SDGs and ESG

ESG integration in business: a key imperative

The Indian business scenario is going through a phase of uncertainty, and the amplification of several natural and social disruptions are making businesses rethink their strategy. ESG, as a concept, is evolving to create long-term value for all stakeholders.

The COVID-19 pandemic was a strong trigger to reshape global economies and determine how businesses operate. By exposing the fragility of the current businesses and economic models, it has forced the world to hit the reset button and think. Future proofing by enhancing resilience is what businesses are looking at presently.

If we look at the top five global risks as depicted by World Economic Forum, they have shifted from economic to environmental and societal. In recent times, cyclones, earthquakes and other alarming natural calamities indicate that focusing on economic risks is not just enough. To future proof a business against uncertainty, ESG integration is equally important.

At the inaugural roundtable of the EY ESG Leadership Dialogues, the importance of ESG as an enabler of resilience came to the fore. While the theme was centered on ESG as a value creator, the discussion also focused on how Indian companies are gearing up to comply and lead with ESG and how private public partnerships will be instrumental.

Rajiv Memani, Chairman and Regional Managing Partner, EY India, opened the roundtable explaining how ESG has transformed from a soft compliance issue to a key strategic discussion point across the board room. The main themes of ESG that are very persistent at all levels of the business include:

  • The digital disruption: COVID-19 has further accelerated the digital disruption that enables agile workspaces, automation in several processes and has the potential to bring about a complete paradigm shift in the business we do today
  • The geopolitical scenario and the complexity of business involving supply chain and intricate value chain is adding up for the need of ESG

Most CEOs of progressive companies are aspiring to take a market leadership stand towards ESG since it has a huge potential in attracting capital when integrated with business strategy. Investors are looking at non-financial parameters with equal focus as financial performance.

Regulators around the world are pushing the ESG agenda. In India, with the launch of BRSR, the regulatory aspect of ESG received further momentum. BRSR will become mandatory for the top 1000 companies in terms of market cap by 2022-23. BRSR aims to gauge a company’s performance on key ESG parameters by asking companies to fill over 150 questions across 9 key principles.

From all perspectives involving customers, suppliers, employers, financial markets, regulators and the governments, ESG is becoming very critical for long-term sustainability of the business.

With growing stakeholder capitalism, the business ecosystem has become more complex over the years. Businesses have to ensure holistic value creation for stakeholders, and the means to determine value have evolved from non-financial reporting to integrated profit loss statements. Such form of reporting attempts
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