India transforms its ESG landscape to be future-ready

By Delta India - Published May 10, 2023

Interview of Benjamin Lin, President, Delta Electronics India, published in Times of India blog

Post-pandemic, global Environmental, Social, and Governance (ESG) investing picked up momentum as investors perceived Covid-19 as the century’s first “sustainability” crisis. In India, ESG is still in its infancy, with only 25 out of 5,180 investors becoming signatories of the United Nations Principles of Responsible Investing (UNPRI). However, global assets managers, private equity funds, sovereign wealth funds, and pension funds started pouring capital into multiple clean energy companies and green business operations.

Why is ESG important in India?
In the Paris Agreement of the United Nations Climate Change Conference in 2021, India’s Prime Minister committed to achieving net zero emissions by 2070. Motivated by a multi-trillion dollar global pool of ESG driven capital, Indian companies are rapidly incorporating ESG into their holistic business strategy.

Status of ESG implementation in India
Companies in high-emitting sectors like industry and energy face stringent scrutiny by the Government. The Securities and Exchange Board of India (SEBI) also made ESG disclosures mandatory for the top 1,000 listed companies under its Business Responsibility and Sustainability Reporting (BRSR) initiative. India has a defined mandate for Corporate Social Responsibility (CSR) for companies with Rs 5 billion net worth, Rs.10 billion turnover, or Rs.50 million net profit. These companies must spend at least 2% of their net profits on CSR endeavors and disclose their ESG profiles to attract capital from global ESG investors and financiers.

Where lies the missing link in ESG for companies to adopt?
While ESG commitments stand on three pillars, the ‘S’ is typically a missing link between business strategy and regulatory compliance. Employment generation is a big challenge in India, and the government is pushing hard to absorb employable youths through mega employment drives. It aims to create 1 million job opportunities with 890,000 vacancies in ministries and central departments.

What are the top 5 ways for beginners to get started with ESG?
Indian companies can lose Rs.7,138 billion due to climate related risks in the next five years if they do not build robust ESG frameworks on priority. As prevention, businesses should demonstrate climate resilience and strive to eliminate emissions to attract investors in the following ways.

1. Utilising resources optimally
Companies, big or small, should adopt the evolving ESG frameworks to satisfy compliance criteria. Environmentally responsible enterprises must focus on sustainable sourcing, resource allocation, and optimal utilisation of resources such as fuel, raw materials, air, and water.

2. Switching to renewable energy solutions
Best-in-class high-efficiency solar and wind energy products from leading manufacturers can deliver industry-leading energy efficiency of up to 98.8%. Cutting-edge power conversion and energy storage technologies integrate bi-directional battery devices, site controllers, inverters, and cloud-management systems to offer comprehensive energy storage for demand management, power dispatch, and renewable energy smoothing.

3. Addressing the missing link
SEBI’s mandates not only look at the firm’s relationships with internal and external stakeholders but also give an insight into how the company protects its workers’ wellbeing. Thus, a firm’s social indicators should include employment opportunities, employee welfare, worker safety and training, human rights protection, social impact assessment, gender equality, and women empowerment.

4. Streamlining people and processes
A PwC report identifies that the ESG agenda of companies comprises reporting, strategy-making, and business transformation. It predicts that senior executives will play vital roles in crafting strategy, driving performance, reporting results, and leading a company’s ESG transformation.

5. Avoiding ESG washing
Businesses should mine and record ESG-driven risks and opportunities and address transparency issues to avoid accidental ESG washing. Financial decision-making should involve data visibility, compliance with global disclosures and data comparison to make ESG standardisation assessment easy for investors.

Final Say
Developing a 360-degree ESG architecture has become paramount in risk management, adaptation, accountability, and compliance from economic, social, and regulatory perspectives. Thus, India looks to integrate environmental and human health, collaboration and transparency, and transformation of various production modalities to realise its pledge of attaining net zero emissions in the future.

This is an abbreviated version of the full article found at Delta India website