India has made a commendable progress on Sustainability front, still there are areas of concern where a lot needs to be done to make it truly sustainable e.g. Gender gap, Diversity & Inclusiveness, Water conservation, Solid waste management etc.
With sustainability gaining acceptance and seriousness it deserves, among all stake holders, concept of ESG (Environmental, Social & Governance) sustainability is also becoming the core of achieving holistic sustainability in all spheres of activities like businesses, policy making, regulations, investments, non- profit/ philanthropic activities, international strategic and political arena, education, healthcare etc. Application of ESG principles to any activity or strategy ensures that actions and outcomes are environmentally sustainable and socially responsible and comply with high governance standards and thus creating a lasting value for all stakeholders. ESG principles are aligned with UN-SDGs and other similar global and regional agendas.
There is a remarkable increase in awareness and desire among businesses and investors to apply ESG principles in their strategy, operations and investment decisions. Companies have started doing ESG reporting/ Sustainability reporting/ Integrated reporting along with regular financial and regulatory reporting using standards like SASB, GRI, GRESB, TCFD etc. Many of them are doing it because of pressure and expectations of investors while others due to their genuine desire to do business in an ESG sustainable way. Moreover, it makes a business sense also, as it has been found that ESG driven companies/ investments do better than their peers on financial terms also.
Globally, the ESG assets have increased from $ 22.8 trillion in 2016 to $ 38 trillion in March 2021. In India, the AUM under ESG funds is around $ 1.35 billion as per the recent data.
In India, awareness, and demand for integrating ESG principles into the business strategy and operations and investments is growing fast. In fact, the Securities and Exchange Board of India (SEBI), the regulatory body for securities and commodity market in India under the jurisdiction of Ministry of Finance has proposed a Business Responsibility and Sustainability Reporting (BRSR) to be applicable for top-1,000 listed entities by market capitalisation, on a voluntary basis for financial year 2020-21 and on mandatory basis thereafter.
The concept of responsible business is based on the principle of business being accountable to all its stakeholders and be responsible and sustainable towards their environment and society. In light of ever-increasing global challenges relating to climate change, environmental risks, growing inequality, etc., business leaders have been compelled, in their own interest, to reimagine the role of businesses in the society and not view them merely as economic units for generating wealth. The performance of a company must be measured not only on the return to shareholders, but also on environmental, social, and good governance parameters.
Most of the companies may not be ready for such reporting but it's a welcome initiative by SEBI to mainstream the idea of doing business in a responsible and sustainable manner. Companies and Investors will have no choice but to embrace the implementation of concepts like "Net Zero", "Carbon neutral", "Zero liquid discharge", ESG reporting to sustain and create long term value for all stakeholder i.e. shareholders, employees, suppliers, governments, regulators, society and the environment. The Covid 19 pandemic has highlighted the necessity of implementing these concepts.
Going ESG way is not the necessity but a great opportunity for companies and investors to create value for all stakeholders, sustainably and responsibly.