As companies in India face increasing pressure to prioritize environmental, social, and governance (ESG) issues, they are adopting a variety of measures to improve their performance in these areas and meet the expectations of stakeholders
ESG (environmental, social, and governance) investing is a way of evaluating companies based on their performance in these three areas. As ESG investing becomes more popular globally, companies are increasingly being held to higher standards in terms of their environmental, social, and governance practices. In India, the new business responsibility and sustainability reporting (BRSR) norms are now compulsory for the top 1,000 listed companies by market capitalization. These norms require companies to disclose information about their environmental and social impacts, as well as their governance practices.
II. Importance of ESG in Business Decisions
ESG has become a key determinant of several key business decisions as stakeholders increasingly expect companies to perform well in these areas. Companies that have a strong ESG profile are often more attractive to investors, employees, and customers. As a result, companies are paying more attention to their ESG performance and are looking for ways to improve in these areas.
III. ESG Priorities for Companies
According to the Morningstar Sustainalytics Corporate ESG Survey Report 2022, the top three ESG issues that companies in India intend to prioritize in the coming year are carbon emissions from operations, emissions, effluents and waste, and carbon emissions from products and services. As part of the BRSR norms, companies in India are also required to disclose information about their energy and water use, greenhouse gas emissions, waste generation, and more.
IV. ESG Measures Taken by Companies
To improve their ESG performance, companies are adopting a variety of measures. These include reducing their carbon footprint, increasing energy efficiency through the use of green buildings, becoming plastic-waste positive, building energy-efficient infrastructure, and making facilities waste-neutral. Companies are also adopting energy-efficient smart manufacturing practices that involve the use of artificial intelligence and machine learning, as well as 3D printing, which can help them accurately measure and report ESG metrics.
V. Focus on Environmental Issues
As the top priority for companies adopting the ESG framework, environmental issues are receiving significant attention. Companies are looking at ways to reduce their carbon footprint and increase their energy efficiency through the use of green buildings, becoming plastic-waste positive, building energy-efficient infrastructure, and making facilities waste-neutral. For example, Ambuja Cements saves around 70 million liters of water at construction sites through concrete mix proportions, modular curing, and rainwater harvesting. The share of renewable energy in Marico’s operations stood at 70% for FY22.
VI. Focus on Social Issues
To improve their ESG performance, companies are also focusing on social issues such as workforce diversity and accessibility, training and health and safety of employees, wage gaps, minimum wages, and the upholding of human rights. For example, there was a 37% increase in Hero MotoCorp’s female staff strength in FY22 to 2,079 from 1,520, and the number of specially-abled employees rose to 2,112 in FY22 from 1,939 in FY21.
VII. Focus on Governance Aspects
Companies are also paying attention to governance aspects as part of their ESG efforts. This includes disclosing information about corporate social responsibility (CSR) spending, CEO pay compared to median remuneration, and more. Companies are also looking at ways to improve their governance practices, such as adopting board diversity policies and implementing anti-corruption measures.
ESG investing and the BRSR norms in India are leading companies to prioritize and take action in the areas of environmental, social, and governance issues. Through a variety of measures, companies are looking to improve their ESG performance and meet the expectations of stakeholders.
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