ESG is the blanket term for sustainable and responsible business practices. It is a framework that considers environmental, social and governance aspects alongside financial aspects in the investment decision-making process. ESG is an assessment of a company’s collective conscientiousness for social and environmental factors.
Importance of ESG
The pandemic has fuelled a growing awareness of the interconnected nature of the world we live in. Owing to this many companies have responded by announcing net-zero or carbon-neutral commitments by pledging to reduce greenhouse gas emissions and investing in climate action.
As awareness spreads, adopting Environmental, Social and Governance (ESG) measures is now more valuable than ever before. It has become the need of the hour for businesses of all sizes to thrive in the present and future proof themselves.
Furthermore, firms that have successfully implemented sustainability and ESG strategies into their core operations and business activities tend to do better than other companies. Investors are increasingly considering ESG performance to [KH2] mitigate risks and generate sustainable long-term financial returns.
ESG has gained currency in the past decade. A lot of that can be credited to The United Nation putting forth a list of 17 Sustainable Development Goals (SDGs). The SDGs are comprehensive and adopted by the UN as the basis for sustainable development—and are increasingly being used by governments, businesses and investors too as benchmarks for their sustainability initiatives.
In India, the country’s top think tank NITI Aayog has aligned the 17 SDGs suitable to the Indian context and inked a Sustainable Development Framework (SDF) for 2018 till 2022 with the UNO.
The Government of India has earmarked a budget of INR 110 trillion to action the same. The main focus areas are poverty and urbanisation; health, water, and sanitation; education; nutrition and food security; climate change, clean energy and disaster resilience; skilling, entrepreneurship and job creation; and gender equality and youth development.
Furthermore, this year the Securities and Exchange Board of India (SEBI) implemented a new sustainability-related norm for the top 1,000 listed companies, bringing India’s sustainability reporting to global reporting standards. The new BRSR format is built on the nine principles of the government of India’s “National Guidelines on Responsible Business Conduct”, which were created to define responsible business conduct for Indian firms.
With this backdrop, some of the biggest corporates in India are dedicating more time and taking serious efforts to seek growth not only at the organisational level, but also for the industry and economy to grow.
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