ESG in India: Emphasizing sustainability & responsible investing

ESG (Environmental, Social, and Governance) investing is a relatively new idea in the Indian market, but it has gained a lot of traction recently. In India, social and environmental activism have a long history, and the country is becoming more aware of the importance of sustainable corporate practices and ethical investing. The greater awareness of connections between sustainability and financial success is one of the main forces behind ESG investment in India.

Investors are starting to expect more openness and accountability from businesses in terms of their ESG performance as they grow more aware of the dangers posed by unsustainable business practices. The country’s asset management industry has also begun to take ESG considerations into account when making investment decisions. Also, a number of ESG rating agencies are now operating in India, providing evaluations of companies’ ESG performance and making it simpler for investors to examine the sustainability of their portfolios.  

With initiatives like the National Voluntary Guidelines on Social, Environmental, and Economic Responsibility of Business, which urge businesses to embrace ethical business practices, the Indian government has also taken strides to promote ESG investing. Further strengthening transparency and accountability, the Securities and Exchange Board of India (SEBI) has published guidelines mandating listed businesses to disclose their ESG performance.

In general, ESG investing’s rise in the Indian market heralds a significant move towards more ethical and sustainable investing methods. Thus, the increasing awareness of ESG investing in the Indian market signifies a notable change towards more ethical and sustainable investing methods. It is expected that ESG investment will become even more common in India as understanding of its significance grows. This will bring prospective benefits for the economy, society, and environment in addition to investors. 

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Legal and regulatory ESG compliance criteria 

Companies in India are required to abide by a number of legal and regulatory ESG (Environmental, Social, and Governance) criteria. Key compliance criteria include the following: 

• Environmental compliance: Indian businesses must abide by a number of environmental rules, including those concerning waste management, the conservation of natural resources, and legislation relating to air and water pollution. Businesses must make sure they are adhering to these rules and act to reduce their environmental impact. 
• Compliance with labor laws and regulations: Indian businesses must abide by a number of labor laws and rules, including those pertaining to minimum pay, working hours, and occupational health and safety. Businesses must make sure they are not involved in exploitative labor practices and are offering their employees a safe and healthy work environment. 
• Corporate governance compliance: A variety of legislation concerning corporate governance, such as those pertaining to board composition, openness, and shareholder rights, are applicable to Indian corporations. Businesses need to make sure they are adhering to these rules and doing their part to advance ethical business conduct. 

• Reporting and disclosure: Indian businesses are required to provide information on their ESG performance as well as their sustainability and social impact. There are further reporting obligations linked to environmental and social impact, and the Securities and Exchange Board of India (SEBI) has published rules mandating listed businesses to disclose their ESG performance in their annual reports. 
• Voluntary frameworks and guidelines: Businesses can embrace a number of voluntary frameworks and guidelines to enhance their ESG performance. Examples of best practices for business sustainability and responsibility can be found in the National Voluntary Guidelines on Social, Environmental, and Economic Responsibilities of Business. 

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The need for ESG adaption 

Adhering to ESG norms and criteria is a crucial part of conducting business in India, and organizations that put an emphasis on sustainability and ethical business conduct are probably better positioned to prosper in the long run. In order to address the increased demand for sustainable, socially responsible business practices, it becomes imperative for Indian enterprises to embrace ESG principles for:  

• Environmental sustainability: India, one of the most populous and fastest developing nations in the world, is experiencing economic growth as well as a rapidly growing middle class. As a result, the nation deals with serious environmental issues like deforestation, water scarcity, and air pollution etc. Companies in India can lessen their environmental impact, protect natural resources, and cut back on waste by putting ESG principles into practice. For instance, the Indian company Tata Steel has put into practice a number of environmental efforts, including the utilization of renewable energy sources, a decrease in greenhouse gas emissions, and water resource preservation. 

• Social impact: India faces serious social problems such as poverty, inequality, and poor access to healthcare and education. Companies can assist in addressing these issues and improving people’s lives by integrating social impact concerns into their business processes. For instance, the Indian IT services firm Infosys has put in place a number of programs to promote education, healthcare, and community development, including offering training courses for impoverished youngsters and funding rural development initiatives. 
• Governance and accountability: Adapting ESG principles can aid in enhancing corporate governance and accountability in India. Companies can gain the trust of their clients, staff, and investors through fostering openness, moral behavior, and stakeholder involvement. For instance, the Indian conglomerate Mahindra Group has put in place a comprehensive CSR program that focuses on social impact and environmental sustainability, as well as on a code of conduct for moral business behavior. 

Some of the other Indian businesses who have implemented ESG (Environmental, Social, and Governance) principles and shown a dedication to sustainability and ethical corporate conduct included, the IT company, Wipro, who has implemented a variety of ESG policies, including a commitment to carbon neutrality, the use of renewable energy, and a focus on inclusion and diversity in the workplace. Sustainability is a key element of Mahindra & Mahindra’s business strategy. This is one of India’s top automakers. The company has begun taking several actions to reduce its carbon footprint, including using renewable energy, developing electric and hybrid vehicles, and promoting sustainable agriculture. One of India’s largest banks, HDFC Bank, has demonstrated its commitment to ethical banking practices. In order to promote financial inclusion, sustainable development, and community development, the organization has implemented a number of strategies. 

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Current scenario in India

In recent years, India has significantly advanced in terms of ESG implementation. The nation has started a number of programs and policies to support sustainability and ethical business practices. For instance, SEBI (the Securities and Exchange Board of India) has mandated that the top 1,000 listed businesses declare their ESG performance. In addition, the Indian government has started a number of programs like the National Solar Mission and the National Electric Mobility Mission Plan to support renewable energy and lower carbon emissions.  

Indian businesses are also beginning to take sustainability seriously. Several businesses have even established goals for lowering their environmental impact and enhancing their social and governance standards as they begin to incorporate ESG concerns into their decision-making processes. Yet, there is still opportunity for development despite the advances made. India has considerable obstacles in the areas of waste management, labor rights, and air and water pollution. However, not all Indian businesses are utilizing ESG principles to their full potential, and more openness and disclosure are still required. India is advancing in the adoption of ESG, but there is still much work to be done.

Manipal Academy of Higher Education (MAHE) teaches Sustainability as a subject with online MBA for working professionals. It covers various concepts in sustainability, including circular economy, sustainable business model canvas and others.