ESG is not about Ticking Boxes

ESG is not about Ticking Boxes

173 0

Environment, Social & Governance, or ESG, is not merely about ticking boxes; it’s about building a fundamental base for the transformation towards sustainable business practices.

A new report by market advisory firm RSM India said that ESG has become a new cornerstone for modern business strategy and is certainly impacting the operations of companies, their communications, and the ways in which they create value.

The Paris Agreement, signed at the UN Climate Change conference in 2015, aims to limit global warming to 2°C above pre-industrial levels and 1.5°C.

According to RSM India, ESG is not just about ticking boxes; it is about building a foundation for sustainable business practices.

India is witnessing a growing significance of ESG for businesses and their long-term sustainability. ESG is driven by factors such as operational efficiency, regulatory requirements, green capital, impact on valuations, consumer demand, and stakeholder expectations.

The Paris Agreement has encouraged countries to declare net-zero goals and sustainability roadmaps, leading to India’s commitment to be net-zero by 2070. To define ESG goals, businesses need to recognize core ESG priorities, align ESG initiatives with corporate strategy, and set SMART ESG goals.

Adopting ESG principles can lead to a 10% increase in revenue and a reduction in costs by up to 20%, the RSM report said.

Key factors driving ESG initiatives in corporates:

The Indian government has implemented several key factors driving ESG initiatives, including regulatory compliance, access to capital, better valuation, reputation, and brand value.

For instance, the CSR Act, 2013 mandates companies to spend 2% of their profits on CSR activities, while the Securities and Exchange Board of India (SEBI) introduced Business Responsibility and Sustainability Reporting (BRSR) for the top 1000 companies. Environmental regulations have also been stricter, with penalties and reputational damage for non-compliance.

Indian companies with strong ESG performance are likely to attract more investment, including ESG-focused funds. Companies with clear ESG roadmaps and targets are performing well against those with poor ESG ratings, potentially benefiting from lower borrowing costs.

Reputation and brand value are also important factors. Consumer awareness of the social and environmental impact of purchases can build trust and brand loyalty. Aligning with global ESG standards can enhance a company’s reputation and ease entry into foreign markets.

Operational efficiency can be achieved through resource management and risk management. Stakeholder engagement is crucial for successful ESG goal setting, and businesses must integrate ESG considerations into their strategic planning process to unlock strategic value.

Best practices and matrix:

Organizations should set specific and realistic ESG goals that are measurable, time-bound, achievable, and align with their business strategy. This aligns with the country’s Panchamrit goals of 2030, which require greater corporate commitment to fostering sustainable growth.

Effective ESG implementation involves creating a roadmap, assigning responsibilities, and building employee awareness. Consistent tracking of ESG initiatives is essential for transparency and accountability.

Encouraging innovation and collaboration drives ESG success by fostering creative solutions to complex challenges. This approach fuels impactful initiatives and enhances competitive advantage.

Benefits of adopting ESG practices include improved risk management, enhanced portfolio performance, positive environmental impact, greater innovation and adaptability, strengthened regulatory compliance, and support for global sustainability goals.

Companies in India use BRSR, inspired by GRI and SDGs, to showcase leadership and contribute to global sustainability while building their reputation, RSM said in the report.

0 0 votes
Article Rating
Subscribe
Notify of
guest
0 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments

Related Post

0
Would love your thoughts, please comment.x
()
x
Subscribe Now