Building a sustainable future: The role of Indian businesses in ESG initiatives
Businesses today understand the risks and opportunities presented by climate change as well as the importance of being future-ready. The rise of ESG (Environmental, Social, and Governance) investing in the Indian market predicts a significant move toward the integration of more ethical and sustainable investing methods. This increasing awareness of ESG investing symbolizes a substantial change that will bring prospective benefits for the Indian economy, society, and the environment.
ESG can be described as a framework that enables stakeholders, including the investment community, suppliers, employees, and customers, to understand how an organization manages its risks and opportunities related to the environmental, social, and governance criteria.
The term was first used in a 2004 report titled “Who Cares Wins,” a collaborative initiative of financial institutions at the invitation of the UN. In less than 20 years since then, the ESG wave has grown into a global phenomenon.
ESG involves pursuing responsible and ethical business practices with attention to social, environmental, and economic development. This ESG-enabled lens allows an organization to manage the risks and opportunities created by changes in environmental, economic, and social systems. ESG reporting is further employed by stakeholders to assess sustainability-related risks as well as relevant opportunities.
Indian businesses are rapidly incorporating ESG aspects into their holistic business strategy. In India, for sustainability, there have been two watershed moments –
- Corporate Social Responsibility (CSR) reporting and spending, an initiative made mandatory under the Companies Act, 2013.
- Securities and Exchange Board of India (SEBI) guidelines for Business Responsibility and Sustainability Reporting (BRSR), a standard framework used as a single source to disclose sustainability-related information.
- CSR, introduced in 2014, made it mandatory for enterprises to spend a minimum of 2% of their net profits on CSR initiatives as well as disclose their ESG initiatives to attract capital from global ESG investors. India has also issued a defined CSR mandate for organizations with a net worth of Rs. 5 billion, or turnover of more than Rs.10 billion, or Rs.50 million net profit.
BRSR, introduced by SEBI as a replacement and enhancement over the Business Responsibility Report (BRR), is compulsory for the top 1000 listed companies (by market capitalization) from FY 2022–23. It requires organizations to report on ESG parameters in line with the National Guidelines for Responsible Business Conduct (NGRBC). As per SEBI, organizations that are already disclosing ESG data in alignment with global standards like GRI (Global Reporting Initiative), SASB (Sustainability Accounting Standards Board), or TCFD (Task Force on Climate-related Financial Disclosures) can cross-refer to disclosures made under these standards.
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