Environmental, Social, and Governance: Building the ESG narrative for a new world
By Akanksha Sharma
The pandemic, even at its most virulent manifestation, has failed to subdue the battling human spirit. In fact, it has triggered several discourses focused on the incessant urge to discard the accepted ways of socioeconomic operations and build a fair and inclusive order.
Among these is the ESG – Environmental, Social, and Governance school of thought. It centers on the conduct of corporations and their ramifications for the planet and communities making it an essential yardstick for countries and corporates. In an era of shifted notions of measuring business growth, it is imperative to look beyond financial numbers as a true measure. The agenda is not just led by investors and larger corporates but the cog here is the millennial consumer.
And as it is said, that with great power comes great responsibility, the moral obligations on corporations to be custodians of social and environmental good is increasing. This, and the changing geopolitical status quo has made it imperative for businesses to adopt fundamental changes in their demeanor, contributing meaningfully to building the narrative for a New World.
Multidimensional shifts in the offing
As the gale of change continues to get stronger across the global business landscape, the role of ESG adherence in amplifying the interests of the Triple Bottom Line is expanding. The concerted effort to standardize corporate reporting on ESG performance into four pillars and 22 metrics aligned with United Nations Sustainable Development Goals (SDGs) has unleashed a series of cascading effects. However, powerful forces are also in action across the global geopolitical, social and environmental lobbies shaping the relevance of ESG adherence in corporate decisions.
Global incidents around over the last few years also drove a consensus around the perils of disregarding science and that global warming is a clear and present danger. On the political front, factors including the European Commission driving policy initiatives like the European Green Deal, the UK pressing for sharper sustainable reforms, and a liberal administration in the United States are expected to cause considerable groundswell around ESG elements.
Dismantling all opacity
In addition to the environment and social aspects, part of the ESG discourse is impeccable governance which includes reporting and ensuring transparency. While developed nations have long been disclosing their ESG data, Indian companies and investors faced formidable challenges in collating company-specific ESG information for evaluation and research purposes. However SEBI’s continuous push for the Business Responsibility and Sustainability Reporting (BRSR) framework, has heralded a new era of standardization and transparency in India’s ESG reporting culture.
The BRSR is expected to allow large institutional investors to compare the ESG performance of companies in the Indian context, evaluate ratings and ensure adequate accountability for their funds. It seeks mandatory disclosures from all listed entities on their performance against the nine principles of the stated ‘National Guidelines on Responsible Business Conduct’ (NGBRCs), giving investors a multidimensional view, enabling them to assess overall performance at a granular level.
Sustaining the dialogue at the top
Companies thus looking to get ahead of the curve with ESG-first business practices need to focus on impeccable governance as well as have their top leadership understand the values and relevance of ESG to specific business outcomes. They need to be armed with the knowledge required for making sound decisions in the New Economy with fresh insights on climate change, human rights, and income equality. Also, there is a pressing need for leaders to drive stewardship on workforce diversity and inclusion, social impact, renewable energy and sustainable operations, to name a few.
Looking beyond institutional boundaries
But in a contemporary world, where economies are highly integrated, business operations are vulnerable to socio-political and climatic disruptions. Companies can therefore no longer afford to be concerned solely with affairs within their turf. Further, there is a growing incidence of modern slavery and human rights violations across supply chains worldwide.
So corporations that are serious about their ESG commitments need to look outward and join the conversation on elevating value and compliance across their industrial linkages. Implementing a circular economic model in ensuring the sustainability of products and orchestrating supplier relations, a healthy mix of localized and global suppliers screened rigorously on ESG requirements, as well as working collaboratively on waste management and enforcing strong labor rights are some of the ways corporates can ensure this compliance up and down their value streams.
With sustainability considerations permeating all spheres of corporate existence, ESG factors can no longer play second fiddle to the core drive for financial profitability. They must form an integral part of a corporate’s mission statement. In a future that is almost undoubtedly disruptive, organizations that can achieve a seamless fusion of tech, talent, and sustainability of purpose will be better equipped to move ahead of their peers.
(The Author is ESG, Policy Expert & Author of “For the Greater Common Good”. Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)
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