India and the ESG Challenge

India and the ESG Challenge

March 31, 2022

Blogs and Articles

Sustainability & ESG

The Rationale
Corporate India’s goal should be to help the Nation achieve the target of a $.5 Trillion economy in the next four years. The goal is eminently plausible in the wake of the world economic order being completely overhauled post the Covid-19 pandemic of the last three years. The most enabling factors for India are :(i) US-China Trade stand-off; (ii) The realignment of the Global Supply Chain; (iii) Challenge to the Chinese “stranglehold” as the manufacturing headquarters of the developed world; (iv) UK exiting the EU; and (v) India’s preeminent position as the global leader in Digitization and Software development. Added to this, the availability of trained IT personnel, as well as qualified professionals at every skill and price points both in manufacturing and service sectors.

India is the only country in the world that produces over 1 million Engineers, 2 million postgraduates and over 7 million graduates every year.

Climate change and the India Commitment
At the COP26, India has committed to almost impossible targets of Net-Zero carbon emissions by 2070. This goal imposes on the Corporate and Business sectors in India some very stiff environmental targets by 2030 :

  • Non fossil fuel energy capacity of 500GW;
  • 50% of energy required only by renewable energy;
  • CO2 emissions to be restricted to 1 million tonnes;
  • Carbon intensity below 45%

The SEBI mandate
In the wake of climate change challenges and the United Nations mandated Sustainable Development Goals, SEBI has now directed the top 500 listed companies to publish an annual Business Responsibility Report (BRR) which follows the broad guidelines and framework as developed by the International Integrated Reporting Council (IIRC), covering the areas of Environment, Governance and Stakeholder Relationships. The noble and unquestionably acceptable objective of ESG reporting is to monitor Organization’s commitment to maximize shareholder value is concurrent with ensuring fairness to all Stakeholders, Customers, Vendors, Investors, Employees, Government and Society at large.

India Corporate Challenge
SEBI mandated the top 500 listed companies for ESG reporting. Of the total 5,000 listed companies in India, the top 100 companies account for more than 90% of the market capitalization. This clearly means that the 400 companies from rank 101 to 500 account for only 10% of the market capitalization. One can safely assume that investors have virtually no value for the last 200 of the SEBI mandated 500 listed companies.

This is the challenge to be tackled.

If India must become a $.5 Trillion economy, the major problems faced by the smaller listed companies are the uncertainties in doing business in India, largely due to Corruption, Nepotism and the scare of more than 26,134 imprisonment clauses of various laws in India. Some for even minor offences like forms not being submitted on time.

Challenges for Companies: Impact of Corruption on ESG reporting
ESG reporting has been derived by the compulsions of Climate Change diktats and mandates of the 17 Sustainable Development Goals (SDG) of the United Nations, ratified by all countries including India. Hence it is important to note that proper implementation and success of ESG, can only be achieved if SDG 16 and 16.5 are also implemented both in letter and spirit.

SDG 16 & 16.5
These goals pertain to provisions of justice for all by building effective, accountable institutions at all levels. It aims at substantially reducing Corruption and Bribery in all its forms across all countries by 2030. Government of India ratified the UNCAC (United Nations Coalition against Corruption) and was compelled to amend the primitive Prevention of Corruption Act 1968 by the newer legislations “Prevention of Corruption (Amendment) Act 2018”.

One of the major rationales propounded during the passing of the new Anti-corruption Act was it was designed for Business and Economy to flourish and grow at a rapid pace and substantially reduce corruption. Born of the treaty obligations, the new Act also conforms to some of the international benchmarks laid down in the United Nations Convention against Bribery (UNCA), including “Bribery of National Public Officials”, “Trading in Influence” and “Asset Recovery”. However, the introduction of the two new sections 8 & 9(i), wherein criminalization of bribery and corruption by the private sector, as laid down by the new Act has given serious apprehensions, fear of extortion and malicious prosecutions in the minds of genuine and honest businesses.

The top 100 listed companies in India have the resources, organization, and bandwidth to fully comply with ESG reporting. For India to truly prosper and reach the target of $.5 Trillion economy we need the smaller and less resourceful listed companies and the MSME to be supported, nurtured and enabled. They must be protected from harassment by multifarious agencies who are out to control and enforce compliance.

They need “Ease of Doing Business” and
“less of Government and more of Governance”
“ to be truly “Aatmanirbhar” and successful.”

Author Info

Prasad Chandran

Former Chairman & Managing Director, BASF India Limited

Chairman, SEEGOS

Author Info

Bcci Admin

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