Increased transparency and visibility of ESG actions and commitments can be good for society and the balance sheet
Social responsibility – how businesses engage with stakeholders and their communities – is becoming a priority in India. Beyond ensuring regulatory compliance or an engaging program with non-governmental organizations (NGOs), social responsibility can be an effective part of a business’ core strategy to ensure sustainable growth and profitability.
Environmental, social, and governance (ESG) considerations are increasingly becoming a key investment criterion in India. According to analysts from Motilal Oswal Financial Services[1], November 2021 saw ESG-related investments jump fourfold to Rs 123 billion, up from Rs. 26.3 billion in November 2019.
Transparency and corporate responsibility are exerting a material effect on the balance sheet, as access to capital, market recommendations, and even regulatory engagement are increasingly subject to such considerations.
These sentiments are not restricted only to financial markets. Businesses looking to hire and retain the best talent need to show current and potential employees how they are engaging with the world around them, including sustainable business practices, and engagement in the communities where they live and work.
According to research by communications group Porter Novelli[2], 88% of employees today say working for a company with a strong purpose is more important to them than ever before, while data from the Mahindra group suggests that nearly half of Indians surveyed[3] believe that equal opportunity, flexible working practices, commitments to diversity, and an innovative environment are the top qualities of a ‘good’ employer. Perhaps surprisingly, results from the Mahindra study showed that an innovative workplace environment was valued above pay and benefits.
For companies looking to attract and retain talent, having a clear ESG strategy in place and communicating it within the workplace, and to potential employees can make the search and recruitment process far more effective.
Consumers too are equally passionate and concerned about these issues; according to the Global Commons Survey, 70% of Indians share that they are ‘worried’ about the state of nature[4], and 90% are willing to do more to protect nature and the climate. For businesses looking to sell their products, these sentiments also impact buying decisions: 38% of Indian consumers are hesitant to buy from organizations which they perceive as non-sustainable[5], according to a Capgemini report.
These trends are increasingly shaping the business environment, redefining the way companies, investors, employees, and consumers make decisions. Our own research suggests that beyond today, the future of business will be shaped by these trends.
In the FedEx Future is Now study[6], 75% of Indians agreed that individuals and communities who have a ‘futuristic’ outlook are more likely to be environmentally conscious than those who don’t, while 71% believe that, as decision-makers in a futuristic business, sustainability would be their top priority.
So, what will the future hold for ESG-focused business in India?
Our country’s challenges, and its business, consumer, and regulatory environment are distinct; but so are the opportunities. Collectively, businesses and society need to define what will make the most difference to society, and how these benefits can be shared with them.
India’s financial regulator has already made great strides, initiating the ‘Business Responsibility and Sustainability Reporting’ (BRSR)[7], designed to bring sustainability reporting at par with financial reporting, a mandatory requirement for the top-1,000 listed entities (by market cap) from next financial year.
Crucially, the Securities and Exchange Board of India (SEBI)[8] also launched a public debate on how ESG ratings should be calculated and monitored; this open and collaborative approach is precisely what’s required to ensure a genuine correlation between ESG commitments, transparency, and – ultimately – shareholder return.
As we look to the focus of Indian businesses, and a future that will support growth and new opportunities in the global arena, ESG and business performance are becoming mutually dependent.
Written by : Mohamad Sayegh, Vice President India Operations, FedEx Express
References:
[1] https://bfsi.economictimes.indiatimes.com/news/industry/mega-trend-esg-investing-gaining-traction-in-india/88358991
[2] https://www.porternovelli.com/wp-content/uploads/2021/01/02_Porter-Novelli-Tracker-Wave-X-Employee-Perspectives-on-Responsible-Leadership-During-Crisis.pdf
[3] https://www.mahindra.com/news-room/press-release/mahindra-good-business-study-uncovers-changing-perception-of-good-business-across-india
[4] https://globalcommonsalliance.org/wp-content/uploads/2021/08/Global-Commons-G20-Survey-full-report.pdf
[5] https://www.capgemini.com/in-en/wp-content/uploads/sites/6/2020/07/Capgemini-Press-Release_Sustainability-in-Consumer-Products-and-Retail_EN-1-4.pdf
[6] https://newsroom.fedex.com/newsroom/fedex-express-study-reveals-india-is-future-ready/
[7] https://www.sebi.gov.in/sebi_data/commondocs/may-2021/Business%20responsibility%20and%20sustainability%20reporting%20by%20listed%20entitiesAnnexure1_p.PDF
[8] https://www.sebi.gov.in/reports-and-statistics/reports/jan-2022/consultation-paper-on-environmental-social-and-governance-esg-rating-providers-for-securities-markets_55516.html
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members
