The pursuit of ESG (Environmental, Social, and Governance) objectives is widely considered to be beneficial for both the environment and business. The benefits that may be realized by adhering to the Sustainable Development Goals by 2030, even simply in the context of the four categories of energy, cities, food, and agriculture, total to $12 trillion in additional revenues or cost savings.
When it comes to sustainability in India, there have been two landmark events: the Companies Act, 2013, which made Corporate Social Responsibility (CSR) reporting and spending, the first global initiative of its kind, mandatory; and the Business Responsibility and Sustainability Report (BRSR), which the Securities and Exchange Board of India (SEBI) made mandatory for the top 1,000 listed companies by market capitalization.
The BRSR, which came into force last year, is anticipated to result in the creation of an index for businesses' business responsibility and sustainability inside the nation's still-under-construction ESG framework. The moves India is taking to create a robust ESG framework are consistent with global trends. For instance, the European Union has urged companies and financial institutions to consider ESG when making decisions and disclosing information.
Social Indicators Now Significant in ESG
Companies that care about the environment have been working to manage waste while sourcing, allocating, and using resources like air, water, and raw materials in a sustainable manner. Although protecting the environment may not be a business's top priority, ethical businesses have been working to prevent its degradation.
Companies will need to concentrate on social and governance challenges in addition to environmental sustainability, which will continue to be a top priority area of action. Social indicators are now becoming more significant due to evolving ESG regimes.
Transparency of Business
Since transparency is becoming the forefront objective for business, companies are not shying away from sharing data with stakeholders. Sustainable finance taxonomies around the world are pressing on ways to make transparency flexible in financial decision making. Likewise, we can witness that companies in compliance with the Task Force on Climate-related Financial Disclosures have commenced into preparing financial disclosures. The credit goes to their comprehension of the risks and opportunities that climate change bores, and not to mention, the significance of being future-ready.
Additionally, we could expect a standardization of ESG risk assessment which would ease the job for investors and make comparable data available, thanks to SEBI’s guidelines.The Business Responsibility and Sustainability Report (BRSR) will replace the existing Business Responsibility and Sustainability Report (BRR) and bring India's sustainability reporting in line with the international reporting standards. SEBI amended Regulation 34(2)(f) of the LODR Regulations to further strengthen the ESG disclosure regime in India, and on May 10, 2021, SEBI issued another circular outlining new sustainability-related reporting requirements on ESG parameters. Quantitative and consistent disclosures of ESG parameters are envisaged for the BRSR. By encouraging stakeholders to think beyond financial results and toward social and environmental implications, such disclosures will enable enterprises to connect with their stakeholders more meaningfully and will aid investors in making better investment decisions.
To give the companies enough time to adjust to the new reporting compliance/regulations, the filing of BRSR following the implementation of new norms has been specified as mandatory for the top 1000 listed companies (by market capitalization) for the financial year 2022–23 but optional for the financial year 2021–22. The nine principles of the "National Guidelines for Responsible Business Conduct" are matched with the BRSR, which asks listed businesses to continuously disclose their performance (NGBRCs). Because BRSR disclosures must be quite thorough, adoption of BRSR has yet yet accelerated. In order to build more impetus, SEBI established an advisory group on ESG issues in the securities market in a press release on May 6, 2022.
However, there is currently no regulation that requires non-listed corporations to comply with required ESG reporting or disclosure obligations. But, if the program is fully implemented where it is relatively easier to regulate, it can be anticipated that it would undoubtedly reach other businesses as well as industries in unorganized sectors.
On the same accord, the Reserve Bank of India already established a Sustainable Finance Group that creates ESG lending rules that are bound to affect borrowers.
Digitals Tools
Circularity is significantly influenced by digital as well. Sustainable manufacturing is built on the convergence of cloud, AI, machine learning, IoT, and other solutions. IoT, digital twin technologies, and other applications are necessary for predictive PLM (already stated) to conduct simulations and what-if assessments to evaluate product performance and feed it into upcoming design cycles.
Supporting Facts with Reliable Databases
It is not necessary to overstate the importance of documenting ESG behavior for investors and other stakeholders. Investors use evidence as an entrée before diving deeply into datasets. The ESG impact of a company's services or goods can be recalled for a long time by creating a story using text, audio, video, multimedia, or social media and supporting it with facts from reliable databases. These improvements to the compliance check-box data offer value.
External communication has a significant role in attracting investors as well as improving stakeholder relationships and public perception. It can also be helpful in risk communication. Such communication can be used by businesses to discuss their future business plan, even if they are not obligated to adhere to the ESG standards set by the regulators.
Increasing Resilience in Energy Systems
The inadequacy of disaster planning is abundantly clear as one climate event after another affects electricity supplies and other services. Utility companies do hold a surplus of capacity, but this strategy is neither operationally effective nor sufficient to keep the system running when a big area is affected. To ensure that energy systems are robust in the face of severe disruption and that the most crucial consumer services are maintained, even if some aspects of the grid are down, a new effective method is required. In the past, this would not have been possible. However, there are increasingly affordable digital alternatives that can increase resilience.