ESG accountability and reporting in India

ESG accountability and reporting in India: What does it entail and what is the long-term value it creates for organizations?

Corporate boards are debating how climate change will affect their companies. Their actions, strategies, and value chains may need to be reframed in light of evolving dangers and possibilities. The expectations surrounding non-financial disclosures have increased as a result of what authorities and other stakeholders anticipate.

It is thought that the epidemic provided corporations with a chance to gauge their environmental, social, and governance initiatives (ESG). Institutional investors, asset managers, lenders, credit rating services, and insurers increasingly base their capital allocation choices in India on ESG disclosures. In light of this, there is an increasing demand for businesses to improve the accuracy, comparability, and utility of their ESG disclosures. Investors today treat ESG disclosures with the same rigour they do financial or accounting records.

Both qualitative discussions of subjects and quantitative measurements used to assess a company's performance in relation to ESG risks, opportunities, and related strategies must necessarily be included in ESG reporting. Many Indian companies have yet to master the art of producing real financial gains from non-financial disclosures, despite the fact that some have matured over the past few years through regimented non-financial disclosures in line with international standards like the Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC), and Sustainability Accounting Standards Board (SASB).

For the top 100 listed businesses, the Securities and Exchange Board of India (SEBI), the country's stock market watchdog, announced a Business Responsibility Report (BRR) in August 2012. Through changes to the "listing obligations and disclosure requirements clause 34(2)(f)" in September 2015, this was eventually expanded to the top 1,000 listed businesses by market capitalization. Additionally, in order to emphasise the long-term advantages of non-financial disclosures, SEBI announced the voluntary adoption of an Integrated Report (IR) in 2017.

Despite the fact that BRR led to market-wide compliance, it was very qualitative in character and was based on the guiding principles of "National Voluntary Guidelines (NVGs)". The Business Responsibility and Sustainability Report introduced a well-organized shift in August 2020 to provide objectivity to disclosures (BRSR). Despite being required, BRSR has given participating organisations freedom through obligatory and leadership indicators. Companies who have a lengthy track record of non-financial disclosures are taking advantage of this chance to establish eminence. Market participants expect BRSR to involve little government action in areas where improvements are being made continuously. Businesses with stronger ESG performance typically receive better terms and are valued higher by investors.

Additionally, firms are institutionalising upstream and downstream consolidation, including a list of preferred suppliers and business partners, which creates more opportunity for supply-chain partners with higher ESG scores.

We think that millennials make a major contribution to the labour force. They are discovered to connect more readily with organisations that make the essential adjustments for long-term business sustainability, leading to a decrease in iteration.

Businesses have many potential to flourish in their respective fields thanks to the expanding ESG landscape. ESG can also be seen as a benchmark by which companies can fairly and openly represent important issues, objectives, environmental and social investments (including mandatory CSR spending), progressive inbound and outbound policies, and finally financial growth without omitting the environment, society, and governance. Thus, it can be said that ESG disclosures serve as a launchpad for businesses to create long-term value.

(Source - The Times of India)