Rule-maker Insolvency and Bankruptcy Board of India and the ministry of corporate affairs have looked into the proposal, which is at an early stage of ideation but expected to gather momentum in the coming months, said two people informed about the discussions.

To investors in India’s distressed asset market, the deliberations may eventually lead to tweaks in the technical parameters for selecting the winning bidder for a company making its way through bankruptcy proceedings, explained one of the persons quoted above. Both spoke on condition of not being named.

“There are financial and technical parameters for selection of the resolution plan. The latter could encourage exploring sustainable business rescue options,” explained the person.

At present, the IBC only takes a narrow financial and legal view of the turnaround prospects of a distressed firm. This involves the administrator hired by lenders confirming whether the resolution proposals from investors provide for the bankruptcy process cost and repayment of debt as provided in law.

The proposed technical criteria could mean exploring specific strategies and technologies needed for mitigating environmental risks and for charting a new business trajectory that is more sustainable, said the person.

The second person said the document inviting bids for the distressed company could seek information on the environment-related liabilities of the company, which in turn could have a bearing on how much the business is worth. “Valuation professionals could do a lot in bringing sustainability considerations into debt resolution,” said this person.

Several experts agreed sustainability ought to be a key guiding principle for professionals, investors and other stakeholders—whether the bankruptcy code specifies it explicitly or not. But specifying it in the code will emphasize its adoption, they said.

“ESG (environment, social and governance criteria) is about sustainability of projects — that is, future risks taken into account today, be it the market-related, technology or any other risk. If a resolution plan is to be successful, viable or sustainable. it has to take into account all the potential risks,” said Ashok Haldia, an expert in accounting and auditing.

“Any plan will be incomplete without that. One would expect prudent investors to take into account the cost of reducing emissions including the need for investment in new machinery and technology etc. throughout the lifecycle of the project.”

One lucrative spin-off for policymakers is that if such steps are taken, it could help boost India’s ranking in World Bank’s proposed global ‘Business Ready’ report that replaces its ‘Doing Business’ ranking from next year.

However, bringing a new dimension to debt resolution won’t be easy. “A lot of ground needs to be covered. It is a long journey from the drawing board to make it a reality,” said the first person quoted above.

Emails sent to IBBI and the ministry of corporate affairs on Friday seeking comments for the story remained unanswered at the time of publishing.