ESG Disclosures
Sustainable Development is the future that we envision for our planet. To reach there, we need to overcome several roadblocks such as climate change, poverty, hunger, inequality, etc. Corporates play a major role in making or breaking the case for sustainable development. Sustainability reporting, also known as environmental, social, and governance (ESG) disclosures, reflects how the corporate sector is promoting positive change in this area.
Fortunately, India Inc’s ESG ratings are steadily improving, owing to improved disclosures and performance, according to CRISIL’s analysis. A risk evaluation of 586 Indian enterprises across 53 industries based on fiscal 2021 data shows that the majority of them have improved their ESG ratings over the previous year, owing to more important disclosures and better performance on numerous aspects.
As of March 2022, 82 companies had committed to achieving net-zero emissions, a 50% increase from 2019. India is ranked sixth in the world in this category by the non-profit Climate Disclosure Project (CDP).
Despite this, just one-fifth of the 586 companies evaluated in 2021 issued sustainability reports, according to the research. This is an improvement over previous year, as 12 new companies made these declarations for the first time.
The Securities and Exchange Board of India (SEBI) has enforced ESG disclosures for the top 1000 listed businesses, therefore the scenario is projected to radically change in FY 2022-23.
Hiking ESG Scores
Renewable energy usage, gender diversity, and board independence are all increasing ESG scores, according to the CRISIL research. When the analytics firm compared this year’s data to the 225 companies studied the previous year, 14 showed a significant positive deviation—more than a 5-point increase in score. Three organisations, however, showed a major negative divergence with a score fall of more than 5-points, while 139 remained rather stable.
Only 14 organisations were recognised under ‘leadership’ classification, in the firm’s most recent rating, while 108 were categorised as ‘strong,’ and 73 were classified as ‘below average,’ and ‘weak.’
“Leaders on ESG have demonstrated a clear commitment towards sustainability and have consistently delivered superior performance. For ESG to truly be embedded and practised in spirit, all stakeholders have to work collaboratively and create a favourable environment for ESG in India,” says Amish Mehta, Managing Director and CEO of CRISIL Ltd.
1 in 5 Companies Disclose GHG Emissions Data
Climate change continues to be a major problem for the business sector, therefore the discourse about the environment has centred on greenhouse gas (GHG) emissions around the world. In India, however, only one out of every five businesses reported their Scope 1 and Scope 2 GHG emissions. The analysis finds that Scope 3 emissions disclosure was even worse: only 63 out of 586 companies provided this information.
“In addition to focussing in the near term on targeted actions such as decarbonisation, a mindset shift is necessary to transform from merely complying to creating value and structurally mitigating risk,” adds Amish Mehta.
Investment required for Decarbonisation
India is one of the world’s 80 percent committed to Net-Zero, and the investment required to achieve this will be significant! It includes cutting GHG emissions in half over the next 50 years, after they quadrupled in the previous 20.
CRISIL predicts that India will need to invest Rs 22-25 lakh crore in decarbonisation over the next seven years. This necessitates substantial expenditures in renewable energy and battery technology.
Investments in hydrogen, CCUS, pump hydro, geothermal, and biomass-linked technologies would more than triple by 2030, according to the report, while India’s potential is vast but mostly unexplored.
As of March 2022, 82 companies had committed to achieving net-zero emissions, a 50% increase from 2019. India is ranked sixth in the world in this category by the non-profit Climate Disclosure Project (CDP).
