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Globally, the corporate world is undergoing significant transformation in the wake of rising focus on ESG and sustainability practices. We are moving towards a world where mere financial numbers no longer define corporate success, and sustainability is emerging as a priority for stakeholders. The pressure on businesses to adopt sustainable practices is mounting each day, with more governments around the world committing to net-zero emissions, regulators tightening up compliances, investors flocking to companies with stronger ESG profiles, and customers and employees showing strong affinity for ESG-compliant companies.
Across the world, companies are inventing ways to improve their processes with a view to contribute to more pressing issues such as climate change, carbon footprint, biodiversity, human rights, gender inclusion etc. While it may seem to be a daunting task over the short term, ESG can also prove to be a hotbed of opportunities to refurbish a company’s image in line with stakeholder expectations.
In India, however, many companies still continue to view ESG as a compliance tool to check the right boxes, rather than adopting ESG as a process that can help create value, spur innovation, gain competitive advantage, and help the company make a difference not just for its businesses and stakeholders but also for the environment in which it operates.
The ESG landscape in India is complex and multifaceted, with an array of ESG challenges that need to be addressed. These challenges include: -
Environmental concerns: India faces significant environmental challenges, including air and water pollution, deforestation, and the impacts of climate change. While the Indian government has taken steps to address these issues (including the implementation of stricter emission norms, investing in renewable energy resources, etc.), a lot more needs to be done to ensure that the country is on a sustainable path for the future.
Social concerns: India has a large population of people living below the poverty line, and a significant portion of the population also lacks access to basic rights and utilities. Over the years, the Indian government has implemented several welfare schemes and programs aimed at poverty alleviation and reduction in inequality, such as the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) and the Pradhan Mantri Jan Dhan Yojana (PMJDY). Yet there’s a long way ahead to achieve inclusive growth and benefits for all people.
Governance concerns: Good governance entails processes, and checks and balances to ensure prevention, detection, and action on acts of corruption and other forms of abuse of power. Goods and Services Tax and the Insolvency and Bankruptcy Code were introduced as steps in this direction. However, more needs to be done to ensure transparency and accountability in the public and private sectors.
With Indian companies now becoming more aware of the importance of ESG reporting and incorporating these principles into their strategies, ESG investing has gained significance. Investing on lines of ESG performance helps in identifying companies that are well-managed have strong growth prospects can also mitigate risks and help capture opportunities in areas such as clean energy, water management and sustainable transportation.
Our latest publication on the domestic turf, titled ‘ESG Champions of India 2023’, serves as a ready reckoner on ESG and sustainability practices and an insightful resource for CXOs of leading corporate houses, bodies, and government ministries. The profiles and narratives of the winners of “ESG Champions” Award would prove to be a valuable source of inspiration for businesses across the country.