0. 3973 (E), Gazette of India, Extraordinary, Part 11, Section 3 (ii), 29 August. New Delhi: Government of India.https://static.pib.gov.in/WriteReadData/specificdocs/documents/2025/sep/doc202593627401.pdf

[2] Government of India, Ministry of Environment, Forest and Climate Change (2025) Environment Audit Rules, 2025, S.0. 3973 (E), Gazette of India, Extraordinary, Part 11, Section 3 (ii), 29 August. New Delhi: Government of India.https://www.indiacode.nic.in/bitstream/123456789/4316/1/ep_act_1986.pdf

[3]Press Information Bureau. (2025) Government brings Major Reform in Environmental Compliance in the form of Environment Audit Rules, 2025, Press Release, Ministry of Environment, Forest and Climate Change, Government of India, 3 September. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2163488&reg=3&lang=2