GREED is good for ESG: From a focus on green in governance to default disclosures on green aspects of business, 5 action points can help


Although ESG conversations are hot in India, it remains to be seen whether they achieve true adoption by business and society.

By Srinath Sridharan

Environmental, social and governance (ESG) issues concern and impact all of us, and every business, wherever it operates. Environmental issues cover climate change, carbon emission issues, waste management, pollution (of all kinds). Social issues range from labor issues, modern slavery, undeclared sourcing practices, product liabilities, information disparity, privacy aspects, data security, and more. practices, board impact, enterprise risk framework, granularity of organization disclosures.

The term ESG was coined in 2005, in a landmark UN study called Who Cares Wins. ESG refers to the three central themes for measuring the sustainability and societal impact of an investment in a company. Lately, conversations around ESG seem like a “moment of contemporary revival”.

Although ESG conversations are hot in India, it remains to be seen whether they achieve true adoption by business and society.

Certainly, political attention to aspects such as skills development and education, sanitation, public health, etc., could shape public and private investments. With growing awareness among young investors of a company’s impact on social development and environmental care, we might expect more conversations. Deloitte’s 2021 Millennials and Gen Z survey found: “During the pandemic, health care and unemployment topped millennials’ list of concerns. But the environment remained a priority. (#3 for Gen Y and #1 for Gen Z). ~40% think more people will commit to taking action on environmental issues post-pandemic…”.

Greed is a desire to have more and more than the actual need. In the ESG journey, we must have more of its elements if GREED is defined as:

green all with governance
ESG assessment frameworks promise to be effective in predicting companies’ long-term ability to overcome, resolve and monetize sustainability risks and opportunities. As green lending gains traction, banking regulators around the world have begun to recommend the adoption of ESG ratings for credit scoring. Hopefully India will bring this to their Net Zero project.

Rto rejuvenate/repair quickly
Reuse is the best green policy. Repair, resell and reuse; keep equipment in service and out of the waste stream. The more repairs and reuse, the less waste ends up in local landfills where proper treatment is expensive or unavailable. While it’s easier and probably even fashionable to have “use and throw away” items, most everyday materials are reusable.

Eenvironment “forever”
Every day must be “Earth Day”. To conserve our land surfaces, we cannot simply throw debris into water, be it lakes, ponds, wells, seas, rivers or the ocean. Huge amounts of lost or discarded consumer plastics, metals, rubber, paper, textiles, ships and other items enter the marine environment every day. This makes marine debris one of the most widespread pollution problems facing the world’s oceans and waterways. The only solution to this problem is to prevent marine debris in the first place. We only have one planet, Earth, which we call home. We must protect and preserve it. In this journey, all business activities must take this into account.

Eempathy for all
The simple philosophy of treating others (people, other living beings, and the planet) the way you want to be treated can work wonders! Adopting green practices can reduce waste, help conserve resources, improve air and water quality, and protect ecosystems.

Adopting sound governance standards in your daily life, including family and work, could make our societies stable. Embracing humane behavior in all aspects of our daily lives can add positivity to our entire ESG journey.

Ddefault closures
SEBI has taken two crucial steps in this direction. First, it launched Business Responsibility and Sustainability Reporting (BRSR), which is an important step towards harmonizing sustainability reporting with financial reporting. This would be mandatory for the top 1,000 listed entities (by market capitalization), to be adopted from FY23.

It also launched a public feedback system to get input on how ESG rating providers should be organized and what standardization could be brought to terminologies and rating methodologies. Reliance on ESG ratings correlates with investor protection, market transparency and efficiency, risk pricing and capital allocation, among others.

If every business entity proactively owns the governance aspect – and in its true spirit, not just through the wording of the regulations – “default disclosures” can increase their brand value.

The only way companies benefit is if their transformation benefits their consumers and other stakeholders. To do this, we simply have to accept that any transformation must have a positive impact on people and on this planet. We have not only inherited the planet from our previous generations, but we have also borrowed it from future generations.

(The author is a business advisor and independent market commentator. Twitter: @ssmumbai
Opinions expressed are personal and not necessarily those of Financial Express Online.)


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