The Securities and Exchange Board of India (SEBI) introduced Business Responsibility and Sustainability Report (BRSR) guidelines, requiring ESG disclosure from the current financial year
India, like the rest of the world, is undergoing a significant paradigm shift in the way businesses approach Environmental, Social, and Governance (ESG) considerations. While ESG was previously perceived mainly as a matter of compliance and regulation, it has now taken center stage in boardrooms and is recognised as a vital component of long-term strategies. The pandemic, coupled with heightened consumer consciousness regarding environmental responsibility and social impact, has expedited this transformation.
Businesses now recognise the visible effects of climate change, water scarcity, air pollution, biodiversity loss, and waste generation. Consequently, they are making sincere efforts to improve their environmental and social footprint. Amidst these changes in the ESG landscape, certain notable trends have emerged over the past three years.
From intent to impact: Integrating Scope 3 in supply chain sustainability: Following the launch of the UN Sustainable Development Goals (SDGs) in 2016, organisations initially concentrated on reducing their own operations and emissions (scope 1 and scope 2). However, as organisation’s declare net-zero plans and sustainability ambitions, they are realising the challenges of addressing operations beyond their units. With stakeholders spanning suppliers, transporters, employees, distributors, vendors, customers, and consumers, organisations are now shifting their focus. Effective measurement of supply chain impact is a crucial challenge, paving the way for cross-sector partnerships, industry associations, responsible sourcing programs, dedicated supply chain sustainability roles, and inclusion of sustainability metrics in supply chain teams' Key Result Areas (KRAs). This shift will become increasingly prominent, with significant efforts invested in improving supply chain ESG footprints over the next few years.
India's path to enhanced ESG disclosure: While ESG data disclosure has been voluntary in India for some time, recent regulatory developments have made it mandatory for the top 1000 listed companies.The Securities and Exchange Board of India (SEBI) introduced Business Responsibility and Sustainability Report (BRSR) guidelines, requiring ESG disclosure from the current financial year. In May 2022, SEBI formed an ESG advisory committee to enhance the BRSR requirements and streamline ESG ratings and investing.
Furthermore, the Reserve Bank of India issued guidelines in February 2023 that encompass acceptance of green deposits, a disclosure framework on climate-related financial risks, and guidance on climate scenario analysis and stress testing. Like the European Union's progress in developing stringent ESG disclosure guidelines, India has embarked on a similar journey. These guidelines are essential for meaningful analysis, comparison, benchmarking, and understanding of businesses' ESG performance.
Elevation of "E," Focus on "S" and "G": Within the ESG realm, environmental concerns such as GHG emissions, electricity consumption, water usage, waste generation, and biodiversity impacts have received significant attention. However, issues related to the social (S) and governance (G) aspects of organisations have been less visible to the general public. Topics like human rights compliance, health and safety, diversity, equity and inclusion, responsible sourcing, ethics, and compliance require specialised understanding and often remain confined to closed circles and subject matter experts. Consequently, the development of programs addressing the S and G elements has been relatively slower, aside from the mandated CSR work. However, with increasing awareness and engagement from external rating agencies and NGOs, we anticipate a shift in focus from just the "E" to encompass the "S" and "G" aspects as well.
Robust ESG regulations to empower change: ESG-related regulations in India have transcended traditional areas such as effluent disposal and emissions compliance. More pertinent, stronger and well-developed regulations are seeing the light of the day and it has indeed taken the industry by storm. A specific example is the movement around plastic waste. The ban on single-use plastics, comprehensive amendments to the plastic waste management rules, and stringent stance shown by regulatory authorities have caused the industry to change and adapt to these new regulations. Five years ago, we would have never dreamt of Extended Producer Responsibility (EPR) being taken seriously in India, but in the last two years, we have seen a significant shift in this regard. It is a great example of how the right intent at the policy-making stage can impact and create a massive change in the industry. Similarly, EPR requirements on e-waste are coming up, and new guidelines around renewable energy sourcing are being developed. The key thing though, will be an effective and common implementation of these standards across all states, and I hope that the implementation does take place in the spirit with which they have been written.
(Rahul Nene is head of sustainability, Huhtamaki India.)