As I reflect on the enthralling path of Environmental Social and Governance (ESG) pillars contributing to pathways for product innovation and operational transformation over the last decade, I am optimistic that the tenacity only grows. I remember reading The Great Derangement: Climate Change and The Unthinkable by Amitav Ghosh, in which the author reflects with dejection upon the lack of dialogue and collective failure of society to resist climate change. Today, India has come a long way by achieving its initial targets under the Paris agreement and a major ‘Panchamrit’ goal of securing 50 per cent of electric power from non-fossil fuel sources five years ahead of the targeted time.
People-first Sustainability
In this context, the growing ESG consulting market is a robust indicator of shifting focuses amongst all stakeholders. Today, both institutional and retail investors look at the ESG roadmap of companies to get a broader understanding of business risk involved before investing, whereas the companies are increasingly analysing direct links between overlooked ESG risk screening and its impact on profit margins. An overall understanding, thus, leads to increased compliance, awareness and planning towards ESG indicators in corporate balance sheets.
CareEdge Advisory recently analysed publicly available non-financial disclosures of 33 major Indian companies across sectors including banking, capital markets, defence and aerospace, electrical equipment, IT/ITeS, manufacturing, logistics healthcare and utilities. The study on one hand clearly indicated strong compliance by organisations with mandatory Business Responsibility and Sustainability Report (BRSR) requirements being duly fulfilled, whereas on the other hand, it glared at the harsh truth of partial disclosures of climate risk in their annual reports and a gap in voluntary alignment with at least one of the globally adopted frameworks such as Sustainability Accounting Standards Board (SASB), Global Reporting Initiative (GRI), TCFD (Task Force on Climate-Related Financial Disclosures) and Integrated Reporting (IR).
Thus, the next phase of ESG consulting translates to integrating more detailed international frameworks and crucial elements such as health and safety training coverage into the corporate value system. As the consultancies handhold organisations through their ESG journey, their focus should be wider than compliance. They should be aiming at long term value creation through structured consultations and focused targeting of qualitative areas of training, empowerment of workforce, transparent governance indicators and their long-term effect on business alongside leadership transformation.
The author is the CEO of CareEdge Advisory.