Mandatory ESG reporting in India
Describing Mandatory ESG reporting in India
The Indian Government and authorities are continuing to drive Corporate Social Responsibility and Sustainability.
In 2022, New Regulations with respect to disclosure and responsivities have been enacted. The main drivers are to bring India in alignment with global efforts to fight climate change and improve its standing in improving the standard of living of its citizens, improving its UN SDG ranking. This has led to new requirements on Sustainability and ESG frameworks. ESG (Environment, Social and Governance) is being adopted worldwide by companies based on the 17 goals UN SDG index. ESG and SDG in India face many challenges and require a collective effort on the part of citizens – Governments Banks, Businesses and the people. Key challenges: · In the 2022 Global Index of SDGs, the country ranked 121 out of the 163 countries. It ranked 117 in 2020 and 120 in 2021. · India is the world’s third-largest polluter, and changes are needed to cut emissions and meet a target of net zero emissions by 2070.
·Approx 400m people are still living below the poverty line · With eight years left to meet the global goals on sustainable development, the country is off-track to meet this https://www.downtoearth.org.in/news/governance/india-s-sdg-preparedness-ranking-continues-to-decline-report-83158 This is an emergency for a country seeking to be a world powerhouse.
There will be a range of needed solutions to these challenges. The basis of this will be increased transparency, awareness and will of the government, big business to address these challenges. Innovation and new methods of doing will be required. In the long term, this is good for the environment, but create more profitability, prosperity and sustainability. The situation today is based on two sets of legislation that will drive this. 1. Corporate Social Responsibility (CSR) reporting and spending, the first such initiative globally, being made mandatory under the Companies Act, 2013;
Whereby all public Companies must allocate 2% pf Profits to CSR. 2. The Securities and Exchange Board of India (SEBI) https://www.sebi.gov.in/ making the Business Responsibility and Sustainability Report (BRSR) mandatory for the top 1,000 listed companies by market
The latter establishes ESG Reporting as a framework. This has been stipulated as mandatory for the financial year 2022-23 but is voluntary for the financial year 2021-22 so that businesses get sufficient to get used to new reporting regulations. This effect of this is no less than an earthquake in the way companies are managed. No longer is profit the sole criterion, but ESG and Impact are major components in the strategy and evaluation of results. The new Reporting builds on from the Business Responsibility Report (BRR and adds a expansive requirements to Sustainability,
This is a very wide term as can be seen in the nine principals as set out in these regulations.
PRINCIPLE 1 Businesses should conduct and govern themselves with integrity, and in a manner that is Ethical, Transparent and Accountable.
PRINCIPLE 2 Businesses should provide goods and services in a manner that is sustainable and safe
PRINCIPLE 3 Businesses should respect and promote the well-being of all employees, including those in their value chains
PRINCIPLE 4: Businesses should respect the interests of and be responsive to all its stakeholders
PRINCIPLE 5 Businesses should respect and promote human rights
PRINCIPLE 7 Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent
PRINCIPLE 8 Businesses should promote inclusive growth and equitable development
PRINCIPLE 9 Businesses should engage with and provide value to their consumers in a responsible manner Each of these principles is backed details questions which will require a new approach, with attention to data and detail.
It will require ESG data extraction, measurement, and reporting. Note only will it affect the company , but is it supply or value chain partners bringing a ripple effect across all businesses in India. Investors and customers will continue to consider the company’s Sustainability Reporting when deciding to invest or buy. Finance will be linked this, and besides the costs of ESG Accounting, companies will need to bring in Innovation & Equipment to measure this. This transparency will drive the adoption of better ways of doing things . more efficiently and result in Capex to undertaken projects in energy efficiency , move to renewable energy , transportation, better water solutions , better air quality etc. In many cases , there may be cost savings, and this should not only been seen as burden. There are many social aspects, and some of treating staff and customers more fairly and creating a more inclusive and cooperative business environment. Clear guidelines are encouraging this spirit of cooperation.