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Indian firms have difficulty adopting ESG frameworks specific to their industry.
While India is catching up with developed countries when it comes to ESG disclosures, many companies are facing certain challenges in meeting the norms specified by SEBI under the Business Responsibility and Sustainability Report (BRSR) disclosure format.
While SEBI has mandated the top 1,000 listed Indian entities by market capitalisation to disclose their ESG risks and responsibilities as well their approach in mitigating the same the BRSR, many are struggling to comply.
Shruti Sharma, Assistant Professor and Consultant for Business Sustainability and Strategy, TERI, SAS, said, “Most of the companies are not designed with ESG integrated into their core strategic vision. It is practiced as compliance or an obligatory requirement.”
Supply chain disclosures
A key challenge being faced by companies are the norms related to supply chain disclosures. “If India must do its business globally it has to integrate ESG in the supply chain. However, there are a number of complexities associated with ESG disclosures for supply chain. In India, a number of supply chain partners are small, unlisted firms. It is difficult for such companies to track and report on a large number of ESG metrics. This is due to lack of awareness, readiness, and financial strength of these MSME (Micro, Small and Medium Enterprises),” Sharma added.
A survey by Deloitte India revealed that only 27 per cent of Indian organisations feel adequately equipped to meet their ESG strategy and compliance requirements, while a mere 15 per cent believe their suppliers are prepared to comply with their organisations’ ESG mandates.
Does BRSR prevent greenwashing?
Another concern that arises is the greenwashing among companies to get a higher ESG score. For example, valuation guru and Professor of Finance at the Stern School of Business at New York University, Aswath Damodaran, recently wrote in a blog post that the Adani Group learned to play the ESG game well, creating an entire ESG universe to underpin its companies, and exploiting the green bond market, presumably for its green energy business.
Inderjeet Singh, Partner, Deloitte said, “The BRSR itself has been a well-crafted document, providing enough opportunities to the participating 1,000 companies in making responsible disclosures. Reasonable assurance of BRSR Core will result in the application of accounting principles such as ISAE 3000 which will ensure the review of data by an accredited agency/statutory auditor. This should reduce the chances of greenwashing to a large extent.”
Does the BRSR have a ‘One Size Fits All’ approach?
Indian firms have difficulty adopting ESG frameworks specific to their industry. The list of ESG parameters currently do not provide a comprehensive and accurate idea of the ESG scores in differing industries. “SEBI has not issued the detailed list of KPIs for BRSR Core (around 49 indicators) yet. A fair analysis will be possible once the list is made available, yet a common yardstick approach may present some degree of challenge. For example, product recall policy is important in a B2C business which may not be of great relevance in a B2B setup as such requirements are covered at length in the purchase orders itself,” said Singh, adding that while companies are ready to augment their competency, there is lack of talent and availability of technical competency in the market.
An ESG scorecard released by Crisil in 2022 showed that the performance of companies on the environmental parameter (‘E’) was weaker compared to social (‘S’) and governance (‘G’). In India, only one in five companies reported their Scope 11 and Scope 2 GHG emissions. The disclosure of Scope 3 emissions was even worse. 63 out of 586 companies published this data.
Future approach towards ESG
“Data collection and disclosure is the principal challenge. Also, how their disclosures will be interpreted by competition and their downstream value-chain partners is another challenge. ESG is the new yardstick for retaining the “preferred supplier” position. This is very clearly visible in B2B play. Companies need to take up capacity-building initiatives across their facilities and consider digital solutions to improve data collection and reporting,” said Singh.
(The write is interning with businessline’s Mumbai bureau)
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Mini
While in office, the 1960-born Kumar will oversee the 2024 Lok Sabha elections and several Assembly polls along with the elections of the president and vice-president of India.
The Ministry of Law has appointed former finance secretary and current Election Commissioner Rajiv Kumar as the next chief election commissioner (CEC). He will assume charge from May 15 after incumbent CEC Sushil Chandra retires on May 14.
After the announcement, Law Minister Kiren Rijiju tweeted, “My best wishes to Shri Rajiv Kumar.”
Kumar was appointed as the election commissioner on September 1, 2020. He is likely to demit office in February 2025. While in office, Kumar will oversee the 2024 Lok Sabha election and several Assembly polls along with the elections of the president and vice-president of India.
More about Rajiv Kumar
Born on February 19, 1960, Kumar holds degrees in BSc, LLB, PGDM, and a Master’s degree in public policy. According to his LinkedIn profile, Kumar completed his LLB from Delhi University between 1979 and 1982. He is also an alumnus of the TERI School of Advanced Studies.
He is an Indian Administrative Service officer of the 1984-batch, who superannuated from service in February 2020.
The 62-year-old officer has extensive experience in working “across the social sector, environment and forests, human resources, finance and banking sector,” a government statement had said earlier.
Kumar’s contribution as an officer
Kumar held the post of finance secretary between September 2017 and February 2020. During his tenure, he undertook several banking, insurance and pension reforms. To curb circulation of black money, the officer froze bank accounts of 3.38 lakh shell companies, which were used for creating fictitious equity.
For public sector banks, Kumar implemented a recapitalisation programme of Rs 2.11 lakh crore to support capital adequacy of these institutions and prevent default. He is credited with implementing prudential norms of lending for bankers and borrowers.
Kumar has been instrumental in streamlining the National Pension System (NPS) which extends its benefits to about 18 lakh central government employees.
Kumar has also held other positions such as director for the Central Board of Reserve Bank of India (RBI), SBI and NABARD. He has also been member of the Economic Intelligence Council (EIC), Financial Stability and Development Council (FSDC), Bank Board Bureau (BBB) and Financial Sector Regulatory Appointments Search Committee (FSRASC).
As the director and joint secretary in the Tribal Affairs Ministry between 2001 and 2007, Kumar drafted the Scheduled Tribes (Reorganisation of Forests Rights) Bill, 2005. It was under his supervision that the Special Central Assistance to States and Grants under Art. 275(1) of the Constitution was granted for the development of scheduled and tribal areas.
Prior to being appointed as the election commissioner, Kumar had held the post of chairman of the Public Enterprises Selection Board since April 2020.
Trekking in Himalayas
According to the ECI portal, Kumar is a keen trekker and has crossed several passes in the Himalayan Mountain range in Ladakh, Uttarakhand, Himachal Pradesh, Tibet and Sikkim. He has also trekked in Sahyadri mountain ranges or the Western Ghats. Apart from trekking, Kumar enjoys listening to Indian vocal classical and devotional music, and practises meditation.
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