A strong Environmental, Social, and Governance (ESG) strategy is a force multiplier. Organizations must integrate their sustainability efforts into a core CSR and transformation agenda strategy.
Like other countries globally, India is experiencing the challenge of large development, and the discourse around environment, social impact, and governance issues is increasing.
Since 2013, the narrative in India has shifted to the crucial role corporations can play in bringing about positive change in human development and social inclusion. CSR is no longer seen as corporate social assistance or philanthropy but as essential to a good business strategy, helping reduce investment risks and enhancing business profits by improving transparency and accountability. It is about working together – with government, with civil society, and with the community – to improve the lives of millions of people by making growth more inclusive.
With the ever-changing business environment, investors and stakeholders seek businesses to be responsible and sustainable towards the environment and society. In recent years, adapting to and mitigating climate change impact and transitioning to sustainable development have emerged as major issues globally.
Further, Global sustainability challenges such as demographic shifts, flood risk and rising sea levels, privacy and data security, and regulatory pressures are introducing new risk factors for investors that may not have been seen previously. As companies face rising complexity globally, investors may reevaluate traditional investment approaches.
Therefore, ESG (Environmental, Social and Governance) comprises the holistic approach for companies to remain responsible to their investors and stakeholders while complying with various environmental, social and governance regulatory risks.
The five elements enunciated by India at COP26 in Glasgow have been appropriately incorporated in enhanced Nationally Determined Contributions (NDCs) under the Paris Agreement and Long-term Low Carbon Development Strategies towards net zero emissions by 2070, following the principles of equity and Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) in light of National Circumstances.
As per the updated NDC submitted to the United Nations Framework Convention on Climate Change (UNFCCC) in August 2022, India stands committed to reducing the Emissions Intensity of its GDP by 45 per cent by 2030 from the 2005 level, achieving about 50 per cent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030, with the help of the transfer of technology and low-cost international finance including from Green Climate Fund; and put forward and further propagate a healthy and sustainable way of living based on traditions and values of conservation and moderation, including through a mass movement for ‘LIFE’– ‘Lifestyle for Environment’ as a key to combating climate change.
The NDC update is also a step towards achieving India’s long-term goal of reaching net zero by 2070, for which India has prepared and submitted a separate framework document titled ‘India’s Long-term Low Carbon Development Strategy’ to the secretariat of the UNFCCC in November 2022.
According to Deloitte India-ESG Preparedness- Survey-Report 2023, an Environmental, Social and Governance (ESG) framework is both an enabler and an amplifier for organizations to start translating their intent into action. The survey covered 150 organizations and brought together the responses of leaders and CXOs on their preparedness to engage with ESG both from a compliance and disclosure perspective and as new generation value drivers.
It points out increasing pressure from investors, boards, governments, and consumers to adhere to new ESG disclosure and compliance requirements per the Business Responsibility and Sustainability Reporting (BRSR) guidelines. Additionally, organizations must account for emerging global regulations on sustainable finance, climate disclosures, biodiversity, and social and governance dimensions, including gender diversity and living wages, within a couple of years.
ESG is becoming a key license to operate and conduct business. ESG may appear to be a complicated maze of disclosures and documents to navigate and comply with; however, there is a well-thought-out art and science behind ESG.
The report suggests that ESG is an opportunity for organizations to create long-term and sustainable value by introducing new product and service lines with a lower carbon footprint and net positive planetary impact. Over time, a robust ESG culture will translate into better top-line growth, cost reductions, reduced compliance burden, increased productivity, and better investment quality and asset optimization. ESG is a significant value driver, and embedding it into an enterprise’s operations is a differentiator. Deloitte India’s ESG preparedness survey report shows that Indian businesses see value in sustainability and building ESG capabilities.
About 88% of organizations believed sustainability regulations would directly impact their businesses. More than 75% of organizations agreed that ESG is a boardroom discussion. Nearly 90% of organizations believed ESG reporting would improve brand reputation. Almost 75% of organizations stated that their investors rate their ESG performance. About 71% of businesses agreed that their organization voluntarily participates in ESG ratings. Nearly 60% of organizations emphasized establishing ambitious ESG goals for the future.
A comprehensive ESG program is founded on four pillars: Governance, strategy, management, and performance and reporting, complemented by a plan to execute these core tenets in a defined time. Corporations should comply to save the world and avoid hiding behind CSR as a philanthropic activity.
