ABSTRACT
In this modern era, the intersection of business and sustainability has become a focal point of attention for policymakers. The conversation has now been directed from profit maximization towards other aspects such as environmental, social, and governance factors. In this article, our focus will be to understand the meaning of ESG, the rise of ESG in India, challenges in the implementation of this news, and the opportunities that these norms open for Indian companies.
KEYWORDS:
ESG, Companies Act 2013, SEBI, Environment, Sustainable development.
INTRODUCTION:
In this contemporary business world, the term sustainability is relevant not just for the protection of the environment but also for the survival of business operations. Environmental, Social, and Governance (ESG) compliance demands an integrated approach to corporate responsibility rather than a traditional metric to measure the company’s environmental performance. In today’s world, adopting the ESG norms is no longer an optional strategy for the business but it is now a long-term strategy to stay in global competition and make meaningful contributions to the national and global sustainability goals. India is a signatory of the United Nations Sustainable Development Goals and the Paris Agreement which makes India an active participant in the global sustainability mission. The Securities and Exchange Board of India has played a primary role in this transformation and has introduced Business Responsibility and Sustainability Reporting (BRSR). This pioneering step requires the top 1000 listed companies to disclose their ESG practices from the financial year of 2022-23.
THE rise of ESG COMPLIANCE IN INDIA
The ESG regulations position India with other nations and international bodies that have released these reporting standards. Currently, it applies to only the top 1000 listed countries but discussions suggest that Business Responsibility Reporting (BRR) will start applying to other companies in the near future. ESG’s are well-crafted regulations and involve three components. Each of these components represents an important component of business practices. The environmental component of ESG focuses on the impact of a company’s business operations on the natural world. Indian businesses are now required to comply with the regulations of Indian legislation such as the Environmental Protection Act of 1986 and the National Green Tribunal Act of 2010. These legislations cover the crucial areas of environmental concerns such as pollution, waste management, and emissions. The social component of ESG focuses on the human-centric approach of Indian businesses. This component requires compliance with legislation such as the Code on Wages 2019 to ensure safe working conditions for workers fair treatment to employees and non-discriminatory practices. Companies are also required to comply with the Corporate Social Responsibility provisions of the Companies Act, 2013 and play an active role in community development. CSR activities need the investment of companies in sectors such as health, education, and skill building.
The Governance component shows the focus on the practices that ensure a transparent and ethical code of conduct in the company’s operations. SEBI regulations require strict corporate governance norms which include the requirement of independent boards, proper disclosures, and compliance with reporting standards. The companies are also required to comply with anti-corruption laws such as the Prevention of Corruption Act, of 1988, and the anti-money laundering regulations.
CHALLENGES IN THE IMPLEMENTATION
ESG has the potential to transform the business practices in India but there are challenges as well in the implementation of these regulations. The Indian regulations are complex because there exists an overlap between the regulations of central and state governments. This complexity in the regulations will create problems in the enforcement of these regulations and make compliance challenging for Indian companies. Small and medium enterprises face even more hurdles in implementation because, unlike large companies, they do not possess the resources to implement these regulations. The small businesses struggle to allocate the required funds to implement these regulations. The lack of awareness and ability to understand these regulations also create hurdles in the implementation of these changes.
OPPORTUNITIES FOR INDIAN COMPANIES
The compliance with ESG norms offers a lot of opportunities for Indian companies to advance their growth. Companies that comply with these sustainable principles of ESG gain competitive advantages over the companies or firms that do not comply because these regulations build the trust of investors and consumers. The companies that would be able to comply with these norms would be better placed to seize the market opportunities and differentiate themselves from their competitors. The employees also prefer to work for organizations that show an interest in the compliance of these sustainable practices. Compliance with ESG helps in the long-term cost reduction makes operations efficient and opens the doors of international markets.
ROADMAP FOR ESG COMPLIANCE
The compliance with ESG norms needs the development of a strategic roadmap. The businesses should start by analyzing their current practices and identifying the gaps and opportunities for all the three components of ESG’s. The infrastructure building and training of employees are very important for the success of these ESG norms. Companies need to collaborate with government bodies and NGOs which can assist in the implementation of these practices.
CONCLUSION:
As India is progressing on its path of development, ESG compliance has become a regulatory necessity to make Indian companies competitive and help them stand at the global level. The path of the implementation of the ESG is challenging but the opportunities are immense. By adopting these measures, India can position itself as a global leader in the implementation of sustainable practices. ESG guidelines are important for India because they also show the Indian traditional knowledge and values which talk about the principle of “Vasudhaiva Kutumbakam”(the world is one family). These values promote responsible resource allocation and utilization. The businesses can promote these values through the adoption of sustainable practices and the reduction of ecological footprints.
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WRITTEN BY MUSKAN.
