Climate change has become a dire threat to the world. It affects corporations as much as it does individuals. A flood or drought can scuttle the operations or slow sales of companies. A growing number of environment-conscious customers are also selective about the corporations they engage with. In other words, the stakes are high and companies can no longer ignore sustainable development. What about Indian corporates? Adapting to climate change is costly and not easy. Allocating capital to the vagaries of nature requires a shift in mindset as well: of investors and the management. In this special series, CNBC-TV18 takes a deep look at whether Indian enterprises have raised their game on sustainable development and environment goals. Follow the series here.
Economies across the globe have unified in their efforts to achieve the goals of sustainable development. This is in contrast to the earlier approaches where governments pursued goals for the growth and development of their respective economies only.
The struggle for growth and excellence has created an imbalance in the economic development of countries, depleted some of the natural resources and has thus altered the ecological balance.A clarion call has gone out asking for an immediate need for action. Corporates have become more vigilant and aware of the fact that that the financial performance of companies corresponds to how well they contend with environmental, social, governance (ESG), and other nonfinancial matters.
There is more focus on the impact economy. This is very different from the traditional economy that prioritizes only financial returns. In an impact economy, consumers and shareholders will challenge entrepreneurs and executives to show that they generate their profits in a manner that contributes to the public good.
Sustainable development and ESG reporting have become an important pillar for the overall growth of any company. A recent report suggested:
At an all-India level (top 100 stocks), ESG Disclosure Score stands at 38/100. This lags global peers (200 plus stocks across regions, sectors) which score 43/100; but the lag is not significant. India’s score on ‘social’ is at par, slightly lower in ‘Governance’, but lags heavily on ‘Environmental’ disclosures. Over the past decade, India’s aggregate ESG Disclosure Score has improved meaningfully (from 20 to 38), reflecting rising corporate awareness on ESG-related disclosures.
The report also suggests that overall ESG disclosures have improved the most in Cement and Engineering. India’s IT sector has also improved steadily (34 to 50), in line with global IT peers (30 to 45). On the other hand, Consumer/Retail and Pharma have clocked the least improvement since 2008, wherein disclosures progress has lagged other sectors.
First Published: Dec 17, 2019 5:37 PM IST
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