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)Read More
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Sharm el-Sheikh, Nov 17 (IANS) Highlighting the growing consensus on oceans being critical to climate negotiations, a new policy brief from The Energy and Resources Institute (TERI) was launched at an UN Framework for Climate Change Convention (UNFCCC) official side event at COP27 here, put forth the need for definite goals and indicators, along with institutional and enforcement mechanisms to steer ocean-climate action.
The policy brief 'Oceans-Climate Interface: Implications for Global Commons based Climate Action' was launched on Wednesday at a session on aClimate Action through Innovation, Implementation and Inclusive Multi-level Governance', organized by TERI and TERI School of Advanced Studies in collaboration with New Energy and Industrial Technology Development Organization, Japan, and Indigenous Information Network, Kenya.
The knowledge document was produced as part of the COP27 Compass component of the Act4Earth initiative launched at the World Sustainable Development Summit in 2022. During the launch at Sharm el-Sheikh, Shailly Kedia, Senior Fellow, TERI, gave a presentation on the Act4Earth policy briefs on COP27 negotiations, internationalizing lifestyles for environment, inclusive energy transitions and ocean-climate interface.
Oceans, which are the largest known carbon sink in the world, were largely omitted from the climate change negotiations until COP21 held in 2015.
The policy brief focuses on the global commons of marine areas beyond national jurisdiction and climate action, and examines the interface between climate and ocean governance.
"The oceans have long been neglected in the climate change negotiations, even though the UNFCCC clearly identified its role as the globe's most important carbon sink. The existing patchwork of agreements on the High Seas, including the UN Convention on Law of the Sea (UNCLOS), scarcely touch upon the role of the High Seas in relation to climate change," said Prodipto Ghosh, Distinguished Fellow, TERI.
The policy brief highlights the gaps in the climate-ocean interface and examines it through the lens of the global commons. Global commons are resource domains that do not fall under the jurisdiction of any single country, and their governance remains contentious since there is no single state or region having complete responsibility over it.
Pointing to the gaps in the present climate regime, Kedia said, "Since climate negotiations are party-driven, climate actions in national jurisdictions have received larger attention and global commons including oceans have not been a focus area in terms of climate ambition and action."
She underscored the need for greater interactions between the climate regime and ocean regime involving UNFCCC and UNCLOS.
The knowledge document observes that problems of ocean equity are often not explicitly stated. "It is a hard fact that till date the distribution of benefits of oceans has been iniquitous and the ocean economy has primarily benefited wealthy nations and firms," it notes.
While oceans have helped in slowing the rate of climate change by acting as a carbon sink, climate change impacts such as acidification, warming, changing circulation patterns and rising sea levels have deeply affected it as well.
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