We are living in a world where more than often the news about social injustice and climate change grabs major headlines globally. Consequently, organisations’ heightened interest in ESG (Environmental, Social, Governance) is not surprising. But to truly understand why ESG matters, let’s briefly define ESG and what it entails. The term “ESG” refers to a corporate approach that takes governance, social, and environmental factors into account, emphasising ethical business practices in each of these three domains. Considering this, ESG continues to span a broad variety of challenges, which is one of the reasons why businesses have historically found it difficult to grasp it and implement controls, processes, and assessments.
India’s position on ESG in 2023
Only 25 out of 5,180 investors in India have signed the United Nations Principles of Responsible Investing (UNPRI), indicating that ESG is still relatively new in the country. On the other hand, many global asset managers, pension funds, sovereign wealth funds, and private equity groups are now investing in a number of clean energy enterprises and green business ventures.
The increasing global trend of interest in non-financial reporting and performance is also evident in Indian corporates. Annual sustainability reports and integrated annual reports, which are based on the GRI Standards and the Integrated Reporting Framework, respectively, are the most common means for Indian businesses to report on environmental, social, and governance issues. The practice of full disclosure on ESG goals is primarily driven by customers and investors, hence regulators have not played a significant role in this movement. Under the Business Responsibility Report (BRR), which is spearheaded by the markets regulator Securities and Exchange Board of India (SEBI), the top 1000 listed companies by market capitalization are mandated to submit information to the stock exchanges every year as part of their annual reports, following a prescribed format. This is the main regulatory framework that drives disclosures related to sustainability.
Investment in renewable energy sector
A recently released study from the Institute for Energy Economics and Financial Analysis claims that in the 2021–22 fiscal year, renewable energy investment in India reached historic levels. Even though India’s per capita energy consumption is currently only one-third of the world average, demand is predicted to rise quickly in tandem with the country’s expanding economy. According to World Energy Outlook report published by the International Energy Agency (IEA), India is expected to have the greatest growth in energy demand over the next three decades compared to every other nation and region in the world. The report also states India’s emissions are expected to rise by an additional 30% by 2050 due to its increasing energy demands. After China and the United States of America, India is currently the third-largest emitter of carbon dioxide, with an annual emissions of about 2.7 billion tonnes.
According to the IEA, the way forward is to increase renewable energy sources, reduce methane emissions from fossil fuel operations, double the rate of energy efficiency, and triple the capacity of renewable energy. These actions alone will account for more than 80% of the emissions reductions required by 2030 to put the energy sector on a path to limit warming to 1.5 °C.
By 2070, India aims to achieve net-zero emissions. It unveiled its strategic roadmap to achieve this goal at the COP27 UN climate conference in Sharm el-Sheikh, Egypt. It specifically declared the call for tripling nuclear capacity by 2032 and accelerating the production of green hydrogen. The installation of 500 gigawatts of non-fossil energy capacity by 2030 is another national objective set by India. (Source)
Different lenses of ESG vision
India Inc.’s ESG vision is a multifaceted one, reflecting several distinct perspectives. Among these lenses, technology acts as a transformative force, facilitating data analytics and blockchain transparency. Simultaneously, social impact initiatives serve as a lens focusing on community development, education, and healthcare, highlighting the broader societal implications of ESG. The diversity and inclusion lens spotlight the importance of equal representation, while the climate action perspective underscores the commitment to environmental preservation. These various aspects demonstrate how ESG encompasses a spectrum of issues and values, and how businesses are navigating this intricate landscape by leveraging technology, promoting social impact, fostering diversity, and addressing climate challenges.
The future outlook
Consumer awareness and influence have played a pivotal role in shaping ESG strategies globally. As companies worldwide recognise the impact of informed consumers, India faces the dual challenge of ESG adoption and the unique hurdles of a rapidly developing economy. Keeping in mind the country’s energy consumption projections in coming years, a $1.5 billion loan from the World Bank has also been approved to boost India’s low-carbon energy industry.
Yet, these challenges bring opportunities for innovation, improved corporate reputation, and a sustainable future. Looking ahead, India is poised to further align with global ESG standards, foster greater transparency, and cultivate a corporate landscape that is not only profitable but also responsible and conscientious, ushering in a promising era of ESG-focused business practices.
About the Author
Rachna Kango, Head of Marketing & Strategy Planning, Delta Electronics India.
