How path to ESG makes companies attractive to invest

The Securities and Exchange Board of India (SEBI) believes that ESG considerations have become mainstream, especially after the COVID 19 pandemic.

As stakeholders, regulators, investors, customers, employees, and communities are emphasising disclosures around risks, practices, and impacts, the current SEBI guidelines mandate the reporting of nine themed ESG funds, termed as the Business Responsibility and Sustainability Report (BRSR). Corporates claim that this mandate goes beyond compliance, and that it helps corporates be more proactive in business decisions. Contrary to popular belief, it resonates well with stakeholders and enhances engagement. On the way forward, organisations are also interacting and including stakeholder perspectives in the strategies.

According to India Brand Equity Foundation (IBEF), a Trust established by the Department of Commerce, Ministry of Commerce and Industry, Government of India, the total AUM of ESG funds in India amounts to ₹9,753 crores as of March 2024.

Wipro has used ESG guidelines to structure its framework on double materiality, says Narayan P S, global head of Sustainability and Social Initiatives, Wipro Limited. "It is a combination of (i) our business’ impact on our stakeholders and the environment, and (ii) the converse impact of environmental change and stakeholders on our business. While the latter is framed in terms of risks and opportunities for the company, our business’ impact on the environment and stakeholders is addressed through our materiality exercise and the execution of our ESG goals."

The shift to ESG and the BRSR disclosures have indeed helped us build stakeholder transparency and commitment to risks and opportunities, says Aun Abdullah, head- ESG, Lodha, a real estate brand in Mumbai, “Our commitment ensures our business model remains resilient and sustainable in a rapidly evolving global landscape. The transition also has broader implications for societal impact and value creation. We are actively collaborating with our value chain partners, and this collaborative approach ensures shared progress towards a more sustainable future,” he tells us.

ESG investing in India is being driven by three main factors: India’s commitment to achieving Net Zero by 2070, which decrees $ 8-10 trillion in capital expenditure over the next five decades. Added to it is SEBI’s introduction of BRSR disclosures and reporting and the United Nations’ Sustainable Development Goals (SDGs), a benchmark for measuring a company’s market presence and fund-raising capacity. Sustainability, of course, has become everyone’s responsibility.

Wipro has a current footprint of 76% renewable energy (RE) and an 80% reduction (from the 2017 baseline) in Scope 1 and 2 emissions as of March 31, 2024. Over the last 10 years, absolute energy consumption has halved, and nearly half a million tonnes of carbon emissions have been avoided. Central to Lodha's decarbonisation strategy are the Lodha Net Zero Urban Accelerator, an initiative driving transformative action within the entire real estate sector, and the RMI-Lodha Sustainability Conclave, which invites knowledge-sharing from across 40 industries. Palava City, an integrated greenfield smart city, and a 23-storey building with low-carbon materials stand in testimony to the real estate group's integrative sustainable solutions applied at scale.

"ESG empowers companies like us to view it as a strategic lever that drives sustainable growth," says Amit Bhasin, Chief Legal Officer and Group General Counsel and Secretary, CSR Committee, Marico Limited. 67.4% of Marico's operational energy emissions come from renewable sources. The renewable energy share at its operational units is amplified year after year, with the Jalgaon unit achieving 100% RE and 100% water neutrality.

With 2.8 MW of on-site solar installation, by 2030, Colgate-Palmolive is aiming for a 100% transition to renewable sources across all industrial site operations and a shift to 100% reusable, recyclable, or compostable packaging. Shilpashree Muniswamappa, director of ESG and Communications, Colgate-Palmolive India highlights how their ESG drives have landed them in achieving ESG Alpha. "Achieving net zero water status at three of our industrial sites has enhanced our operational efficiency and resilience. This achievement not only conserves a vital resource but also reduces operational costs and mitigates risks associated with water scarcity, thereby contributing positively to our bottom line."

The holistic approach is playing a significant and transformative role in an organisation’s journey. ESG could account for approximately 31% of total domestic AUM by 2051. But if they rely heavily on easily quantifiable metrics, the collective view reflects that there is a danger of true efforts getting lime-lit as performative achievements. “The true value of the ratings hinges on their rigour and transparency,” notes Muniswamappa, Colgate-Palmolive India. The key to growing the enthusiasm and impact lies in well-designed ESG ratings. Active riddance and specificity are essential for consistent adherence to the regulations and ESG-success. “Multiple ratings may disincentivise companies and cause them to turn away from the reporting burden,” Narayan cautions for the future.