ESG reporting in India set to see a sea-change
With India working towards a robust ESG framework, companies are trying hard to adapt to the changing requirements and complying to the ESG goals -
The "Global Carbon Budget Report 2022" states that more than half of the world's CO2 emissions in 2021 were from three places — China (31%), the U.S. (14%), and the European Union (8%). India is at the fourth spot and accounted for 7% of the global CO2 emissions.
At the recently held 2022 United Nations Climate Change Conference (COP27), India set 2070 as its target year to reach net-zero status which makes it crucial for businesses to comply with their ESG goals. However, in absence of a proper framework, Indian companies face several roadblocks during their Environmental, social, and corporate governance (ESG) reporting are like lack of standard reporting framework, lack of data and third party opinions, cost of integrating ESG practices etc. This becomes even more prevalent for the MSME sector.
Preeta Misra, Senior Director – Credibility & Business Insights Group, ESG and SME tells VARINDIA of where Indian companies stand when it comes to ESG reporting -
When seen from a global standpoint, where do Indian businesses stand when it comes to complying with ESG goals and standards?
Preeta Misra (PM): We will see the listed 1000 companies complete their (Business Reporting & Sustainability Reporting) BRSR filing in 2023. Many of these have set goals for themselves. We will have to wait and see how many of them are committed enough to meet their goals. However, we have seen awareness and willingness to invest/measure ESG increase through the various conversations that we are having with our customers. There is pressure from investors and other stakeholders to understand what the companies are doing in ESG.
In the near future, we will see pressure from customers as well as employees too who would opt to work with companies who are ESG focused.
Are they doing enough to keep up to the standards since there is no framework yet?
PM: We have some of the listed companies making voluntary disclosures on ESG earlier. As far as reporting is concerned, the companies will meet the requirements. India is working towards have a robust ESG framework and the companies are also trying to adapt to the changing requirements not only in India but also globally.
What role can the Indian government play to ensure that businesses become fully ESG compliant? Is there any Company law/legislation around it?
PM: We have seen regulations move from voluntary disclosure to mandatory disclosure globally and we are beginning to see that in India too now. While the focus are the larger companies right now, ESG is very important for the MSMEs too and the government will have an important part to play.
What are some of the challenges faced by Indian business houses during ESG reporting?
PM: A few of the challenges faced during ESG reporting are -
a. Lack of data remains one of the major challenges. Putting the data in order comes first, then comes measuring and reporting it and finally managing it to achieve the goals that you have set up for yourself.
b. Lack of skill sets – we need ESG specialists who not only understand the E, S and the G, but are also data analysts
What are some of the ESG trends (ten years down the line) that will shape the future?
Preeta Misra: In the next 3-5 years, the following trends will become dominant in the area of ESG -
a. More mandatory disclosures for a larger number of companies will come in
b. We will see customers and employees driving ESG within companies
c. Climate change will remain a dominant theme. We will have to see how the companies meet their net zero targets that they have set for themselves
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