Does ESG Integration on Indian Corporate Boards matter?

Recently, I got an opportunity to attend the National Conference on “Responsible Business Conduct: Escalating ESG for Viksit Bharat”, organised by the Indian Institute of Corporate Affairs (IICA), Gurugram, India, on September 04^th and 05^th in New Delhi.

Among many high-level panels, what impressed me the most was the discussion around the Integration of ESG on the boards.

The entire corporate governance landscape, especially in India, is transforming vividly. During the discussion, I learnt that while integrating Environmental, Social, and Governance (ESG) on Indian boards is gaining momentum, we still have a long marathon to cover. An experienced professional said that talking about ESG during the board meetings is undoubtedly a good idea; however, in many meetings even today, the focus remains on stakeholders' share maximisation.

Another senior ESG Professional argued that the time is over when we should say that ESG is “non-financial” reporting and disclosure. It is, in fact, very much a “financial” disclosure by the very virtue of the fact that ESG-positive companies tend to attract more sustainable investments from the market.

The concept of ESG has shifted from a buzzword to a core component of modern business strategies. Globally, and increasingly in India, companies are beginning to understand that responsible business practices are not just about compliance but seizing new opportunities and mitigating risks in a rapidly changing world.

ESG integration in India is a story of progress mixed with hurdles. On one hand, there has been a noticeable push towards better sustainability reporting. Initiatives like the Sustainable Business Leadership Forum are helping to underline the importance of ESG factors, showing that companies with strong ESG credentials are often better positioned to handle risks and opportunities.

Nevertheless, it could be smoother sailing. One major challenge is the patchiness of ESG information. We juggle a lot between the recorded, calculated and estimated data. Financial reports do not always fully picture a company's sustainability efforts. As a result, alternative ESG ratings and more comprehensive disclosure frameworks are becoming vital. They help investors and stakeholders get a clearer view of how companies perform regarding sustainability.

Despite these hurdles, there are bright spots. Take the renewable energy sector in India, for example. Companies like Tata Power and Adani Green Energy set impressive standards in sustainable practices, proving that ESG integration can drive growth and positive environmental impact.

Looking ahead, integrating ESG into corporate boards in India is set to gain even more traction. As the country works towards its Sustainable Development Goals (SDGs), the private sector will be crucial in steering the ship towards sustainability.

Addressing the challenges of ESG integration will require a collaborative effort. It is about building partnerships among companies, investors, regulators, and civil society to create solid ESG frameworks, enhance data transparency, and implement effective sustainability practices.

Moreover, the Indian government is stepping up its efforts to make ESG reporting a norm. For instance, the mandate for the top 1,000 listed companies to submit Business Responsibility and Sustainability Reports (BRSR) is critical in this direction. It is a trend that's likely to grow as policymakers increasingly see the value in aligning business practices with broader societal and environmental goals.

The COVID-19 pandemic has underscored the need for resilience and adaptability in business. ESG practices can help companies navigate global challenges by highlighting and addressing environmental, social, and governance risks.

To conclude, integrating ESG into Indian corporate boards is a progress. While challenges remain, there is a strong sense of optimism. As businesses, investors, and policymakers continue to work together, a real opportunity exists to weave sustainable and responsible practices into India's business landscape.

Kishore holds a PGDM from XISS and a doctorate in Strategic CSR from Santiniketan. He works for HPPI in New Delhi and is pursuing the HP Future Impact Leader - Certified ESG Professional Program from IICA (views are personal).