2023 marked a global paradigm shift as stakeholders and major regulators were active in developing frameworks and stipulating reporting requirements, setting the stage for a transformative 2024 in ESG and corporate sustainability. Let us look at some areas that businesses may need to align their focus on, this year.
A New Era of Transparency and Sustainability
A major transformation is expected in India in 2024 with the evolution of the Business Responsibility and Sustainability Reporting (BRSR) framework. Now the top 1000 companies require “reasonable assurance” of BRSR Core, marking a significant shift from mere compliance to a strategic imperative for businesses. Aligned with global trends, and firmly grounded in the double materiality principle, India’s integrated BRSR will result in stricter reporting standards, enhanced transparency, improved access to capital, proactive risk management, and a strong commitment to advancing sustainability.
Simultaneously, businesses will encounter the Corporate Sustainability Reporting Directive’s (CRSD) comprehensive ESG reporting mandate, the EU Taxonomy’s sustainability criteria for European finance access, and Sustainable Finance Disclosure Regulation’s (SFDR) standardised sustainability disclosure requirements. While these necessitate investments in robust systems and data collection, they unlock opportunities for brand enhancement, conscious consumer attraction, green finance access, and a competitive edge through genuine sustainability commitment. Streamlined energy and carbon reporting will simplify the quantification and disclosure of carbon emissions, encouraging transparency and informed decision-making. Moreover, businesses can accurately assess their environmental impact, monitor progress towards decarbonisation goals, and gain insights for optimising resource usage.
Value Chain Assessment
2024 unveils a dynamic landscape as businesses focus on building a sustainable value chain beyond the gate-to-gate approach. Heightened emphasis on value chain transparency will reflect a broader social responsibility. Globally, leading companies have been dissecting the impacts of their value chains. However, in India, this approach is just gaining momentum primarily due to the SEBI BRSR requirement. For most businesses, this is a new challenge with no established frameworks, with materiality assessment adding to the complexity. One critical concern is that the largest impacts are often beyond the company’s control.
Circular economy gains traction, prioritising waste management for resource efficiency in alignment with global sustainability goals. Collaboration with stakeholders becomes paramount, reflecting a broader social responsibility. Addressing fair wages, community development, and human rights fosters a positive brand image and attracts conscious consumers. Adapting to this challenging environment, Indian businesses gain a competitive edge, improve their environmental and social impact, and contribute to a more sustainable future.
From Foundations to Compliance: A Tech-driven Journey
In 2023, emerging technologies laid the groundwork for ESG practices, enabling more comprehensive data collection, analysis, and reporting. This year, India enters the “Year of Compliance” for ESG reporting. Standardised disclosure formats are mandated, making technology an imperative for businesses to manage and report with additional value realised in forecasting abilities and decision support, especially with climate studies gaining attention.
India’s Decarbonisation Drive
2024 promises significant strides in India’s decarbonisation journey, driven by regulatory mandates, market forces, and technological advancements. The voluntary carbon market, gaining momentum in 2023, is poised to mature, offering more carbon credits, and encouraging wider participation. Strengthened regulations will provide clear targets and standards for decarbonisation and carbon pricing. Meanwhile, standardised ESG reporting will enhance transparency and accountability. Additionally, technological advancements in clean energy and carbon capture are expected to expedite India’s decarbonisation efforts.
Actionable Social Impact and Inclusive Practices
The year will be pivotal for social impact and inclusive practices with companies moving beyond awareness to take tangible action, with a focus on integrating social impact considerations into core business strategies and daily operations. This shift will be driven by increased collaboration between businesses, governments, and civil society organisations to address complex social challenges, and diversity, equity, and inclusion (DE&I) will take centre stage.
Navigating the Next Wave: Top ESG Trends to Watch in 2024
The rise of green credits and impact investing presents a potent dual strategy for promoting sustainable change. The Green Credits Program, which is currently in development and being assessed by the MoEFCC, encompasses relevant environmental aspects and has initially identified eight activities to be covered under the scheme. Expected to kick off in October 2024, it holds substantial opportunities for businesses to leverage its sustainability initiatives and align with the Sustainable Development Goals.
Partner, Sustainability and ESG
BDO India
Simultaneously, the impending EU’s Corporate Sustainability Due Diligence Directive (CSDDD), set for implementation in 2024, mandates proactive due diligence for supply chain mapping, risk assessment, and implementation of corrective measures. Businesses must ensure upholding of human rights and environmental standards, assuming accountability for their entire value chain. The CSDDD presents challenges and opportunities, requiring investments in due diligence systems, but also promoting responsible business practices, enhancing brand reputation, and reducing potential legal and reputational risks.
In conclusion, 2024 is forecasted to be characterised by increased recognition and dedication to shaping a more equitable and sustainable future in the dynamic realm of ESG for Indian businesses. Businesses will be expected to report and take tangible action with environmental and social considerations in their core strategies. 2024 is poised to be a turning point, guiding the way towards a more conscientious, sustainable, and inclusive business landscape in India, where sustainability is not merely an aspiration but an actualised reality. Although challenging, it will present opportunities aplenty to differentiate and lead.
