The call for environmental, social, and governance (ESG) compliance in business reflects the growing awareness of the need for responsible and ethical economic growth. The compliance ecosystem is expanding rapidly, with even outliers realizing they may soon be compelled, either by law or by business sense, to adhere. This presents both a challenge for companies and an opportunity for platforms offering software solutions for data management related to ESG disclosures, aiding in meeting compliance frameworks’ requirements.
From the top 100 to 500 and now 1,000, the number of listed companies in India mandated to make ESG disclosures has only increased since the Securities and Exchange Board of India (SEBI) first made it mandatory in 2012. In response, many other public and private companies in the supply chains of these top 1,000 companies have voluntarily begun assessing their ESG compliance. Additionally, the rising awareness of the significance and relevance of ESG compliance in the international market has further encouraged businesses involved in exports to join the movement.
With disclosure parameters becoming more stringent, navigating the ESG requirements has become increasingly complicated. The Business Responsibility and Sustainability Report (BRSR) framework in India, which replaced the Business Responsibility Report, is more detailed and comprehensive, necessitating a heightened focus on data management.
ESG is playing a crucial role in preparing Indian businesses for the future. It encompasses all non-financial aspects directly or indirectly impacting the bottom line of businesses. While companies have long dealt with ESG, it’s only in recent years that organizations have realized the business benefits of adhering to these principles. ESG-centric organizations can build resilient, viable, and impactful businesses in the years to come, offering benefits such as better operational efficiency, tapping unexplored opportunities, sustainable profitability, improved risk management, and strong governance—all of which enhance shareholder value.
The emphasis on the ‘environmental’ aspect of ESG leads businesses towards responsible resource consumption, including energy and water, as well as the adoption of environmentally friendly technologies. Environmental metrics also play a key role in reducing operational costs. Energy and emissions tracking enables companies to identify areas for energy efficiency improvements and incorporate renewable energy measures into their operations, leading to significant long-term savings.
Social factors are pivotal in determining a company’s long-term sustainability and ability to face challenges. This includes factors such as human rights, fair labor practices, living conditions, health, safety, diversity, work-life balance, community engagement, and philanthropy. Robust diversity, equity, and inclusion (DEI) policies tend to outperform their peers financially, indicating the positive impact of fostering a diverse and inclusive workforce.
The governance aspect of ESG helps companies identify and manage risks effectively, ensuring a clear understanding of risks, mitigation plans, and resources to respond to them. Strong governance practices lead to a more resilient organization capable of anticipating and mitigating potential risks, including sustainability-related ones like environmental incidents, social unrest, or regulatory non-compliance.
ESG compliance is no longer just a trend but a powerful driver of change in the corporate landscape. Companies face increasing pressure to align their operations with ESG principles, leading to a growing interest in sustainability and building ESG capabilities. However, despite this interest, many organizations still struggle to handle ESG strategy and compliance requirements effectively, indicating a significant gap between intent and action.
Comprehensive data management is crucial for identifying areas for improvement, setting measurable targets, and monitoring progress toward achieving ESG goals. Data management platforms facilitate data-driven decision-making, enabling organizations to implement sustainable practices, reduce their carbon footprint, and ensure ethical business operations. They also enhance stakeholder engagement by providing accurate, relevant, and timely information.
Data management tools offer customizable dashboards, effective approaches adhering to international standards, a plethora of ESG benchmarks, and visualization options. They improve stakeholder engagement, allowing stakeholders like investors to directly access and generate reports, graphs, or comparisons, enhancing transparency and credibility within the stakeholder community.
Despite the availability of data management tools, industry experts believe businesses need to do more to enhance ESG solutions. There is a need for tech experts and ESG experts to collaborate, providing insights into complex ESG data. Trained experts bring expertise and insights essential for effective decision-making and strategic planning, navigating the decarbonization journey for businesses.
Effective ESG data management hinges on merging technology with existing corporate processes, emphasizing the need for detailed data processing across all organizational levels. It’s crucial to engage every department and site to ensure the efficient and effective implementation of ESG strategies, highlighting the collective effort required to achieve the net zero goal for the organization.
